But discord within the debt commission highlights the difficulty of reaching a consensus on how to reduce government spending. If Congress were to refuse to increase the debt limit, the consequences could be severe for the global financial system. Think of the debt ceiling like the limit on your credit card. If you max out, your life doesn't automatically shut down, but you do have to finds other means of funding, such as borrowing cash from family and friends or selling belongings.
The government, for instance, could continue operating with cash on hand or cash coming in, Collender said. Or it could can postpone or delay paying certain obligations, such as payments to contractors, he said. But resorting to moves like that sends an unnerving message to the rest of the world.
That is why while election momentum might be on the side of Republicans, history is on the Democrats' side. No Congress has ever voted against approving an increase in the debt ceiling.
"Ultimately," Collender predicted, "they're going to have to do it. Otherwise they'll throw the markets into turmoil and create all kinds of concerns overseas about the US economy and the US government. I get asked a lot at what point the US would turn into a third-world country. This wouldn't get us there, but it'd get us close."