In negotiations, the experts say it is critical to know your BATNA (Best Alternative To a Negotiated Agreement), and it is also important to have a good feel for your counterpart's BATNA.
Right now, the trajectory we are on is unsustainable. The rate of new spending and entitlement programs is out of control. Right now, we can get X amount in cuts. If the U.S. defaults, it is a catastrophe for the fiscal well-being of the country. If we raise the debt limit without meaningful cuts, we merely postpone and crystallize the certainty of eventual default and fiscal catastrophe. Our BATNA as such cannot be confused with our goals though. If we get no deal, and there is default, we may still have bargaining power to enforce cuts, but the cost may be too high. The cuts themselves are instrumental to the intrinsic good of our country's fiscal health. That intrinsic good is shot to hell by a default. Not a good BATNA.
The Dems' BATNA is equally bad. If we default, then our country takes a huge hit and so do a lot of their cherished spending programs, particularly social security and other non vested "entitltements." They cannot let that happen.
Best scenario to my mind given the short timeline is get a short term (3-6 months) deal in place so the issue can be revisited while securing substantial cuts now. The amount of increase in the debt limit should be less than the amount cut from spending (speculative spending not included).
If we set a $.50 on the dollar bar or even a $.75 on the dollar bar, that parties can agree to, the rest is working out the math on how much has already been agreed in cuts now, and the rate of spending will dictate how quickly we revisit the issue. That's a simple line in the sand the public can understand and support, and it is a path to fiscal solvency.