Last week’s budget deal in Washington, D.C., which prevented yet another government shutdown, confronts Americans with a grim new reality: trillion-dollar deficits as far as the eye can see and federal debt that, even in percentage terms, could surpass the highest in U.S. history. This, I believe, has been a big contributor to the sharp run-up in yields on the 10-year Treasury note TMUBMUSD10Y, -1.20% since the beginning of the year, which in turn has rocked stock markets globally, pushing the Dow Jones Industrial Average DJIA, +1.70% and S&P 500 SPX, +1.39% into a full 10% correction. But investors in both the stock and bond markets have yet to grasp the longer-term implications of mind-boggling deficits and an onerous, permanent debt burden. It’s no longer a question of “whether” the massive debt will start to squeeze the economy; the only issue is when, and how we’re going to manage it. Ironically—and many commentators already have pointed this out—this comes when Republicans control the White House and both houses of Congress.via