This decision tree from Societe Generale (via Business Insider) seems more or less correct. I think there will be a deal by Aug. 2 (or whatever the deadline ends up being). But it is the content of the final austerity plan that remains impossible to predict.
A few thoughts:
1) Rs had every right to walk out. Dems pushing unacceptable tax hikes (including, basically, axing Bush tax cuts, along with an automatic tax trigger and a host of tax breaks done away with) with no real entitlement reform.
If you listen to Treasury Secretary Timothy Geithner and the rest of Obama administration, failure to raise the debt ceiling by Aug. 2 risks “catastrophic economic and market consequences of a default crisis.”
To employ the phrasing of Gov. Chris Christie, America hit the debt ceiling and didn’t vaporize. New borrowing has put the U.S. Treasury right up against its $14.3 trillion borrowing limit, but financial markets aren’t crashing over fear that this will lead to default.
Stu Rothenberg thinks there is plenty of danger to go around:
The nature of the Republican risk is obvious. If the GOP looks inflexible, excessively ideological and extreme, voters are likely to turn against it. This is more likely, of course, if Democrats look reasonable and emphasize their willingness to compromise. (Swing voters love the idea of compromise.) It’s also more likely if the most vocal and ideological elements of the GOP define their party.
On its face, House Speaker John Boehner’s demand for perhaps more than $2 trillion in spending cuts may look like a dangerous escalation in the political battle over raising the federal debt ceiling by a similar amount. But the reductions would be over 10 years, they’d be in line with several budget proposals, and they would represent only a modest down payment on austerity.
Conservatives have many flavors of views on this, as can be seen at an online symposium over at National Review Online. Here are two of the more interesting takes: