The "two-party" system is NOT fiction created by Dems and Repubs. It's the
natural result of our election system. People--voters--tend to utilize
tactical voting, where voters may vote for an option they perceive as having a greater chance of winning over an option they actually prefer (e.g., a left-wing voter voting for a popular moderate candidate over an unpopular leftist candidate, or in order to help defeat a strong right-wing candidate.)
Even if a third party became strong, it does so at the expense of one of the existing two major parties, and the system will re-stabilize into two-party mode after a three-party interlude (as what happened when the Republicans rose up in the 19th century, at the expense of the Whigs).
So it's not some Dem/Repub conspiracy, though both clearly are fine with the system as is. There are ways to change it (adopting, for example,
proportional representation systems like is done in much of Europe), but all voting systems have shortcomings of one kind or another, and any such change would require a MAJOR overhaul of the Constitution, and that simply isn't going to happen (especially since both parties in charge do NOT want the system to change).
So where are we headed? It doesn't look good to me. The McCain/Feingold campaign finance reform has reduced the power of moderates in each party (see: Joe Lieberman), while talk radio and blogs tend to promote extremism on both sides. Partisanship used to "end at America's shores", but clearly that's not the case anymore--politicians will criticize the other party simply to make them look bad, with no regard to what's actually right or how the infighting looks to the rest of the world (particularly those that would do the U.S. harm). Meanwhile, current crises (terrorism in general, N. Korea, Iran) and future problems/crises (Social Security, medicare, trade and current account deficits, China, potential oil crises, potential use of nukes against U.S. cities, Europe, or Israel, etc.) need a federal government that can work to resolve problems. I'm not sure of our ability to deal with such issues. So I'm thinking of buying property in Costa Rica...time to go brush up on mi Espanol.