U.S. Treasury bond investors -- who most directly bear the risk of a government default yet have not shown alarm about the potential for a debt-ceiling confrontation -- are suffering from “beaten bond market syndrome,” Holtz-Eakin said. “We’ve been beating them so hard that they’ve acquiesced to the violence and have come to expect that there will be an 11th hour deal, so they are fine until the 11th hour,” he explained. Still, he added, “the failure to resolve the fiscal side of things prolongs the inability to accomplish an exit from extraordinary monetary policy.”

The debt limit has been periodically raised since its creation in 1917, when Congress and President Woodrow Wilson authorized the Treasury to issue long-term securities to help finance entry into World War I. Since 1960, Congress has raised or revised the limit 79 times, including 49 times under Republican presidents, according to the Treasury Department, noting the U.S. never has defaulted on its obligations.

Lower Yields

Yields on 10-year Treasury notes, a benchmark for everything from mortgages to corporate borrowing costs, were at 1.84 percent yesterday at 5:00 p.m. Washington time, down from more than 5 percent in 2007 before the worst financial crisis since the Great Depression and compared with the average of 6.79 percent since 1980.

Lawmakers in both parties say it’s not the way to make policy either, as the extension of the farm subsidies illustrates.

In the absence of a broader rewriting of the five-year farm bill, Congress moved Jan. 1 to simply extend the old one -- including payments that farmers acknowledge are no longer politically palatable with commodity prices high and the government starved for revenue. The program, created in 1996 to help keep farmers in business in times of low commodity prices, pays them regardless of whether or how much they produce.

Farm Subsidy

Farmers “recognize that we have taken enough bludgeoning in the press that they are no longer possible,” Mary Kay Thatcher, a lobbyist for the American Farm Bureau Federation, said of the direct payments. The group supports a revamped farm law that would “put some of that money toward deficit reduction,” she added.

That prospect was pushed off with enactment of the New Year’s Day deal, which extended farm programs through Sept. 30. Also postponed was what came to be known in agriculture circles as the “dairy cliff” -- a threatened sudden increase in milk prices to $7 a gallon that would have resulted from expiration of current agriculture law.

While the U.S. Department of Agriculture could have held off the price-increase at least temporarily, the current dysfunction incentivizes interest groups, lawmakers and agencies to manufacture emergencies to increase their chances of getting priorities addressed, said Ryan Alexander, president of the anti-government waste group Taxpayers for Common Sense.