Spending cuts, tax increases, or both? How's the debt ceiling debate going to work out?

[Mark Fitzpatrick]

With the specter of a US default growing over this debt ceiling issue, how do you think all this is going to work out? Republicans are firmly against tax increases and want steep spending cuts, but Democrats want tax increases and are resistant to steep spending cuts. Republicans also don't want to raise the debt ceiling unless it is accompanied by steep spending cuts. Democrats want to raise the debt ceiling right away.

Both Moody's and Fitch have warned of debt downgrades if Congress doesn't come to an agreement, which could have serious ramifications in the financial markets and push up interest rates. Chinese ratings agency Dagong is saying the US is "already defaulting" by printing money to inflate away our debt.

How do you think this is all going to turn out? Though Speaker Boehner has been holding a hard line on the spending cuts issue as a condition for approving a debt ceiling increase, I think he'll cave on it.