Big news. Eric Cantor has just made it official: The GOP leadership is prepared to agree to a three month debt ceiling hike. This is a major de-escalation of the crazy and effectively means Republicans have all but taken the threat of default off the table completely.

First, the key bit from Cantor’s statement:

We must pay our bills and responsibly budget for our future. Next week, we will authorize a three month temporary debt limit increase to give the Senate and House time to pass a budget. Furthermore, if the Senate or House fails to pass a budget in that time, Members of Congress will not be paid by the American people for failing to do their job. No budget, no pay.

Here’s why this matters: This increases the debt ceiling to authorize borrowing to pay the country’s bills well into April. That punts the debt limit deadline until after the deadline for funding for the government to run out, which is on March 27th. In other words, Republicans will now use the threat of a government shutdown along with the coming expiration of the sequester to extract the spending cuts it wants. Presuming this all gets resolved by then, or soon after, it means the threat of default is no longer a factor. This will all but certainly get resolved in advance of this three month deadline, and a long term debt limit hike will get attached to that agreement.

On the debt ceiling, at least, this is a complete cave. As noted below, the mere willingness to raise the debt ceiling temporarily was itself an acknowledgment by Republicans that the threat of default gave them no leverage and that they had essentially lost this fight. Now the three month extension means that in practical terms, it’s essentially been removed from the talks entirely.

The GOP will now stage the battle to get the spending cuts it wants around the threat of a government shutdown. Remember, GOP aides have explicitly conceded that instigating a confrontation will be necessary in order to placate House conservatives and Tea Partyers who wanted to flirt with default in order to get their way, but will ultimately be forced to accept the fact that this just ain’t gonna happen. Remember that quote to Politico?

House Speaker John Boehner “may need a shutdown just to get it out of their system,” said a top GOP leadership adviser. “We might need to do that for member-management purposes — so they have an endgame and can show their constituents they’re fighting.”

And so it looks as if we’ll now have to deal with the threat of a government shutdown, rather than default, so House conservatives can “get this out of their system.”

As of now, there’s still an open question of whether this temporary extension can pass the House. John Harwood quotes one GOP Rep. saying that he isn’t sure the votes are there among Republicans — so it remains to be seen whether House conservatives will accept this surrender, or whether we’re looking at another fiasco like the nixed “Plan B” vote.

And make no mistake: Just because the GOP blinked in the debt ceiling fight doesn’t mean the battle over the government shutdown will be easy. As Steve Benen notes, the possibility of a shutdown — and the coming expiration of the sequester — are real threats that pack a real punch.

But the GOP leadership has signaled that for all practical purposes, it is ready to remove the threat of default from the discussions. That’s very good news for the country. Coming after the GOP cave on the fiscal cliff, that means the score right now is: GOP hostage taking, zero; refusing to buckle to GOP hostage taking, two.