President Obama and Treasury Secretary Timothy Geithner are warning that there will be economic calamity if Congress doesn't strike a deal to raise the $14.3 trillion debt ceiling by Aug. 2, when the federal government will run out of money to meet its financial obligations. Many economists agree, and bond ratings agencies say the scare alone could be enough to result in a downgrade of America's credit rating. But many House Republicans don't believe it — Rep. Darrell Issa (R-Calif.) says Obama is setting an "artificial deadline" to "extort a deal" out of his rivals. How bad will it be if Congress doesn't raise the debt ceiling by Aug. 2?

The economy won't collapse: At some point, "the government will hit the ceiling and have to reduce spending by about 40 percent," says Dean Clancy at RedState, but anyone who tells you he knows the day and hour the government will default is lying. The government won't default on its debts — and I bet we'll still be able to send out Social Security checks, and pay for Medicare, too. The much-hyped Aug. 2 date only matters if Obama insists on forcing "a political crisis."
"Seven reasons why Aug. 2 isn't the end of the world"

Hold on. It's crazy to say the deadline doesn't matter: "Sane conservative economists" know that missing the Aug. 2 deadline would be a disaster, says Adam Ozimek at Modeled Behavior. Ratings agencies will lower our credit rating, and we'd face the impossible task of having to slash government spending by 40 percent overnight so we could pay foreign lenders, while our own voters suffer. "I'm trying not to get shrill here," but it's frustrating when some on the Right invent their own facts.
"Sane conservatives and the debt ceiling"
It will be bad, but no one knows how bad: ""No one knows the precise scale of the impact," says Lisa Desjardins at CNN, largely because this crisis "is unprecedented." Still, some things are pretty certain: "Hitting the debt ceiling would raise interest rates and lead to immediate, dramatic cuts in government spending." It could also harm the financial markets. There's disagreement on how bad the skid would be, but even House Speaker John Boehner (R-Ohio) says "if the markets are jumpy it could lead to 'catastrophe.'"
"Cheat Sheet: Debt ceiling consequences"