Debt ceiling: Here's what could happen in a credit "debacle"

The federal government's cap on the amount it can borrow to fund is approaching fast. U.S. Treasury Secretary Janet Yellen told lawmakers last week that the nation will reach the debt limit on January 19, prompting a slew of warnings from Wall Street analysts and economists about the potential financial fallout if Congress fails to take action.

The debt ceiling is currently at $31.4 trillion, representing borrowing that the Treasury undertakes to fund its financial obligations, ranging from safety-net benefits such as Social Security payments to interest on the national debt. 

Yellen urged congressional leaders to raise the debt limit, which is set by lawmakers, as soon as possible to avoid a fiscal crisis. But with a Republican-controlled House, it's unclear whether lawmakers can reach a compromise to lift the ceiling. If lawmakers fail to come to an agreement, the "debt ceiling debacle risks a self-inflicted recession," Gregory Daco, EY Parthenon chief economist, said in a report.