Krugman on the political economy of US debt

A bit late for me to mention, but in his January 1 column, Paul Krugman reflects on the misinterpretations of government indebtness. In so doing, he raises two interesting and - importantly! - related points.

Jan 8, 2012

First, he discusses the costs imposed by taxes, "if nothing else by causing a diversion of resources away from productive activities into tax avoidance and evasion." Of course, in Krugman's view taxes need to be levied (mainly) to pay the interest on debt; economic growth and time will take care of the rest.

Second, he considers the importance of stable, "responsible" governments. What does responsibility mean in this respect? In Krugman's view, it is the willingness "to impose modestly higher taxes when the situation warrants it."

So is it just willingness? Or is it a different worldview that explains why some are afraid to raise taxes (modestly, as Krugman says) or not? Let's turn then, to the 'wisdom' of Wikipedia. There is a clear distinction between default, insolvency and bankruptcy. The latter, in most cases, is not relevant for governments. As Wikipedia states, insolvency "is a legal term meaning that a debtor is unable to pay his or her debts." Default, on the other hand, "essentially means a debtor has not paid a debt which he or she is required to have paid." Is that what it comes down to, then? One party is afraid of insolvency, the other of default?