Shortly after the federal government reopened and the debt-ceiling standoff was temporarily resolved, a European friend -- an admirer of the U.S. -- asked me plaintively, "What is going on over there?" What indeed? I was tempted to say it was just another bout of partisan squabbling that didn't signify much. In the markets there was no "debt crisis." The yield on very short-term Treasuries (the ones due to be repaid immediately) spiked. But the benchmark 10- and 30-year issues barely budged, and stocks stayed close to all-time highs. Investors never believed a debt default was a serious possibility, and they were right. Despite all that, we can't afford to ignore what's happening in Washington. Political dysfunction now represents the biggest threat to the U.S. economy. However you look at it -- short term, medium term, or long term -- the gridlock is crimping growth and undermining the country's prospects. Worst of all, there's no end in sight.