What allows us to rack up debt when everyone else has to cut spending? The dollar is the reserve currency of the world. This allows us to print money at will to pay our debts and it's exactly what the Fed is doing right now, "monetizing debt." Essentially, the government runs a deficit and sells bonds to finance it. If foreigners don't want to buy all the debt, the Fed (a branch of the U.S. government) buys the debt by crediting the government with the cash and putting the debt on it's balance sheet as an asset. The Fed has effectively printed money, albeit electronically. This is a very dangerous practice and is not sustainable. It has me very worried and holding a lot of gold.
Stiglitz puts it well in this quote. Definitely read the whole article.
The dollar has long been the reserve currency—countries held the dollar in order to back up confidence in their own currencies and governments. But it has gradually dawned on central banks around the world that the dollar may not be a good store of value. Its value has been volatile, and declining. The massive increase in America’s indebtedness during the current crisis, combined with the Federal Reserve Board’s massive lending, has heightened anxieties about the future of the dollar. The Chinese have openly floated the idea of inventing some new reserve currency to replace it.