I have been trying to decipher the ongoing wars over the 'deficit ceiling' in the US.  Essentially, as you may have read, the Republicans in Congress are raising the prospect of forcing a default by refusing to raise the 'deficit ceiling', which would allow the US to borrow sufficient money to pay its bills.  They insist that they will only support an increase if the administration assents to a plan to repay the deficit with 100% spending cuts and no increase in tax revenues. 

There is precedent for this sort of conduct.  The creation of fiscal crises in order to force a transformation of class relations (as mediated through the public sector) is a mainstay of neoliberal ruling classes since, perhaps, the New York City fiscal crisis.  It's certainly how the Republicans have attempted to force through such changes in Wisconsin.  Even so, playing chicken with the government's ability to pay its bills might strike you as insanely counter-productive even from the perspective of the US ruling class.  A default would be deeply damaging to US capitalism.  And certainly, Wall Street is not happy with the Republicans' conduct, despite the latter's claim that they are merely deferring to the mighty bond markets.  It's important to appreciate just how far Obama has gone to meet the Republicans' demands.  He is quite insistent that trillions of dollars of 'savings' (cuts) need to be found over the next decade, and recently offered the GOP a $4000bn 'grand bargain', comprising deep cuts to social security and medicare - which has further alienated his base and shocked some on the left of the Democratic Party.  All the Democrats want is the ability to raise some of the money from tax revenues, and for a little bit of that to come from the richer tax payers.  As Shawn Whitney points out, there doesn't appear to be a difference of principle between Obama and his Republican opponents, merely one of degree. In fact, the strident articulation of neoliberal orthodoxy by the administration is one of the reasons why centre-left economists such as Paul Krugman and Robert Reich keep bashing their heads against their keyboards.

There is a rumour, being encouraged by the administration, that by supporting cuts Obama is cannily positioning himself as a 'moderate' to win over frightened independent voters.  This seems superficially plausible, and feeds into the narrative, disseminated on both sides of the Atlantic, that Obama is trying to steer a sensible course between right and left whose silly ideological squabbles risks destroying the economy.  Yet governments always claim a pseudo-democratic mandate for policies they intend to pursue anyway by claiming that they're beholden to the voters.  The same governments, you tend to find, are quite happy to force through unpopular policies, while claiming that the issue is too important to treat as a political football (meaning it's too important for democracy). 

Obama will probably have no difficulty being re-elected, not because he has delivered for his voters, but because he has delivered for capitalism.  Yes, capitalism is now operating at a much lower growth rate, with a larger reserve army of labour.  But profitability has made a recovery, and some of the worst has been avoided, even if this does mean that there is a glut of unproductive capital that hasn't been destroyed.  (The Hayekians in the Republican Party are particularly exercised by this).  Jared Bernstein, a former Google exec who has moved through the revolving doors connecting silicon capitalism to the White House (I am assured I'm wrong about this, see comment thread), points out that the distributive trends under Obama's watch have been as terrible for wages as they have been a boon for profits, and provides this graph:

Note what's happened here.  Financialization has tended to mean not the dominance of financial corporations over industry, but rather the emergence of industrial and service firms as autonomous financial actors.  They tend to fund their investments from their own retained profits rather than from bank lending, and those profits have been increasingly augmented by financial holdings.  A classic example was GM making 40% of its profits from financial investments.  So, though industry is still sluggish, productive investment is low, and unemployment is settling at a higher new plateau (notably, the Obama administration accepts that this reflects a 'natural' or 'structural' rate of unemployment), the revival of Wall Street has boosted profitability.  

The result is that the US capitalist class is rallying behind Obama's re-election campaign.  His 2012 campaign manager has recently announced that Obama raised "$86 million for the first quarter - shattering previous fundraising records by incumbents, dwarfing the totals of the GOP field, and besting the campaign's own $80 million target".  The Republicans, as far as I'm concerned, are taking a dive this time.  The candidates they are fielding are heavily weighted toward the lunatic right, and the grandees don't appear to be disciplining the reactionaries ahead of the election.  As a consequence, no matter how much Obama disappoints his own base, his well-financed campaign, unchallenged in the Democratic Party, combined with revulsion over the Bachmanns, Santorums, Gingriches and Pawlentys, will probably ensure victory.  So, I'm saying that the dance-off between Obama and the Republicans is not mainly about the election.

What's really happening is that Obama is using the Republican right as a weapon against his own base to deliver policies that his class allies favour.  Yet he has no intention of allowing the GOP to force a default, and seems to be intent on avoiding a completely cuts-based approach to the deficit.  And he has the class power of Wall Street backing him up.  Apart from anything else, there's the strange relationship with Chinese capitalism to think about.  The US hasn't completely gone down the route of austerity in the way that EU ruling classes have, in part I think because the US-PRC axis which has basically driven global growth depends on America borrowing to buy Chinese products, while China ensures a profitable investment climate for overseas capital.  Defaulting, undertaking excessive or premature 'fiscal consolidation', or hitting consumer spending too hard, would presumably put that dynamic in some danger.  In other words, I think what's happening here is a relatively sophisticated and partially choreographed example of class praxis, with the political conditions being created for the rolling out of an austerity project with a degree of flexibility and pragmatism built in.  The deficit wars, from the White House's perspective, seem to be largely about putting manners on the Republican far right while using them to neutralise popular opposition to the coming capitalist offensive.