John Cassidy's view of the budget debate:

The big question is whether the bond market will afford Obama the time he is asking for. So far, foreign investors have basically given the United States a pass, as reflected in the low interest rates that the Treasury pays on ten- and thirty-year bonds. If investors really suspected that the U.S. was likely to mimic Greece or Ireland and go bust, they would be demanding much higher rates. In recent months, however, bond rates have been edging up. 

This partly reflects faster economic growth and expectations of the Fed raising the short-term interest rate, but it may also reflect growing nervousness over the U.S. fiscal outlook. (Last month, the credit rating agency Moody’s warned it might cut the Treasury’s AAA rating.)

Nobody can be sure how things will play out. The optimists (Paul Krugman) and pessimists (Niall Ferguson) both have valid points to make. Even now, the U.S. enjoys safe-haven status. Many investors tend to go along with Churchill’s edict that after exploring all the other possibilities the politicians in Washington will eventually get their acts together. But confidence in the United States is by no means guaranteed. Financial crises, almost by definition, are unexpected.

His "gut feeling is that Obama will get lucky, and the bond market will continue to be cooperative, at least for another couple of years."

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