You can't blame Obama for this

So this is the way the economy ends: Destroyed by a small cabal of tea party zealots.

The truly scary thing is that we actually have no idea what will happen. We don't know if it's even possible for the government to prioritize payments to millions of different clients. Households, businesses, and investors don't know how long they'll have to wait for their money, whether it's a defense contract deal, a doctor's reimbursement, or a Social Security check. And nobody will know how long the nightmare will go on. Our international economic reputation—reflected in our low interest rates, the safe haven status of Treasuries (when everything goes haywire, investors clamor for U.S. debt), and our status as global reserve currency—rests on the assumption that Washington isn't completely insane.

More:

If the debt ceiling isn’t lifted again this fall, some serious financial decisions will have to be made. Perhaps the government can skimp on its foreign aid or furlough all of NASA, but eventually the big-ticket items, like Social Security and Medicare, will have to be cut. At some point, the government won’t be able to pay interest on its bonds and will enter what’s known as sovereign default, the ultimate national financial disaster achieved by countries like Zimbabwe, Ecuador and Argentina (and now Greece). In the case of the United States, though, it won’t be an isolated national crisis. If the American government can’t stand behind the dollar, the world’s benchmark currency, then the global financial system will very likely enter a new era in which there is much less trade and much less economic growth. It would be, by most accounts, the largest self-imposed financial disaster in history.

Krugman:

Add me to the chorus of those puzzled by the lack of market alarm over the possibility of U.S. default, induced by failure to raise the debt ceiling. The best story I’ve heard came from a government official who put it something like this: “Business types come to Washington, and they talk to Boehner, or Paul Ryan, or Eric Cantor – all of whom are very hard line, but not insane. So they go home reassured. What they don’t realize is that those guys aren’t in control, and that they’re running scared of a large faction of the party that is indeed insane.”

If the feds are forced to slash spending, one way or another (and probably semi-randomly) to match receipts, that’s about $600 billion in cuts at an annual rate, or 4 percent of GDP. That’s a huge case of unintended austerity, quite aside from the disruptions, surely enough to push us back into recession if it lasts for any length of time.

The real targets, of course, are Social Security, Medicare and Obamacare.

The approach is aimed at gaining enough Democratic support in the Senate to force Obama, who said he won’t negotiate on the debt limit, to accept changes that he has called “manageable” as a first step to shoring up Social Security and Medicare.

You're probably familiar with the old science fiction conundrum: If you could go back in time and kill Adolf Hitler as a child, would you do it? I'd like to re-word that problem: What if we could go back and off a young Ayn Rand?

Things sure have changed since Reagan's day. Back then, the strategy was to fuel the economy by running up huge deficits in order to make military contractors rich. Now, those contractors may not get paid.

Never thought I would say this, but I wish Ronald Reagan were back in charge. Of course, the teabaggers would call him a socialist.