So what will actually happen if Congress doesn’t increase the debt ceiling by approximately October 17? The government’s debt obligations will be paid, but reductions in other spending will start to become necessary. In effect, leaving the debt ceiling as is would function as a spending cut. This is why the Democrats hate the idea so much. They know there is zero chance of default, but they are horrified at the prospect that voters and taxpayers may find out that there is a relatively simple way to bring about spending reductions that would create, in effect, a balanced budget. Hence the hysteria.
I'm not sure this is right. If the government can't sign people up for health care, how likely are they to be able to prioritize interest payments? If they can't do that in time, that's a default. No one will care whose fault it is. Well, some people will care, but that will be the least of our problems. Maybe the Dems are bluffing about the inability of Treasury to prioritize, but maybe not.