Paul Krugman has a good analysis of the current state of affairs, and says that what we have is not a debt crisis.
No, what we’re having is a political crisis, born of the fact that one of our two great political parties has reached the end of a 30-year road. The modern Republican Party’s grand, radical agenda lies in ruins — but the party doesn’t know how to deal with that failure, and it retains enough power to do immense damage as it strikes out in frustration.
Since the 1970s, the Republican Party has fallen increasingly under the influence of radical ideologues, whose goal is nothing less than the elimination of the welfare state — that is, the whole legacy of the New Deal and the Great Society. From the beginning, however, these ideologues have had a big problem: The programs they want to kill are very popular. Americans may nod their heads when you attack big government in the abstract, but they strongly support Social Security, Medicare, and even Medicaid. So what’s a radical to do?
The answer, for a long time, has involved two strategies. One is “starve the beast,” the idea of using tax cuts to reduce government revenue, then using the resulting lack of funds to force cuts in popular social programs.
It’s a dangerous situation. The G.O.P. is lost and rudderless, bitter and angry, but it still controls the House and, therefore, retains the ability to do a lot of harm, as it lashes out in the death throes of the conservative dream.
Our best hope is that business interests will use their influence to limit the damage. But the odds are that the next few years will be very, very ugly.
His article is worth reading in full because I think he has got it exactly right and we need to brace ourselves for what is to come.