Silliness about the debt ceiling has risen to the absurd. Anyone who steps back from the swirl of current arguments will immediately see that there is an easy, almost unavoidable exit from our current paralysis, and President Obama controls it. If Congress cannot reach agreement on terms for raising the debt ceiling, President Obama will have the inescapable duty to invoke the 14th Amendment and continue to pay U.S. debts. He may not like that option. He may be opposed to it in principle. But he will be compelled to take it unless he is seriously deluded about the state of the world.
Legal scholars may quibble about whether the 14th amendment allows or compels the president to blow past Congress' debt ceiling, but as a practical matter there is no question that if the president invokes it to avoid a looming economic disaster plain enough for all the world to see, there will be no legal recourse. Because the president has the power to ignore the debt limit, even if he doubts he has the authority to do so, he will be compelled to do so. If Congress is unable to act, he will have, whether he wants it or not, the last clear chance to avoid disaster. Whether he is a naïve ninny, innocent as a baby, and pure as the driven snow or a cynical Machiavellian manipulator without a principle to his name, he has to understand this: if he has the last clear chance to avoid the abyss and does not take it he will not be forgiven by his own supporters, by the American people, or by history itself. However, if he does save the system, he will be a hero to all but the most obtuse economic know-nothings and cynical demagogues. Even Corporate America will have to doubt that it can entrust all branches of government to the Republicans and consequently entrust the economy to the economic nincompoops who have shown themselves willing to destroy it for principles and theories they do not understand. No matter whether the decision terrifies him or disgusts him, President Obama will be compelled to act.
From a progressive, fiscally responsible, and security-conscious point of view, the consequences of presidential action would almost all be positive. Once the president ignores the debt ceiling there will be no going back. The world will understand that any future president, faced with the same situation, will have to take the same action. The full faith and credit of the United States will remain inviolate. Congress might as well stop enacting a debt limit. Not only will it not be enforceable, it will be universally perceived as meaningless.
The wisdom of markets deserves scant faith, but if they "understand" what I have just outlined, that may explain why U.S. and world markets have proceeded to date with seeming confidence that no default is likely.
There is a very sober side to all of this from the progressive point of view. The chance that President Obama and the members of his administration do not understand all of the above is vanishingly small. Consequently, it is very hard to explain all of the concessions the president has made to Republican intransigence except by the theory that he really shares many of the Republican objectives, from undermining Social Security to putting Medicare beyond the reach of millions of people, and is trying to use the manufactured "debt crisis" as an excuse to allow him to implement them.