Once again, the two old wings of the political establishment do business as usual in Washington. In the tax deal between Obama and the Republicans – passed with the help of a majority of Democrats – they all cut taxes, especially on the rich, and extended unemployment benefits. In short, the government keeps spending mountains of money to subsidize a deeply recessional private capitalist economy, to prevent it from spiraling down into depression. The result is a further expansion of the deficit that so recently was a pretend concern for so many candidates.
The establishment pandered to corporations and the rich with lower taxes. To win the necessary broader support it also pandered more modestly to everyone else with tax cuts too. Therefore, even more of government spending will now have to be borrowed. Big businesses and the rich will oblige by lending the US government much of the money the government has decided not to take from them in taxes. So too will enterprises, rich people, and governments in other countries. All Americans will need to pay yet more billions in taxes in the years ahead to pay interest to all those lenders. That is, all Americans will pay more taxes to service the small minority of Americans rich enough to lend to an ever-more-debt-dependent Uncle Sam.
Soon enough, the political establishment will come under pressure from all those who do not want to pay those rising taxes. Then the cry will go up that "we" cannot afford the public services the government provides. So pressure will mount to cut social security, Medicare, college student loan supports, etc. The mass of Americans will be told they must choose between higher taxes or cut services. It will be neatly repressed or forgotten that today's tax cuts coupled with massive crisis-caused government spending bear much of the blame for the government's costs in servicing its debt explosion.
Maybe then the establishment will yet again evade the political costs of facing that choice and postpone it by another round of borrowing. This can continue until lenders will no longer risk further loans without much higher interest costs. They will then demand an "austerity" program to free up and earmark the money that must be paid to lenders. That's exactly what those lenders have been doing to Greece and Ireland and are threatening for many other countries. Austerity arrives when the mass of people is taxed more and served less by a government that instead pays out ever more of its scarce resources to the richest enterprises and citizens among them. What is conveniently forgotten is that those enterprises and wealthiest citizens became the government's creditors each and every time the government chose not to tax them instead.
With its huge and rapidly growing debts — made worse by Obama's tax deal with Republicans — the US moves quickly toward austerity while the political establishment and the media mostly pretend all is well. That was the same path followed by Greece, Ireland, and so many others.