The Debt Ceiling.

The big argumemt over the debt ceiling rumbles on in Washington. Failing to raise it would be a disaster because cuts deep enough not to exceed the ceiling would have to be massive and immediate. While spending does need to come down cutting 40% in one year is not possible without damaging the economy more.

Anyway the deal that Obama and Boehner eventually come up with is going to involve spending cuts and once again demonstrates that the most effective combination for fiscal responsibility is a Democratic president and a Republican congress- the combination that produced welfare reform in the 990s for example.

With a Republican president a Republican congress will happily forget any notion of limited government and support massive increases in healthcare entitlements, military expenditure and education spending. Equally a Democratic president with a congress of his own party will spend like Charlie Sheen in a brothel.

So while Obama doesn't like being forced to offer cuts, he will in a few years be claiming credit for them as Clinton does for the policies forced on him in the 1990s which led to higher growth.