If the debt ceiling is not increased, the Treasury can prioritize interest and debt payment to avoid a default and essentially put the government on a stringent pay-as-you-go basis. Would that involve extreme cuts in government spending? Certainly. But it could be done, if it had to.
If Republicans hold tough on the debt limit, they will have the public strongly on their side. According to the most recent Ipsos/Reuters poll, fully 71 percent of Americans oppose raising the debt ceiling. In fact, that number didn’t change even after people were told that “not raising the debt limit would damage the U.S. sovereign debt rating, which is like our credit rating: it would seriously damage our credibility abroad, would make it much more difficult for us to borrow in the future, and would likely push up interest rates.”
In the long-run, a limited increase in the debt ceiling might be negotiated in exchange for significant structural budgetary reforms designed to limit future government spending. But there is no reason for Republicans to surrender preemptively.
— Michael Tanner is a senior fellow at the Cato Institute and author of Leviathan on the Right: How Big-Government Conservatism Brought Down the Republican Revolution.