Addressing the possibility of the GOP-led Congress not voting to raise the debt ceiling, Austan Goolsbee, President Obama’s top economic adviser, histrionically asserted this month: “This is not a game. The debt ceiling is not something to toy with. If we hit the debt ceiling, that’s . . . essentially defaulting on our obligations, which is totally unprecedented in American history. The impact on the economy would be catastrophic.”

In context, his comments are more than a bit hypocritical.

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Key words: next year. Not 2012, and certainly not 2013.

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What our great nation just watched was the Democratic Party preview its political strategy for the next two years. It also watched a united Senate GOP defeat that approach, though not before a handful of Republicans considered walking straight into the Democratic trap. The whole episode was an early peek at the GOP’s biggest challenge going forward.

That challenge is, as it always is, spending. Republicans lost in 2006 primarily because of their profligacy, and they won this year primarily because they swore off that profligacy. It’s that simple—and don’t think Democrats don’t know it. President Obama, Harry Reid and Nancy Pelosi understand that the surest, quickest and most delicious way to undermine their opponents is to tempt them into renouncing their own promises of fiscal responsibility. The added beauty is that Democrats continue to get exactly what they want: bigger government.

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The best medicine can taste awful.

The governments of the U.K., Ireland and Greece have embarked upon ambitious, sometimes painful efforts to restore their economies to sustainable growth paths. Of the three, the U.K. and Ireland took their medicine, following the lessons of past efforts to pull national economies away from spiraling debt. Greece decided the taste was just too awful, and its irresponsibility threatens every euro-zone country.

The history of the modern welfare state is replete with examples of fiscal calamities. In good times, politicians expand government spending as far as soaring revenues will let them. In bad times, when the bubble bursts, countries find themselves in a ditch.

Numerous fixes have been tried over the years, and economists have created a cottage industry studying them. What has emerged is a consensus about what works, a consensus that is about as strong as any in the macroeconomics literature.

The antidote to fiscal crisis is fiscal consolidation, a dramatic change in spending and tax policy that reduces the indebtedness of a nation. Such consolidations have relied on varying degrees of tax increases and spending reductions. Some have successfully reduced debt, some haven’t. The data tell a clear story: What works is cutting government spending.

A series of influential papers by Harvard University economist Alberto Alesina and various co-authors found decisive evidence that successful consolidations rely almost exclusively on spending reductions, while unsuccessful consolidations seek to close 50 percent or more of the gap with tax increases.

Cutting Is Key

A recent study by the International Monetary Fund supports the principle that cuts, particularly to entitlement programs, are key.

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Today’s auction of 10- and 30-year US Treasury notes and bonds won’t tell us as much about the US economy as auctions used to — because the Federal Reserve has started buying up the notes as part of Fed Chairman Ben Bernanke’s “quantitative easing” effort.

Until recently, a plentitude of bidders for long-term US government debt was a sign the US economy was strong. But Bernanke is buying that debt in what he says is an effort to make the economy stronger.

This has a lot of people nervous — and the news that the Fed may spend up to $800 billion on this, rather than the $600 billion figure initially given, doesn’t help.

Even if the purpose is to stimulate the economy, increase stock prices and lower interest rates, the effect of Bernanke’s policy may be monetizing the nation’s growing debt — printing new money to finance deficit spending.

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Ireland had little choice but to accept European Union help to avoid a breakdown in the financial system. There was no other way to rescue the banks without placing the burden on Ireland’s 4.5 million people.

At the peak of the financial crisis, the U.K. and U.S. were able to provide guarantees worth trillions of dollars to support their banks, though the actual costs turned out to be much lower as confidence was quickly restored. The full extent of the guarantee was largely hypothetical. They succeeded because they could make a credible promise of support — Ireland could not.

The Irish banking meltdown, so soon after the euro-area stress tests this year, raises questions over the reliability of these assessments, which failed to put enough emphasis not just on bad debts but on the risk of relying on the wholesale market for funds. The tests, which covered some banks but not others, will cast doubt on the strength of the remaining European banks.

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DUBLIN—With doubts swirling about the solvency of the Irish state in early September, Finance Minister Brian Lenihan summoned a dozen senior government and bank officials to a conference room nicknamed the “torture chamber,” a nod to its history as a venue for painful meetings.

For two years, Ireland had poured money on a raging banking crisis, to no avail. Each estimate of the rising price of rescuing Ireland’s banks turned out too low.

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During a recent press conference, President Obama blamed George W. Bush for the nation’s fiscal condition. “When I walked in,” he declared, “wrapped in a nice bow was a $1.3 trillion deficit sitting right there on my doorstep.” Earlier this year he asserted that “we came in with $8 trillion worth of debt over the next decade.”

Neither statement is correct, according to the Congressional Budget Office (CBO). True enough, the outgoing Bush administration bequeathed big deficits to Mr. Obama. The expected 2009 deficit was $1.19 trillion, not $1.3 trillion, however—and the actual deficit for 2009 came in at $1.41 trillion, meaning that the new president added some $220 billion to the total.

Far more significant, however, was the president’s misstatement that Mr. Bush and the Republicans left the country with $8 trillion of debt over the next 10 years.

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Like a drunk at a party, the bond market is starting to bump into tables, telling off-color jokes, talking too loudly and spilling drinks. The smart guests will steer clear before he starts screaming at his shoes and wanders off to pray to the porcelain.

Did you think a 950 billion-euro ($1.2 trillion) emergency backstop cobbled together by the European Union and the International Monetary Fund in May was the answer to Europe’s debt crisis? Were you expecting central banks to turn off the money taps as normal funding service resumed in the banking industry? Had you hoped the heavy hand of government would only briefly slide its interfering digits into the folds of finance?

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