2. It’s Complicated
After the continuing resolution-cum-debt-limit-suspension fails, Democrats have other fiscal action to focus on. Schumer and House Speaker Nancy Pelosi have to unite their caucus’s progressives and moderates over what’s now a $3.5 trillion bill to expand social spending, paid for in part with tax increases. Pelosi has also promised a Sept. 27 vote on a bipartisan $550 billion infrastructure plan, which has already passed the Senate.

Financial market stress may start to rise as Republicans and Democrats blame each other for leaving the federal government on course for a shutdown and a default. Financial-industry heavyweights have already weighed in with calls for swift action. And stocks slumped on Monday in part thanks to worries over the debt limit’s approach.

3. Shutdown
If Democrats stick to their strategy and Republicans stay dead set against it, lawmakers could cause a government shutdown after Sept. 30, something that’s happened for varying stretches several times since 1995. That could in turn escalate fears about a default once the Treasury runs out of space through it’s so-called extraordinary measures to avoid breaching the debt limit.

Treasury bills maturing in October to November are trading at a discount compared with those due outside that range, as traders price in the chance of turmoil around the time the Treasury runs out of cash. That discount could expand, and stocks could tumble, as the game of chicken continues.

4. Market Mayhem
The S&P 500 Index tumbled more than 16% over a fortnight in the summer of 2011 during a particularly bitter partisan standoff over the debt limit—one that spurred S&P Global Ratings to cut what had been the U.S.’s AAA sovereign credit rating.

That’s one sample of the kind of pain markets could wreak. Another: when the House rejected a $700 billion rescue plan amid the throes of the global financial crisis, the S&P 500 plunged almost 9%, the most since Wall Street’s crash in 1987.

Even that may offer little guide if the two sides were to allow the Treasury to default on its obligated payments to everyone from bondholders to Social Security recipients to federal contractors.

“We’ve been very clear in our message to Capitol Hill that it would have a very significant effect generally on the financial markets if there were a delayed payment,” Robert Toomey, managing director of capital markets and associate general counsel of the Securities Industry and Financial Markets Association, told Bloomberg. “At the highest level it is truly unknown, because it has never happened before.”

5. Break-the-Glass
Long before such market pressure, Democrats are likely to strip the debt limit from the continuing resolution—smoothing bipartisan passage and avoiding or ending a shutdown.

As for the debt limit, there’s a backup option that would allow them to raise it with only Democratic votes, using the so-called reconciliation process that bypasses the filibuster. Congressional watchers say they could proceed with a standalone bill, without needing to attach it to the broader tax-and-spending bill that is also using the reconciliation format.