Debt Ceiling

I find it interesting how Congress and the President are flirting with the debt ceiling.  The republican controlled Congress wants spending cuts in order to raise the debt ceiling.  However, the President (democrat) wants the debt ceiling and taxes for the rich raised.  As for me, I would like to see spending cuts and also taxes for the rich raised.  But I do not feel like this is the time to flirt with this ticking time bomb.

In my opinion, the debt ceiling is like a firecracker (say black cat or cherry bomb).  You light the fuse and it begins to travel along the wick.  Generally people throw it and get it out of their hands as quickly as possible.  However, it seems like in this case Congress and the President are holding onto their ideals, holding on to the firecracker trying to see how long they can hold onto it before letting it go and explode.  If one holds onto it for too long, their hand is blown up (i.e. debt ceiling breached).

What does it mean if the debt ceiling is breached?  The government can't pay its bills, it defaults, etc.  I expect US debt would go from AAA rating to AA.  Interest rates for which the government can borrow would increase.  The economy would go into a tailspin.  Wall Street would definitely drop at least 10%.  We would encounter a recession similar to the one a few years ago.  Unemployment would go from a 9.2% to say 13-14%.

I just don't understand why the impasse on the debt ceiling.  I think in the end (the debt ceiling is due to be breached around Aug 2), Congress and the President will increase the ceiling with some minor budget cuts and other compromises.  For sake of our posterity I hope so.