The world's developed countries face growth and employment shortfalls, while developing countries are confronting huge challenges in adapting to increasingly volatile capital flows while adjusting their growth patterns to sustain economic development. Yet, America's political dysfunction has come to marginalize these (and other) crucial issues. It is all very difficult to fathom.

The threat of a default on U.S. sovereign debt has been lifted — for now — but the deeper problem persists: For America's Republicans and Democrats, negotiating a fiscal grand compromise appears to carry higher costs than playing a game of brinkmanship, even at the risk of default. Surely this involves a collective miscalculation of the longer-term costs.

Setting aside the external impact on the global economy, the damage to domestic stability and growth from anything other than a short-term technical default would be so severe that the political system (along with both parties) could not withstand the backlash. Domestic and foreign holders of U.S. Treasury bills would regard a deliberate, unforced default as a betrayal of public trust.