Gov’t Careening Towards Shutdown. What’s Next?

This could be the straw that breaks the back of the U.S. economy

   

Obama, Reid and Boehner just came out of another emergency budget meeting to head off a government shutdown … but STILL no agreement!

Will they finally make a deal when they meet AGAIN at 7 p.m. tonight?

Maybe they will; maybe they won’t. Either way, we — the American people — will continue to pay the price for our leaders’ incompetence and cowardice.

To most of us, it’s like watching an old episode of “The Three Stooges”:

President Obama is blithely ignoring the recommendations of his own deficit-reduction commission, offering a budget deal rife with fuzzy math that does next to nothing to reduce the deficit.

Senate Majority Leader Harry Reid, who couldn’t pass a budget even when his party was in control of both houses of Congress — still refuses to acknowledge that the $1.6 trillion deficit is a problemin the first place.

And House Speaker John Boehner is demanding that the Democrats agree to cuts that are a drop in the ocean compared to the massive deficit: Cuts so minuscule, they will have no perceivable impact whatsoever on Washington’s debt crisis.

Sometimes, you have to laugh just to keep from crying.

Make no mistake: If the government shuts down, it will be far more severe than the shutdown of 1995-96.

Back then, America was at peace, and the U.S. economy was on fire. The tech boom was driving stocks sky-high, and unemployment was near historic lows.

Investors felt rich; their stocks were up, and their homes were soaring in value. Credit was freely available to businesses and consumers alike.

King Dollar was still on his throne. And for investors looking for the ultimate in safety, there was only one game in town — U.S. Treasuries.

Today, America is embroiled in not just one, but THREE wars. The U.S. economy is still reeling from the most severe financial crisis since the Great Depression. Thousands of banks are still wounded; some in intensive care. Some of our largest and oldest firms are still barely clinging to life.

Unemployment is still sky-high. Consumer and business credit is anything but plentiful. The real estate depression has destroyed nearly all the equity in most people’s homes and continues to undermine prices.

The U.S. dollar is being beaten, bruised and bloodied by out-of-control Fed money-printing.

2011 deficit 257x300 Gov't Careening Towards Shutdown. What's Next?And there’s one more huge difference: The 2011 budget deficit that’s threatening to shut down our government is more than 10 times larger than the deficit in 1995.

Given these realities, there’s little doubt that a government shutdown could prove to be the straw that breaks the back of the U.S. economy.

Here’s the important thing to remember: Whether this latest extension passes or not … whether the government shuts down this weekend or not, I have no doubt that this is only the first volley in an all-out war in Washington that could rage for at least 21 more months!

Remember: All this controversy is over the budget for 2011 — for this fiscal year only — and it’s all about a mere “nick” in the budget, not true cuts. 

The fight over the next budget — the one Congress should have resolved months ago — hasn’t even begun yet. And when that battle begins, Congress will be staring, blind sighted, at a proposal advanced by Representative Paul Ryan to cut $4 trillion in spending.

That’s as much as 100 times the amounts being proposed today!

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Article printed from InvestorPlace Media, http://investorplace.com/investorpolitics/government-shutdown-whats-next/.

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