Though I hold out hope this is not true, it does seem to be the inescapable conclusion.
These programs will likely collapse eventually, the question is who will be around when the reform, restructuring and curtailment happen. The Democrats and their media cheerleaders are probably aware of this and in an effort to hold on to power at all costs will simply demagogue the whole thing so they retain the reigns of power now and when the time comes that dealing with this stuff is no longer an option.
Republicans, particularly considering the loss of NY 26, are probably coming to the same conclusion. Obama and the media set the trap and I suppose the GOP walked into it. Republicans took the bait and it appears to have blown up on them. A media that claimed it was time for "adults in the room" to stand up and talk entitlement reform instantly turned on them. Hussein did the same, even inviting Ryan to be present when he rolled out the Democrat medi-scare strategy. Politically speaking, the Republicans may have to just let the entitlement programs blow up and hope they are the ones standing when it comes time repair the damage. These programs are as much, perhaps more, of a third rail today as they've always been. Americans are absolutely wedded to the social welfare state and simply won't hear of changing it.
The demagoguery that you refer to has only just begun, and is nothing compared to what it will be when things start to really collapse.
I am, I think, more pessimistic than you, in that I see the entitlement programs as the tip of the iceberg. Globally, Europe, China, and Japan are in even worse shape, for a variety of reasons. Europe is collapsing, not just because of sovereign debt (and unsustainable entitlement programs), but because so many of their financial institutions are going to implode when those losses get realized. Japan has survived with a ridiculously bloated government, and equally ridiculous debt levels, by being an export-oriented nation at a time when world consumption was exploding, and by being a nation of savers. But the savings are tapped out now, and this is not a good time to be an export oriented country. This is all in addition to their obvious demographic problems.
And China is much more of a tinderbox than most people realize (economically, socially, and politically). I would not want to be there when/if the world slips into a real depression.
And in this country, we never allowed prices to revert to their norm. Even with the losses in real estate so far, the bottom line is that we have a terrible glut in housing, and taking into account taxes and the cost of home ownership, housing has a long drop ahead of it. Commercial RE is, if anything, in even worse shape. And it was only a couple of years ago that the stock market was a little over half of what it is now. When it drops, I believe it can easily test those lows. This isn’t even taking into account problems like the vulnerability of pension funds.
Basically, the loss of wealth will be staggering.
You said that “Americans are absolutely wedded to the social welfare state and simply won’t hear of changing it”. I think we are also absolutely wedded to a standard of living that is not sustainable, and I think the vast majority of the population will be taken by such surprise that they will be easy pickings for the demagoguery from the left.
As if that weren’t pessimistic enough: we also have a global just-in-time economy, which has never existed before, and is in many ways an untested framework. While it has tremendous virtues (efficiency, tolerance to shock, etc.), it also has one serious flaw: it is vulnerable to complete collapse, in a way that all other economies throughout history were not. My biggest fear is that a large enough shock in the system (such as a deflationary collapse starting in Europe), and suddenly the entire global economy pulls a Soviet Union: one day it is working, and the next it is not.
We will see. I could be very wrong on all of this. If nothing else, it is at least interesting.