Wonkbook: It’s time to downgrade America’s political system
By Ezra Klein and Evan Soltas, Published: October 16 at 8:41 am
What you see with the Fitch and S&P calls is that the market price on the U.S. political system doesnt reflect what market participants are coming to believe about it: that a once capable and reliable system is now dysfunctional and unpredictable.
That raises the possibility that a pivotal event could move markets dramatically because traders are prepared to believe, and to begin trading on, a much more pessimistic assessment of Americas political system. If everyone were moved to act on that belief simultaneously -- by a debt-ceiling crisis, for example -- the results could be earthshaking.
Spectacular crises arent the only way a political system can fail. A Congress that cant avoid own-goals like sequestration, that can't routinely legislate to address problems like aging infrastructure, and that misses opportunities like immigration reform will, over time, meaningfully harm the countrys growth prospects. And it will do so in a way thats hard to notice, and thus hard to fix: People dont much miss the three-tenths of a percentage point worth of growth they didnt have that quarter. But compounded over time, its a disaster.
Crises can happen slowly, too. We can't say we weren't warned.
http://www.washingtonpost.com/blogs/wonkblog/wp/2013/10/16/wonkbook-its-time-to-downgrade-americas-political-system/