If a Debt Deal Isn't Reached by August 2, Do You Fear the Consequences?

Every week there's a new thing that could mean the end of the world as we know it that sends us into a frenzy.

Maybe you've already forgotten about the dreaded Y2K virus that turned out to be much ado about nothing, despite the billions people spent making bomb shelters in their backyards and updating their computers to avoid a meltdown. There was the SARS virus that never turned into the black plague as advertised.

And just this year we've had two false alarms on judgment day and, a few weeks ago, Los Angeles' Carmageddon, a catastrophe that never materialized when a stretch of the 405 freeway was shut down for repairs. Pardon us if we're a bit jaded by these "catastrophic" threats.

Now we are just days away from the true final countdown: the debt ceiling. For months we've heard about the dire consequences that will come if Congress fails to raise the debt ceiling for the 75th time since 1962. The deadline came and went on May 16, and then was pushed back several more times until August 2.

Even as Congress scrambles to make that deadline, some in Washington are saying that Tuesday's drop dead has some fudge room and could be a week earlier then true Armageddon. And as both sides dug in over the past few weeks – with President Obama and Democrats refusing to sign off on a plan that had cuts but no new revenue and Republicans preemptively blowing off any talk of a compromise that includes tax increases for millionaire hedge fund managers and oil companies – news channels raised the fears of a global meltdown that would make the last global meltdown look like a picnic by comparison.

What will happen if we blow the deadline?

-- The Treasury Dept. won't be able to pay between 40-45 percent of the 80 million payments it needs to make every month.

-- Millions of active-duty soldiers, veterans and government workers won't be paid, and taxpayer refunds won't go out, while Medicare, Medicaid and Social Security checks will still go out and interest on the debt will be paid.

-- Oh yeah, world markets will go into a massive meltdown as stocks melt down – the Dow Jones was down four days in a row this week – while rates on consumer loans on everything from mortgages to cars, will also skyrocket.

-- The U.S.'s reputation as the world's economic engine will be trashed as our credit rating is downgraded.

Unless none of that happens and this is all another manufactured drama meant to whee-whee up the party's respective bases.

Remember the eleventh hour budget deal from a few months ago?

Neither party has any incentive to be the one that causes the destruction of economic life as we know it, even if it means pissing off its base. This won't happen because it can't happen.

But what might happen is that Republican House Speaker John Boehner will be so mortally wounded by the upstart Tea Party caucus' rejection of his compromise that he could lose his leadership position and President Obama could finally expose the GOP as not just the Party of No, but the Party of No Clue. As in, they have no clue how to lead or how to be caretakers of our nation's financial security.

Ponder this. In his two decades in Congress, Boehner has voted to raise the federal debt ceiling five times, with almost no complaints. Since 2002, in four out of five of those instances he voted to raise it by more than $800 billion. All told, he's voted to raise it by $4 trillion over five year, or the amount the Obama administration is trying to trim the deficit by over the next decade. "So, what's different now? That's right, there's a Democrat in the White House," Cincinnati's CityBeat weekly noted.

You can be sure that a band-aid compromise will be worked out at the final minute that will allow both sides to save face and kick the can down the road for another 10 months.

That's what we should be afraid of. Now's the time for decisive, earthshaking action, not half measures. So don't worry, the sky's not falling … this time.

But next time…