You know things are getting bad for American liberals when people start to look back at Bill Clinton with nostalgia. But that’s where things have got to, in the frazzled state of play around the raising of the US debt ceiling, and the strategy being adopted by President Barack Obama.

For those distracted by white Right terror, the collapse of the EU, or the death of Amy Winehouse, a recap: unlike most other governments, the US has to officially authorise a raise in the total amount it is borrowing at any one time. The law can be seen as an extension of the separation of powers, allowing Congress to set limits on borrowing by the Treasury. In Westminster systems a debt ceiling law would be redundant — parliament itself would set the limits on a government drawn from its ranks. The ceiling law came about for the usual reasons governments want to borrow money — to finance a war, WW1 in this case.

The debt ceiling is usually raised at the same time as the budget is brought down, but not always — and it is this out-of-cycle requirement that has given the Republicans the opportunity to use the law to create a political war. Quite possibly, it was an opportunity its central leadership did not want, given the high stakes involved — but since they regained control of Congress in 2010, via the Tea Party push, the party has been beholden to that faction. The surprise loss of New York’s 26th district in a special election several months ago will have concentrated their minds, establishing that Tea Party support can either drift away, or to a third party candidate if the Right feel the Republicans have returned to business-as-usual politics.

The hard-right of the GOP wants to refuse to raise the ceiling at all, which would mean an immediate cut of up to 50% in public spending, in order to service existing debt — effectively closing down vast areas of US public life. The mainstream Right will only pass it if it involves no new tax raises — and includes the extension of expired Bush-era tax cuts in the “new taxes” bracket. They have various figures for cutting debt over the next decade, most of them in the dizzying range of round $6-8 trillion, which would essentially involve the privatisation of social security and the evisceration of Medicaid, low treatment for the poor among others.

Obama and the Democrats responded with a package that promised around $2.5 trillion in debt retirement — the figures vary depending on how they’re estimated — including $1.2 trillion in tax raises. The Republicans walked out on these talks at the end of last week, claiming that initial negotiation had been for $800 billion in tax raises and that there was a $400 billion hidden hike in taxes.

Whether this was a pre-planned gambit or not, it is supremely political in intent. Republican leader John Boehner’s alternative have been to propose a short-term small lift in the ceiling, which would carry over only until — surprise, surprise — September next year, at which point Obama would have to be seen pushing for yet more government debt while campaigning for re-election. As a response to this, Democrat Senate leader Harry Reid has proposed an alternative $2.7 trillion debt reduction plan, which involves no new taxes — and no cuts to entitlements (ie: social security and Medicare).

It’s a political fix since its numbers are entirely spurious — counting $1 trillion in reductions from an Iraq-Afghanistan full withdrawal over the next decade, something which may or may not happen and which is, in any case, savings on things you didn’t spend anyway.

From the Left, the criticism of Obama has been total — and, it strikes me, once again massively unfair, the projection of a fantasy situation in which America was not governed by a split political system. He’s accused of giving away the farm in terms of cuts to medical programmes, poverty relief, etc, and of caving in before negotiations even began.

Hence the hark-back to Bill Clinton who went toe-to-toe against the GOP in 1995, prompting a government shutdown for some weeks and an ultimate Democratic victory, which gave Clinton the ’96 election. However two things are forgotten in this: the first is that Clinton had already agreed to “triangulate” and concede far more in terms of welfare cuts than Obama has been willing to sign off — remember “the end of welfare as we know it” — and secondly, that a government shutdown is far less than a default, which is what the US and the world is facing on August 2.

Some on the Left dismiss this as a pseudo-crisis, but the truth is that it could pitch the country and the world into a renewed credit crisis. Ultimately what might threaten is a collapse of inter-banking loans, and hence the basic credit functions of the economy grinding to a halt. The stakes are huge.

In that respect — and given as one has to repeat ad nauseam that a PRESIDENT IS NOT A PRIME MINISTER and must share government — I think Obama has played it much better than others suggest. To include any tax raises at all has been to go up against a Republican party that fully intends to politically satisfy its base at any cost.

Obama’s also rejected the Reid plan, and threatened to veto a short-term raise. All of that adds up to a pretty reasonable fightback. Leave Obama alone. Aside from his strange feminine metaphors — left at the altar again, looking for someone to dance with — he’s playing it reasonably tough.