"The federal government's mammoth, and growing, forward-looking budget imbalance" has so far been met with yawns from capital market investors, the Financial Analysts Journal reports in its March/April edition (see abstract here). 

The bulk of the article--titled "Do the Markets Care about the $2.4 Trillion U.S. Deficit?" and coauthored by a senior fellow at CATO and a Wharton professor--examines not whether markets do care, but rather why they ought to care.  Some highlights (all emphases added):

"Programs such as Social Security and Medicare shift a large amount of resources between generations regardless of whether they are financed with a dedicated payroll tax or out of general revenues.  Entitlement programs are financed by by transferring funds from young workers to older retirees, which reduces national savings, increases interest rates, reduces wages, and generates an important debate over generational fairness."

"[U]nless the growth in future outlays in soon substantially curtailed, future generations will be taxed dearly to pay for the nation's entitlement programs."

"If the U.S. federal government properly accounted for its explicit and promised liabilities, it would record a national debt of $64 trillion and a national deficit of $2.4 trillion in 2006."

"Under current OMB assumptions, health care costs per capita will grow significantly faster than GDP per capita through 2025."