Ezra Klein discussed this back in december. The Democrats' thinking back then was not to raise the debt ceiling during the lame duck session so that they would force the GOP to themselves propose radical cuts during their new majority, and then the Dems could ride the outrage all the way to the next election.

What's important to understand about the debt-ceiling vote -- where Democrats and Republicans will either strike a deal to increase the Treasury's borrowing cap or the country will collapse into default -- is that it's not like Democrats have simply forgotten about it. It's not that they haven't realized that they could tie it to the tax cuts, which Republicans want and which will add $900 billion to the debt. It's that they simply don't want to. “Let the Republicans have some buy-in on the debt. They’re going to have a majority in the House,” said Harry Reid. “I don’t think it should be when we have a heavily Democratic Senate, heavily Democratic House and a Democratic president.”

The theory goes something like this: Republicans will demand sharp spending cuts in return for lifting the debt ceiling. Let them. "Boehner et al have had the luxury of proposing all sorts of ideas that bear no relation to reality," says Jim Manley, Reid's spokesman. "Next year, they’ll have to lay it all out. No more magic asterisks, no more 'we’ll get back to you.’ "

It seemed like a bad strategy to me back then and I said so. It was basically a lets-let-the-GOP-destroy-the-country-so-we-can-win-an-election strategy. I.e. the Dems win by abdicating their responsibility to the country and letting the GOP have their way.