1. The debt ceiling and appropriations are both decided by congress so the ceiling should have some provisions that force congress to adjust appropriations and/or debt ceiling to be in agreement or else some specific cuts are automatically made, so there is no mystery what gets cut – or what government assets get auctioned off – when the ceiling is reached.
2. Capping debt need not cause any default. That is just a dishonest and irresponsible scare tactic, or worse, a threat. Capping one’s debt level should increase security about one’s ability to pay debts in the long run.
3. Assurances from government about a highest priority for bond interest payments over other expenditures (as opposed to the immoral threats to default) would protect the high rating of government bonds.
4. It looks perfectly legal (although politically unpopular probably) to use the Social Security trust fund, which is $2.7 trillion of the debt counted toward the debt ceiling. See Does Obama Have 27 Trillion. That is a huge rainy day fund to use while they trim government back.
FUD (Fear, Uncertainty, and Doubt) is being used brilliantly to fleece the public.