President Barack Obama delivers remarks at a meeting of his...

President Barack Obama delivers remarks at a meeting of his Export Council in the Eisenhower Executive Office Building in Washington, D.C. (Sept. 19, 2013) Credit: Getty Images

President Obama says he won't negotiate with Republicans over the debt ceiling. That may be a good bargaining tactic, but if push comes to shove, is it good policy?

There's no question that Obama strengthens his hand by saying, as he has over and over again, that he won't let Republicans use the debt ceiling to extract concessions from Democrats, whether it's Obamacare, the Keystone XL pipeline, spending cuts or anything else. In theory, that should make Republicans think twice about failing to raise the debt ceiling, by reducing their expectations of winning the fight.

But what if the tactic doesn't work? What if House Republicans make good on their promise not to raise the debt ceiling without getting something in return, and on Oct. 17 Obama has to choose between caving in or letting the country renege on its obligations? To be sure, caving has all sorts of unpleasant consequences. Politically, it hurts the president's remaining credibility, emboldens Republicans and leads to policy outcomes that Democrats don't want (though what level of concessions would be required is unclear).

And that isn't just a problem for this president. Giving in to Republican threats legitimizes the politicization of the debt ceiling, weakening future administrations and making it easier for the House to get its way. It also sets up future debt- ceiling crises, by rewarding bad behavior.

So giving in is a terrible idea. But what about the alternative?

As Annie Lowrey wrote in the New York Times: "The financial markets would probably panic. They might not. Some financial experts argue that a few missed payments that spurred immediate Congressional action to lift the ceiling might not be so bad. But many, many others foresee a financial tsunami that would raise the country's borrowing costs, send investors scrambling for safety and deeply injure the United States and global economy."

It seems hard to dispute that however bad it would be for Obama to cave, not caving would be worse. Republicans must know that, and Obama must know they know that. The only hope for the White House is that Republicans will be scared off by the possibility that Obama will still decide not to negotiate, in which case all hell would break loose, and they would be left to take the blame. But that would be an empty victory, as everybody would be worse off.

So how does Obama avoid that outcome should Republicans be crazy enough to pursue it? One option, which the White House must already be considering, is offering concessions at the last moment that let Republicans claim a victory, without causing too much damage to Democratic priorities. So defunding Obamacare is out, but maybe some less-sweeping changes, such as delaying the individual mandate for a year, are in. Or the president could approve Keystone, something he may well do anyway, and let Republicans call it a win.

Sure, the appearance of negotiating, however small the concessions Obama actually makes, would be a defeat in itself, and a worrisome precedent. But if the X-date comes and there's no deal, Democrats will have to choose between that and the even worse outcome of an international economic mess. That's a hard choice - but not that hard.

Christopher Flavelle is a member of Bloomberg View's editorial board.

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