Earlier this week, I wrote an article for RealClearMarkets that challenges the conventional wisdom that a failure to raise the debt limit would lead to an acute economic crisis. We’ve seen this claim made a number of places, perhaps nowhere more vividly than by Lawrence O’Donnell on MSNBC, who warned that Rand Paul’s debt limit obstructionism could “destroy the credit rating of the United States of America… wreak havoc on the world’s financial markets, [and] cause a worldwide depression.”

This sort of doomsaying is certainly wrong, and it is even probably wrong that a debt limit impasse would lead to a less-severe but still acute crisis involving a significant spike in Treasury yields. Instead, I believe the Administration could muddle through for months (or possibly even years) by using accounting gimmicks and clever cash management strategies to stay within the current debt limit.

Partly, it would do this by mimicking the strategies of state governments that find themselves entering a new fiscal year without a balanced budget and without authorization to borrow for deficit spending. While it would be unusual for the federal government to face a stack of bills due with no authorization to borrow to pay them, states face this situation on a fairly regular basis and handle it in ways that might give us heartburn but do not cause the world to come crashing down.

A number of strategies are available to manage the amount of federal debt. One is to replace bonds in the Social Security Trust Fund with non-interest bearing IOUs that do not count toward the debt limit. (It’s surprising this works to get around the limit, but it’s been done before on a smaller scale.)

The debt limit restricts gross debt, so if you reduce the amount of eligible debt that the government owes to itself, you can continue to grow the net debt while staying within the cap. It would be legally dubious to cash in the Trust Fund’s bonds to pay for general government operations, but even just redeeming bonds to pay Social Security benefits and then diverting Social Security tax receipts to general government could buy hundreds of billions of dollars a year in breathing space. We’ve been here before: Ronald Reagan used this strategy during a brief debt limit standoff in the mid-1980s.

The federal government can also recall its funds on deposit in banks, sell gold, or borrow from several funds smaller than the Social Security Trust Fund. George Bush used this last strategy during debt limit standoffs in 2002 and 2003. Because the Fed is now such a large owner of federal debt, the Fed could also take some steps that help with debt limit compliance, though I suspect the Fed would tread cautiously here.

Finally, the federal government could do what states do: decide which payments are really important, and delay payments it doesn’t have the cash to make. This essentially grows the “accounts payable” component of the federal balance sheet, and accounts payable don’t count toward the debt limit.

This can’t work forever but it can buy you a surprisingly large amount of running room. Illinois regularly manages its cash situation by delaying payments to government contractors, mostly Medicaid providers. It’s currently built up a backlog over $6 billion, or roughly half the annual cost of its Medicaid program, yet Illinois Medicaid somehow continues to operate. This strategy would face legal challenges, but in 1995 the Republican Congress offered to explicitly strengthen President Clinton’s hand to take such actions, and could do so again.

I think it’s possible that the bond markets would tolerate a prolonged period where the government operates like this, so long as it continued to service bonds (which, I contend, it could). The last three times that Congress played chicken with the debt limit, bonds did not spike. (This was when we hit the debt limit in 1995 and came close in 2002 and 2003).

The relatively quick end to the first government shutdown in 1995 was not driven by a need to calm the bond markets. Fundamentally, the United States government remains solvent and bond investors understand that Congress will raise the debt limit if the other option is a financial collapse.

I’m not contending that a debt limit standoff is OK because it may not lead to an acute crisis: this is also a very bad scenario. It involves the federal government acting more like state legislatures in Springfield and Sacramento, which we certainly don’t want. It could undermine perceptions of America’s creditworthiness and increase the medium-term likelihood of a sovereign debt crisis.

But I think the problems created by a debt limit standoff could well be more long-term than short-term, which would mean that Congress and the President will be less inclined to deal and more willing to let the situation drag on. So, I suppose, fasten your seat belts.