The Republicans - or the Tea Party element of them - have been holding the economy hostage for political gain. It's a bargaining chip and not only are they holding the economy and Goverment hostage but also the Republicans too with their our way or no way philosophy which is nothing about the ordinary man and woman on the street but everything to do with their own politial ends, less government, no Medicare, no food checks and the like. Crazy conservatism at it's best and one our own Cameron would fare well in.

As for the bipartisan committee to decide on areas of cuts, tripartisan would be more apt with the Tea Party element of the Republicans and I dread to think what would be 'agreed'.

Couldn't Obama have just signed an executive order on raising the ceiling anyway?

The level of govt. spending in the US is currently at approx. 24-26% GDP, which is much higher than it was during Eisenhower's two terms (in reply to Nalliah Thayabharan's erroneous comment). The dramatic increase in the annual deficit and accumulated debt has its origins in the irresponsible Bush tax cuts, the unfunded prescription drug benefit program (also Bush's), and two unfunded wars (Bush yet again). When the bottom fell out of the economy at the end of Bush's second term, funding TARP and the indispensable stimulus spending that Obama and the Democrats got through the Congress, as well as paying for a big increase in unemployment benefits (more than 9% unemployed), and sundry other expenses associated with preventing the meltdown of the US and world economies helped bring the debt up to its current level.
If you examine the compromise debt limit law closely, you will learn that practically all the cuts are pushed way off until the end of the 10 year period. For example, only about $20-30 billion in actual cuts will occur this year -- hardly a sum to get worked up about, in a $4 trillion annual budget (pace Krugman; you should slow down and take a breath, the hyperventilating is bad for your health). Medicare, Medicaid, and Social Security recipients are protected from cuts, if and when they occur. Tax increases and other spending cuts are ostensibly on the table, but remain uncertain. The so-called triggers will impose spending caps and cuts, in the event that the super committee of Democrats and Republicans appointed under the law can't agree to a mix of cuts and taxes, and if imposed, will hurt Defense spending as much as domestic spending. But, and here is what people unfamiliar with the wily ways of Washington politicians don't yet understand, the back-ended cuts won't come into effect until several future Congresses have come and gone. Nothing binds these Congresses from repudiating (or more likely, simply ignoring) the law that has just been passed. Happened before and will most likely happen in this instance as well. As for Obama now playing on Tea Party ground, well, perhaps. It is telling, however, that the American public doesn't support the Tea Party; they rather like Obama's approach, his reasonableness, and his patience. As for getting re-elected, he is now free of the threat of repeating this debt limit farce next year, and, on the well-tested US political principle that nobody can't beat somebody, should sail through to a second term. Then we can tote up the winners and losers in this fracas.

Suppose there is that argument. He could have used whatever
there was available to roll over the Republicans, sacrifice himself and at least make a statement then he would have looked a man of principle.
As it is, he's caved in to right wing nutcases whose primary objective is to hack away at entitlements for those who don't happen to be wealthy.

For everyone who's confused about Obama's powers in this, here's a summary:

If no bill was agreed to by tomorrow night, Obama could legally declare a "national emergency" and then raise the debt. He could have also used the 14th Amendment. But many think that's unconstitutional.

Why didn't he sign an Executive Order to raise the ceiling and be done with it? Because that would mess up his "nice centrist guy" image. He's running for re-election with no opposition and millions so far in campaign funds. Just like 2008, he's being positioned by the party Powers that Be. Now he can say under my leadership the parties came together to save the country and so on. Lots of soundbites yet to come.

Is this a solution? No it's not. Both Obama and Cameron refuse to admit that the global toxic debt (which includes national debt) can never be paid back. Which means that all major Western countries should write off the debt and start over.

If they did that, the banks will scream. Wall Street and the hedge funds will all threaten to move to Geneva. The Tories will lose lots of campaign donors.

However, if we don't write the debt off, do you seriously believe that the politicians will ever solve this? No they won't.