When Republicans started threatening to force a federal default if their demands for reduced government spending were not met, the goal was to scare their political rivals. As it turned out, the Democrats never flinched, but the markets did.
In August 2011, congressional Republicans demanded that the projected federal budget deficit be cut by $4 trillion over 10 years or they would not vote to raise the debt limit.
Democrats, defending pet spending programs, resisted. Talks to end the dispute collapsed and the U.S. Treasury came close to the first debt default in U.S. history. This was averted by a last-minute deal that was closely followed by Standard and Poor's decision to cut the U.S. credit rating below its top tier for the first time.
The episode triggered the highest reading in the CBOE Volatility Index, sometimes known as the fear index, since the 2008-2009 financial crisis.
In October 2013, when another debt-limit fight coincided with a 17-day government shutdown, the VIX was more muted. Just a month ago, another episode barely registered on it.
A similar pattern of declining market impact is evident in yields on one-month Treasury bills, the debt security most vulnerable to short-term payments disruptions.
Closing yields, measured in thousandths of a percentage point in recent years with short-term rates effectively at zero, spiked to just under two-tenths of a percentage point during the 2011 episode. They jumped to a third of a point during the 2013 shutdown as uncertainty reigned, but this year's debt limit debate in late October saw a rise of only a tenth of a point.
Spikes in the cost of insuring U.S. government debt against default also moderated with each recurring dispute, even in 2013, for both one-year and five-year credit default swaps.
Ryan takes over
Reduced financial market worry about the debt limit has coincided with increased hesitancy among some Republicans to create standoffs over the issue, though demand for spending cuts remains high in the party.