Ezra Klein writes:
So long as the political system is working reasonably well, we can get out from even quite a lot of debt. But the more it breaks down --- the more the market sees things like the deficit commission rejected by its Republican sponsors in Congress, the more it hears threats to repeal the deficit reduction in health-care reform, the more it seems likely that Democrats will become just as unreasonably obstructionist when they become the minority --- the more it has reason to worry.
I doubt that investors worry more when they hear threats to repeal ObamaCare or its Medicare cuts, which few took seriously in the first place. Given that the non-partisan Congressional Budget Office, the non-partisan chief actuary of the Medicare program, and even the International Monetary Fund have all expressed skepticism that those cuts will take effect, I expect investors have already discounted claims that ObamaCare will reduce the deficit.
More generally, the problem is not that the political system is breaking down. That system is working pretty much the same way it always has and always will: it promotes irresponsibility. Republicans and Democrats are merely responding to the incentives created by the system in which they operate. (If they didn't respond to those incentives, the political system would throw them out and replace them with people who do.) If investors don't already understand that, the sooner the better.
This is why responsible people want to take responsibility for our health care, etc., out of the hands of politicians.