It's not crashing through the guard rail that kills you

…. it's hitting the ground below.

Which is another way to say that the government shutdown (no, Fox, not "slimdown") is, in fact, bad, but playing chicken with the debt limit is the point where the Coyote (or the US, or the World Economy) goes "boom" in a cloud of dust.

The three alternatives to that (assuming the GOP keeps kicking in the afterburners as we plummet downward) are as laid out here: the Dems cave (ensuring further such destructive antics from the GOP), nobody blinks and we find out just how disastrous it turns out to be, or Obama uses one of a few suggested (but arguably sketchy) means of getting rid of the debt limit altogether (net-net the best thing, but sure to draw hyperbolic outrage from the hardliners so thwarted; I would expect impeachment proceedings to follow).

Reshared post from +Gary Roth

As a general rule, I don't go in too much in these budget fights.  People probably note I talk more about the authoritarian problem than the Republican vs. Democrat problem.

But, you see, things just got a lot worse than a shutdown.  The Republicans just tied the fight to the debt ceiling as well.

A shutdown is invisible to most people.  The ones it hurts immediately are typically the most underprivileged and underrepresented (like those who need SNAP to not starve), but most of us continue on as normal.  For scientists like me, it impacts our ability to apply for funding which is a nasty thing, but most of you won't feel the impact on technological development for years, when it's diffuse and difficult to pinpoint.  The same is true for a lot of services: it will do a lot of damage, but it's so nebulous and distant that it's hard to grasp.

The debt is another matter.  Brinksmanship with a shutdown looming is like gambling with the lives of millions who have no influence and, as such, can be done (especially by callous jackasses who are only after donors and votes).  Brinksmanship with a debt ceiling is gambling with the full faith and credit of the US.  In other words: it's gambling with the value of the dollar itself.  Since everyone either uses dollars or products whose price is directly connected to the dollar, this is a very dangerous thing to gamble with.

The problem is that Republicans are quite willing to gamble with it.  Democrats lately haven't been and, as a result, have been willing to cave to most Republican demands when these fights occur.  The reason is that the Democrats aren't crazy.  They're rational and will accept a loss over total collapse.  But the Republicans like this pattern and have come to realize that, as long as they act crazy, the Democrats will cave to their demands.

Eventually, the Democrats will lose everything or will stand up and fight.  The problem is that the Democrats have created a monster: by backing down every time in the past, they have given the Republicans no reason to think it won't happen again.  As in times past, the Republicans feel they can get their way if they just push a little harder.  Worse, the extreme part of their base is encouraged by this belief, so even though the average American hates it, the base supports this tactic and so we can't rely on popular pressure to change their mind.  And now that Obama faces the loss of his only substantial positive result of his presidency, the health care law, he will encourage his own party to stand firm.  Thus, it seems neither side will budge.

Now, disaster isn't completely inevitable here.  The President has the same two options he's always had.  He can choose to cite the Fourteenth Amendment, which has a clause stating that the "The validity of the public debt of the United States … shall not be questioned."  However, this is tricky, and will inevitably result in a massive legal battle, because this was not the intended use of the clause (debt limits really didn't exist at the time, originating during a massive restructuring over fifty years later) and that the phrasing doesn't clearly grant the President power to violate one law of Congress (the debt limit) to uphold another (debts issued legitimately under the law).

The other way involves a trick involving the US treasury: either minting platinum coins of enough value to pay down the debt for a while and simply depositing them (effectively just making more money).  There is another approach which uses the Federal Reserve to do much the same thing, but it's a bit more convoluted.  These methods seem magical to some and draw criticism, but the reality is that they don't fundamentally change the nature of the game: they just put enough money in the US coffers to keep doing business as usual and, in an oblique way, work around the debt ceiling.

Here's the thing that makes defeating the debt ceiling so important: it doesn't defeat it once.  It defeats it forever.  Barring an act of Congress, the rules of this game won't change, and the debt ceiling will cease to be a useful bargaining chip in these negotiations.  This is why it should have been done years ago: it would have protected our credit not only from default but from the uncertainty that Congressional brinksmanship creates in the world markets.

Either way, the President faces a choice.  He cannot count on Republicans backing down.  This offers him only three options: either drive over the cliff (default and see what happens), abandon the Healthcare law (losing his legacy and only delaying before this happens, yet again, further down the line), or kill the debt ceiling argument forever with one of the two previously described options.

I'm not sure which one of these he'll take.  He should have done the latter for the last several years and, in failing to do so, created the monster he now faces today.  But maybe this time, facing the ultimate destruction of what little positive legacy he may have, he'll do what needs to be done.  Only time will tell.