Avoiding default is the easy part for America. It's mapping out the economic future that's hard

We’re less than ten days away from a debt default by the US government.

It’s a story that has kept a remarkably low profile. The euro’s own existential crisis is part of the explanation. Wall Street has collectively spent far more time thinking and worrying about how Greece and Ireland will repay their debts than how the deficit on its own doorstep will be made good.

But it’s largely because no one has believed default will happen. America’s own debt drama has been one in which investors have been willing, if not happy, to leave the stage to the politicians. We haven’t seen the sharp rise in bond yields that finance ministries in Greece, Portugal, Ireland and, more recently, Spain and Italy, have become accustomed to. A quick glance at where US government bond prices closed on Friday doesn’t speak of impending panic.

The absence of pressure from Wall Street helps explains why talks in Washington have remained fruitless for so long. It’s worth briefly recapping the twin but linked objectives of the talks between President Obama and the Republicans and Democrats in Congress. The first aim to is to ensure America’s debt ceiling is raised from its current $14.3 trillion by August 2. Failure, as we’ve been repeatedly told and will hear again, means the government won’t be able to pay all its bills, including the interest payments on its borrowings.

The second and far more ambitious objective is to strike a deal to tackle America’s debt, which the Congressional Budget Office predicts could reach 190pc of US gross domestic product in 2035. It’s little wonder that Obama and Congress have struggled with this one because it requires answering questions that most American politicians would choose to duck – at least until after next year’s elections. Can most Americans expect their children to enjoy a higher standard of living? Can older Amercians expect the same health and retirement benefits their parents enjoyed? Can America still afford to be the world’s military superpower?  

It was little surprise when talks between Obama and John Boehner, the top Republican in Congress, collapsed under the weight of these questions late on Friday. So that leaves a matter of days to achieve the far more modest objective of raising the debt ceiling and avoiding default. As negotiations enter a final, fraught week expect to see:

1, Markets take a greater role in this drama. Investors know a bounce in bond or stock markets isn’t going to give the talks the sense of urgency they clearly need.     

2, Plenty of worried head-scratching among investors because no one really knows to how to protect themselves if there is a default. US government bonds are the oxygen of the world’s financial system. Pollute them and well…

3, Talk of America losing its AAA credit rating to increase. Ratings agency Standard & Poor’s warned earlier this month that preserving it, and the lower borrowing costs that go with it, would depend on striking a serious long-term deal on the deficit. Raising the debt ceiling without it would, according to S&P, spell trouble.

4, Increasing signs of concern and anger from US businesses if a more ambitious deal isn’t agreed. No one believes another 12 months of uncertainty and argument over the deficit will help an economy that slowed in the first half of the year.