It is becoming increasingly clear that that all the tax cuts will be passed and extended unemployment benefits will continue. President Obama wants a strong economy for his re-election so he is willing to sleep with the enemy in order to ensure it. The deficit will remain close to 10% of GDP and that is before an onslaught of baby boomers retire and start collecting Social Security and Medicare.
While the problems in Europe might seem foreign, it is only a matter of time before the bond vigilantes come for us. Politicians will not make hard choices unless they are forced to. I am not certain the bond vigilantes will give Obama until his re-election. At that point the adjustments that we have fought tooth and nail for the past two decades will finally happen.