By August 2nd the US will default on their debt for the first time in American history. Even being this close to defaulting may cause their AAA debt rating to be downgraded. This act alone would cause catastrophic inflation effects leading to job and home loss. The Republicans are still claiming that not raising the debt ceiling would do nothing. They propose that they could move cash flow around to pay debts. The result of this would be the end of medicare, pensions, military pay, infrastructure and basically all social programs. The US GDP will collapse by 10% immediately. Either choice is a man made downfall of America. This does not have to happen but the Tea Party Republicans will not listen to economists; even Republican ones.
The suffering that this will cause to an already beaten American people is staggering. Inflation will cause all goods to be raised in price. Subsidy food programs for children and the poor will stop immediately. The elderly, those who are barely surviving, will not receive any cheques. Disabled people who can not work and some who cannot leave a hospital bed will not be able to pay for food or shelter. Infrastructure will cease; meaning roads, bridges and programs will stop. There is a great potential that fire fighters, garbage collecters and police officers would not receive pay. The House of Representative Republicans are willing to do all of this because Obama's concessions are not 100%. The childish game that has been played; as in anything Obama wants we don't want, is a damaging one to be playing.
Due to the fact that America is the world's only superpower this will have drastic effects on the world economy. Look for a worldwide depression if a deal is not reached. The entire world trades gas in US dollars so the outlook for this is an increase in gasoline prices for every non-oil producing state and under producing state around the world. Trade from or to the US would sharply decline due to a lack of consumer and business confidence. For example, the US accounts for 73% of Canadian exports. If a large portion of that were to stop; Canada would be a bad place to be.
The most disheartening part about all of this is that some Republicans are not holding out for a personal gain (as they usually do). Some of the freshmen Republicans say plainly that they will not raise the debt ceiling. These are people that cannot be worked with. If Obama had to divert an American armageddon he could invoke constitutional rights. It is in the American constitution that the validity of American debt may not be questioned. To do so used to be considered treasonous. He could unilaterally raise the debt ceiling. This could, however; later lead to impeachment processes if his judgement was questioned by Republicans. Which it most definately would.