The President and Congressional Republicans have been throwing down gauntlets for weeks over the debt limit vote. Demands are flying: No tax increases, revenue must be part of the equation, entitlements on or off the table. We've even heard that the 14th Amendment to the Constitution means the debt limit is irrelevant because all debts of the United States are valid. Or that the debt limit is irrelevant because we take in enough revenue to pay off private debts and we can just ignore our other legally obligated creditors.

Cutting through the din, let’s be clear on one thing – the country cannot afford to mess around with default. This is not the time for the blame game. No matter who wins, the taxpayers will lose. The President and Congress have to get this done.

For many years, the dollar has been the reserve currency of choice for the world. Investors are willing to lend us money for fractions of pennies on the dollar. If we have a fiscal fidget, much less a hiccup or a sneeze, and the markets react, we will have to pay higher interest rates to get people to buy our debt. The $200 billion we spend on interest each year is going to soar.

But we also can’t afford to just jack up the limit on the nation’s credit card and go about business as usual. Congress and the President have to match the debt limit deal with real changes – trillions of dollars – in cuts and revenue to demonstrate that they’re serious about getting the nation’s fiscal house in order. And here’s the kicker: these cuts and revenue raisers are just the budgetary appetizers. This isn't just about a $2 trillion haircut over ten years. We have to fundamentally reform our tax policies, defense spending, and entitlement programs. We are on an unsustainable fiscal path.

The debt deal should gather some of the low hanging fiscal fruit and lay out a path for greater reforms down the road. Yes, we need to cut spending, but we have to look at other areas as well.

The tax code is rife with a thick underbrush of special interest tax expenditures. Instead of dithering over whether there would be a net tax increase or not, let's chop the dead wood out of the code. Eliminate wasteful tax earmarks for profitable oil and gas companies, end the wasteful tax credit for corn ethanol, strip out the litany of research and development breaks, get rid of the last-in, first-out accounting gimmick, strip out industry-specific special expensing rules. Eliminating the corporate safety nets and giveaways should be easy calls. But this can't be the end of tax reform. Republicans and Democrats have been picking winners and losers in the code for political gain over the years, and the debt limit deal must set the stage for bigger tax reforms in the coming months.

Similarly, we cannot expect that the debt limit deal will fix the unsustainable path of entitlement programs like Medicare and Social Security. It’s too complicated to solve in a couple weeks, but the deal should include a framework for hammering out reforms. The crushing baby boom demographic wave is beginning to break on these programs fiscally. Particularly in Medicare, retirees are expected to get benefits worth many times more than the taxes they paid into the program. Clearly, this is unsustainable, and given the real ideological differences between the political parties, any likely solution will include both ways to bring in more revenue and ways to limit the costs of benefits. But let’s not forget that the debt limit deal can tackle other entitlement spending, like wasteful agriculture subsidies for wealthy “farmers” and making the retired military health care programs more fiscally responsible.

For years our politicians have ignored the looming and growing debt crisis and our completely American propensity to live beyond our means. You don't even need to be old enough to vote to remember the federal budget surplus, but in the last ten years we have racked up $8.6 trillion in additional debt.

Those that demand we fiscally crash in this game of chicken with our debt limit are being arrogantly irresponsible. Instead, the debt limit deal should be a starting point for greater, more painful, but necessary reforms in taxes and entitlements.

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TCS QUOTE OF THE WEEK

“The full consequence of a default — or even the serious prospect of default — by the United States are impossible to predict and awesome to contemplate. Denigration of the full faith and credit of the United States would have substantial effects on the domestic financial markets and on the value of the dollar in exchange markets. The Nation can ill afford to allow such a result.”

–President Ronald Reagan in 1983, as quoted by Treasury Secretary Timothy Geithner ( Wall Street Journal )