The AP is reporting that House Republicans offered to increase the debt limit and end the shutdown as part of a package that includes spending cuts.

Related: Republicans Should 'Take Hostages' Over Debt Ceiling; U.S. Won't Default, Says Stockman

The ongoing negotiations have business leaders on edge.

"This is very serious business," says Frank Keating, president and CEO of the American Bankers Association and a former Republican governor of Oklahoma. If the debt ceiling is extended and a budget and entitlement conversation follows, "everybody wins" says Keating.

But if no agreement is reached on extending the debt limit and "we go over the cliff, then the calamitous consequences of that are unimaginable."

Related: Here's How to Avoid a Debt Ceiling Disaster: Norm Ornstein

Here's what could happen:

The Social Security system, the largest holder of U.S. treasuries, could be unable to pay retirees.

The value of Treasuries--collateral for financial transactions around the world--could crash, spreading havoc in economies and financial markets around the world.

Money market funds, bond funds and other investment funds that are barred from holding assets from issuers in default, would be required to dump their U.S. debt, adding to the market calamity.

Sovereign lenders to the U.S.--including China and Japan which hold more than $1 trillion worth of Treasuries--would suffer huge losses that could spread.

The dollar could collapse, trashing the purchasing power of all Americans.

Interest rates on everything from mortgages to credit cards could skyrocket — if there were any lending at all.

Tim Bitsberger, a former Treasury official under President George W. Bush and now a New York-based managing director at BNP Paribas told Bloomberg News, "If we miss an interest payment, that would blow Lehman out of the water.” The U.S. government has $12 trillion worth of outstanding debt, more than 20 times the $517 billion Lehman had. After Lehman's default, the stock market lost half its value and the U.S. unemployment rate topped 10%.

Keating testified before the Senate banking committee Thursday about the possible consequences of a default and warned, "If Congress fails to act and we hit the debt ceiling we will set off a chain of events that will cover our entire economy and impact all Americans."

He tells The Daily Ticker, "If we default on our debt...if we lose that kind of credibility then it's going to take a long time to pick ourselves up off the floor and our enemies and our adversaries are going to be laughing at us. I can't imagine both parties not recognizing that...and fix this."