Economic crises have a habit of erupting just when politicians face the voters. The reason is simple: They are born of long-festering problems such as lax lending, excessive deficits or an overvalued currency, and these are precisely the sort of problems that politicians try to ignore, hide or even double down on during campaign season, hoping to delay the reckoning until after the polls close or a new government takes office. Perversely, this only worsens the underlying imbalances, making the mess worse and the cost to the economy — in lost income and jobs — much higher…

For now, there’s enough risk of Japanese-style stagnation and deflation that U.S. interest rates could remain very low for a while yet. But if that risk fades, investors in U.S. Treasury bonds will want to know how we’ll get our deficits and debt under control — and could demand higher interest rates to compensate for the uncertainty. By then, though, the 2012 campaign may be upon us. The Republican nominee will assail Obama’s fiscal record and promise a determined assault on the debt. Obama will respond by blaming George W. Bush and promising to unveil his own plan once he’s reelected. Neither will commit political suicide by specifying which taxes they’ll raise or which entitlements they’ll cut.

Will investors trust them, or will they start to worry that the endgame is either inflation or default, two tried-and-true ways other countries have escaped their debts? If it’s the latter, we’ll face a vicious circle of rising interest rates and budget deficits, squeezing the economy and potentially forcing abrupt and painful austerity measures.