Low Yields
Yields on Treasury securities are hovering near record lows as the U.S. benefits from its status as a safe haven for investors during a period of financial turmoil in Europe.

Politicians will be tempted to delay needed efforts to deal with the debt because borrowing costs are low, says Robert Litan, director of research for Bloomberg Government in Washington. "We have a lot more freedom to be irresponsible," he says.

That's a risky path, says MacGuineas, who has former politicians and policy officials from both the Republican and Democratic parties on her group's board. "Playing chicken with the credit markets is a dangerous game," she says.

A surge in borrowing costs is the likely scenario when debt gets out of hand. Rogoff, Reinhart and her husband, Vincent Reinhart, a former Fed official who's now chief U.S. economist for Morgan Stanley, authored a paper earlier this year that examined 26 separate episodes in 22 countries in which central government obligations rose above the 90-percent-of-GDP mark.

Growth Hit
In the most common scenario, debt above that threshold led to higher interest rates that in turn created a drag on growth, the researchers found. In other instances, the economy slowed because of the need to raise taxes and cut spending, particularly on public investment. Either way, the hit to growth was inescapable.

"The long-term risks of high debt are real," the economists wrote in their paper, published in April on the website of the National Bureau of Economic Research.

Advanced economies with debts above the 90 percent threshold grew on average 2.3 percent a year, compared with 3.5 percent growth in lower-debt periods, the research showed. The periods of elevated debt lasted an average of 23 years. In spite of the dangers, the economists said, they're not advocating rapid reductions in government debt during times of extremely weak growth and high unemployment.

David Fuller's view It is a reasonable guess that nothing will happen regarding deficit reduction this side of the Presidential Election. Thereafter, the lame duck Congress with have the rest of the year to agree on a plan for avoiding the fiscal cliff. This should be in place before the inauguration in January.

The historic evidence, not surprisingly, shows that huge budget deficits are a recipe for slow GDP growth.