A lot of the problem here is that after the 2010 elections, Obama decided his path to reelection was through deficit hawkery. Back when Clinton took this tack, he did it through the "Reinventing Government" initiative and welfare reform. Obama wants to do it by allowing cuts to Medicare and raising the retirement age.
But those are actually very unpopular ideas, the fact of which should have discouraged Obama from pursuing them. Instead he decided to let the Republicans appear to twist his arm into doing it. In his mind, he's getting it both ways. On the one hand, his administration is pursuing a draconian austerity program which all the "responsible grown-ups" assure us is what "independent" voters want. On the other hand, he gets to pretend like he's been backed into a corner by crazy Tea Partiers which keeps his sycophants sufficiently "fired up" to shout down his liberal critics.
I'm sure the President thinks he's handling this brilliantly but he's wrong. For one thing, it's a losing electoral strategy. He's planning to sell himself in 2012 as the guy who really wants to cut your Medicare but is too ineffectual to accomplish that against a party of true believers who really want to cut your Medicare and will do whatever it takes to make it happen. Also cutting Medicare is a really shitty idea.
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