A functioning political system is a necessity for a strong economy

Want to understand why government debt is bad? Read Paul Krugman's awesome blog post:

[I]f...interest rates are at...zero...why should we worry about government borrowing? After all, doesn’t that mean that the government can borrow [money without paying any interest]?...

[I]f you do the arithmetic of debt service, that really does seem to suggest that debt isn’t a problem...Suppose that we add debt equal to 100 percent of GDP, which is much more than currently projected; servicing that debt should cost only 1.4 percent of GDP, or 7 percent of federal spending. Why should that be intolerable?...

[T]his benign view of debt isn’t just hypothetical: countries have, in reality, run up immense debt/GDP ratios without going insolvent: see the history of Britain [in which debt has exceeded 200% of GDP twice without causing a sovereign default]...

So what’s the problem? Confidence. If bond investors start to lose confidence in a country’s eventual willingness to run even the small primary surpluses needed to service a large debt, they’ll demand higher rates, which requires much larger primary surpluses, and you can go into a death spiral.

So what determines confidence? The actual level of debt has some influence — but it’s not as if there’s a red line, where you cross 90 or 100 percent of GDP and kablooie; see the chart above. Instead, it has a lot to do with the perceived responsibility of the political elite.

What this means is that if you’re worried about the US fiscal position, you should not be focused on this year’s deficit, let alone the 0.07% of GDP in unemployment benefits Bunning tried to stop. You should, instead, worry about when investors will lose confidence in a country where one party insists both that raising taxes is anathema and that trying to rein in Medicare spending means creating death panels.

This is something that most non-economists (and possibly many economists) don't seem to realize. Government debt is a problem to the extent that people don't trust the government.

Krugman is absolutely right that the Republican party has been the main group lowering Americans' trust in their government over the past three decades. Democrats have discarded their old tax-and-spend ways in favor of fiscal responsibility and centrist policies, even as Republicans have embraced ballooning deficits, slapped down any effort at fiscal restraint, and even explicitly suggested defaulting on our sovereign debt.

But the Republican party is only the proximate cause. The fundamental cause of our political paralysis is a deep social divide between those Americans who demand that this be a white evangelical ethnic nation-state, and the larger but disunited collection of non-white and non-evangelical groups who are determined not to be permanent foreigners in their own country.

(Warning: prepare for slight - but only slight - exaggeration...)

As Howard Dean once tried to explain, the GOP has become the instrument of the white evangelical bloc. This bloc hates taxes because they think their tax money will mostly go to non-whites, whom they perceive as non-American; hence, the GOP blocks any attempt to balance the budget by paying taxes. But, in a seeming paradox, white evangelicals (who are, on average, almost as poor as blacks) benefit a great deal from continued government safety-net spending (remember "keep the government's hands off my Medicare"?); white evangelicals also see themselves, rightly or wrongly, as forming the backbone of the U.S. military, and so refuse to allow defense spending to be cut. Meanwhile, any and all government regulations and bureaucracies are targeted for destruction, because these are seen as inevitably being tools of the non-white + non-evangelical majority.

So what we get is a white evangelical bloc who demands eternal massive deficit spending and paralysis of essential government functions. Is this against their long-term interests? Probably so, but in the short term, the idea of supporting a multi-ethnic, multi-relgious nation is simply a deal-breaker for them. And so our national debt is a problem, because a government cannot work when 25% of the populace is implacably opposed to having a working government. The war to balance the budget is simply a continuation of the Civil War of 1861-65.