I follow this debate a bit on Bloomberg and to me what seems to be
developing is a political game of chicken, with the main prize being
the next presidential election.

Political strategists are well aware that if the US economy is still
sick at the time of the next election, Obama is less likely to win
and limiting his spending is one way to achieve that. Obama is
responding by cutting the one sensitive spot where tea party
senators don't want cuts, that is military spending and threatening
to cut that even more, if they should push harder.

Personally I think that Obama has been quite reasonable. Even
wealthy Americans like Warren Buffet freely admit that the very
rich are lightly taxed in America and could easily pay a bit more.
So his first move was to cancel tax cuts for those very rich, before
cutting those earning below a quarter of a million. He also tried
to close a few loopholes such as corporate jets and other things,
but was blocked. Those new tea party senators are quite obstinate,
even old veterans like Senator McCain agree on that one.

When Bush took over from Clinton, US finances were in pretty good
shape. Bush introduced tax cuts for everyone, but then started
two wars and increased spending without funding it. Cheney made it
clear that he thought that deficits do not matter. By the time
that Bush/Cheney left office, the economy was in the gutter, the
deficit was huge and trying to repair it without Govt spending is
a pretty difficult task.

But US voters seem to have short memories. " It's the economy,stupid"
remains true and if its still weak next year, Obama will invariably
be blamed

“But US voters seem to have short memories. " It's the economy,stupid"
remains true and if its still weak next year, Obama will invariably
be blamed”

There is no IF about it. There is no way that the US economy can recover.

http://deadlinelive.info/2011/08/03/drunken-ben- Here we see Ben Bernanke sloshed at the Elwood's Corner Tavern finally admitting that the US economy is stuffed.Ben however did not take responsibility.

You tell me Saul the morality of the US Federal Reserve creating money from nothing which depreciates the US $,then has the audacity to loan it as debt to the US people.They are stealing from the US people via inflation and then further penalise them by expressing this theft as debt.

Taxes will not fix a broken economy.Heard of flogging a dead horse? Austerity just makes it worse.The fake derivative market needs to be separated from the real productive one.There needs to a Glass Stegal Act to triage the derivatives.Put a tobin tax on all financial and currency transactions.No more taxes on the real productive economy.

The author has some insightful suggestions for attacking the deficit, supported by numerical estimates of impact (although the suggestion of a federal GST would come up against the politics associated with the current levying of State sales taxes).
But the article is written as if the US is like any other country (Australia?). No mention of Empire. The bulk of federal government expenditure is on the military-industrial-intelligence-security complex. The US is omnipresent across the globe, expanded rather than contracted since the break-up of the Soviet Union, built on the fabricated 'War on Terror'. The mooted expenditure cuts include the military sector, but the likelihood is that those planned cuts will not take place.
(As a small gesture to sanity, moral as well as fiscal, the US could pull the plug immediately on the $3bn annual present to the rogue state that is Israel, and the subsidiary package to Eqypt to maintain that state as a satrap of its neighbour.)
Moreover, the fact that the US dollar has acted as the global currency post WWII (and for 40 years without gold backing) has allowed the US government atypical fiscal leverage. The ratings agencies, either utterly stupid or utterly politicised, have been missing in action.
The complementary factor is the tax structure favouring the elite. Reagan started the rot for personal taxation in the modern age. Now we have corporate tax evasion on a massive scale.
The whole edifice is dysfunctional.
Frankly, the fact that the global financial system is centred on this edifice highlights that perhaps we shouldn't care about saving it either in its present state

The United States has no hope of overcoming it's enormous debt burden. The U.S creates money within a fractional reserve banking system. As such the U.S economy must sustain continuous growth to offset the payment of interest owing on money lent into the system. Unfortunately, Saul, like most economists fails to grap the one single fact regarding economics on a finite planet and that is the ability to grow an economy when net energy is in decline. According to the International Energy Agency (IEA) Peak Oil occurred in 2006, major oil producing countries are unable to raise production due depletion of existing fields and rising populations within these countries are using more and more of their own energy resources. Without cheap energy, you cannot have growth, without growth you cannot sustain a fractional reserve banking system, thus no ability to pay off interest and debt. Welcome to a very different future, real growth is dead and is not going to return in any meaningful manner into the future

Geoff of Perth,as Ron Paul says it is ficticious debt.If the fed actually borrowed the money from someone who produced something then the debt would be real.Creating money from nothing is stealing from the people.The US Constitution says that new currency should only be created by elected Govts not private banks.Both the debt and interest should be wipped.Get rid of the US Fed since it is the cause of all our grief.The World Bank and IMF should follow suit.