The Capitol Building in Washington, D.C.Spring is approaching in Washington, and most investors know what that means: the start of federal budget debate season and the annual ritual known as "rhetoric for dollars."

However, this year the rhetoric and its consequences could really hurt investors, as in turmoil for stock and bond markets, if Capitol Hill lawmakers and the president don't compromise and reach an agreement on the budget.

Congressional Republicans, now in control of the U.S. House of Representatives, and President Obama have until March 4 to agree on a budget or a stop-gap measure known as a continuing resolution, or another temporary extension, to keep the U.S. government funded and open. On March 4, the current stop-gap funding measure expires, and the U.S. government runs out of money.

Without an agreement by March 4, several U.S. government agencies will be forced to close, and Social Security checks, and other federal payments, could be delayed.

What's the GOP's Real Strategy?

Congressional Republicans, now in control of the House in good part due to support from voters who want federal spending cut substantially, say there won't be a government shutdown. But the latest House Republican action hardly defuses the crisis and potential fiasco.

On Wednesday, it was reported that House Republicans passed a continuing resolution that contains about $60 billion in cuts from this year's budget, fiscal 2011. Obama administration officials have already issued a statement indicating that President Obama will veto that resolution in its current form.

House Democratic Whip Steny Hoyer (D-Md.) said: "If the government shuts down, it will be the Republicans' responsibility," politico.com reported.

Senate Republican Whip Jon Kyl (R-Ariz.) said talk of a shutdown is greatly exaggerated. "The government isn't going to shut down," Kyl told Fox News Tuesday. "Nobody is talking about shutting the government down."

However, on Wednesday House Speaker John Boehner (R-Ohio), increased that probability by ruling out another, short-term, stop-gap funding bill, which would give both political parties more time to reach an agreement.

Boehner said he's "not going to move any kind of short-term [funding bill] at current levels. When we say we're going to cut spending, read my lips: We're going to cut spending," politico.com reported.

Will Republicans Repeat Gingrich's Mistake?


Further, although budget-cutting zeal from Tea Party voters and other conservatives may be pressuring congressional Republicans to slash spending at any cost, history may provide an important electoral lesson concerning the federal budget, U.S. government operations and voter attitudes.

In the fall of 1995, then Speaker Next Gingrich (R-Ga.) chose to shut down the federal government rather than pass an alternative budget, after then President Bill Clinton vetoed a Republican-crafted budget, due to its cuts in Medicare, education and environmental programs.

Gingrich blamed Clinton for the shutdown, which had two stages. But most Americans, apoplectic that the world's richest and most technologically advanced democracy, somehow couldn't find a way to maintain basic public services -- blamed the Republican-led Congress. And Clinton's approval rating rose both during and after the crisis. Voter distaste for Gingrich's government shutdown, along with a very strong U.S. economy, were factors in President Clinton's reelection in 1996 over Republican challenger, former U.S. Sen. Bob Dole.

While a government shutdown isn't likely to interrupt the U.S. Treasury Department's operations -- under most circumstances the department will still be able to issue bonds -- just the sight of federal buildings and departments temporarily closing and senior citizens upset about their missing monthly Social Security checks -- would hardly be calming for U.S. stock and bond markets.

Finding Common Ground


Of course, a government shutdown need not occur. All President Obama and congressional Republicans have to do is find common ground and do what's reasonable. President Obama can do so by outlining reasonable cuts in nonessential programs; congressional Republicans by scaling back their draconian reductions specified in the continuing resolution. Finding common ground here would also serve as a case study for responsible decisionmaking for a nation that needs to tackle the big issues of entitlement reform and taxes in the quarters ahead.

Finding common ground. Acting reasonably. True, those attributes are usually in short supply in Washington, no matter what the season.

Increase your money and finance knowledge from home

Introduction to Preferred Shares

Learn the difference between preferred and common shares.

View Course »

Timing Your Spending

How to pay less by changing when you purchase.

View Course »

Add a Comment

*0 / 3000 Character Maximum

99 Comments

Filter by:
Escalonz

One thing for sure, a government shutdown will finally stop Democratic spending...

March 24 2011 at 4:12 PM Report abuse +1 rate up rate down Reply
ugha323a

The nation can only improve if the govt shuts down. This time, stay shut.

February 21 2011 at 6:33 PM Report abuse +1 rate up rate down Reply
journey6855

I was there in 1995, I did not miss a army retirement cheeck , no civil service employeee missed thier pay check , my mother got her SS check. Only ones that got screwed were the so call "Essential personnel beccause they had to work and rest of us got a free PAID vaction, and even on site government contractors were paid. So the ones that are spreading rumors about all of this really need to get thier facts correct first.
Want to keep American jobs at home stop buying imported goods including gas also known as crude oil. Have a Nice day.

February 21 2011 at 5:48 PM Report abuse +1 rate up rate down Reply
sgentilejr

First the Republicans betray our nation by outing our own CIA agent and giving control over our major seaports to their Muslim buddies. Now the Republicans are betraying Americans again by cutting all assistance to the poorest or poor Americans. The Republicans are no better than President Mubarak of Egypt in their greed and selfishness. Their motto is "Screw the Poor, We want more".

February 21 2011 at 4:38 PM Report abuse +4 rate up rate down Reply
3 replies to sgentilejr's comment
sgentilejr

Under Bush___Between 2004 and 2008 the Republicans gave over $275 billion dollars to help rebuild Iraq and they gave Pakistan over $75 billion___now the Republicans want to take away food stamps, day care, rent subsidies, Family Planning etc. from Americans to pay for what they gave away to foreign countries. The Republicans care more about helping their Muslin buddies in Iraq and Pakistan and giving control over our seaports away to their Muslim buddies than they care about Americans.

February 21 2011 at 4:35 PM Report abuse +1 rate up rate down Reply
3 replies to sgentilejr's comment
sgentilejr

Republican gave tax cuts to the Already super wealthy and the Republicans gave tax cuts to Big Businesses which is moving jobs out of the USA. Now the Republicans want to cut spending by taking from the poorest or the poor by taking heating help away and taking day care away so they can hold a job.
Yet the Republicans refuse to cut Farming subsidies even though the farms are now getting all time record high prices for their crops. Republican motto is: Screw the poor, We want More.

February 21 2011 at 4:30 PM Report abuse rate up rate down Reply
2 replies to sgentilejr's comment
bansijeff

Here's an article from 2007 about the Republicans' tax cuts to the super-wealthy, which was recently pushed through Congress for renewal by the new Republican House majority -
http://www.epi.org/publications/entry/pm120/

February 21 2011 at 5:00 PM Report abuse rate up rate down Reply
warrenbent

Let's say every Friday on your neighbors payday you meet your neighbor in his diveway as he returns home from work and steal his paycheck. Then after a while you begin to feel guilty so you start only meeting him in his driveway every other Friday to steal half his paychecks. Would you have "given" your neighbor anything?

February 22 2011 at 9:21 AM Report abuse rate up rate down Reply
scottee

can't wait! congress needs to take a pay cut to the national average wage and they need to forego their benefits and pay into social security, buy their own IRAs, and pay their own health insurance premiums! how about it???

February 21 2011 at 2:12 PM Report abuse +7 rate up rate down Reply
1 reply to scottee's comment
melgoodmel

Blaming the rebublicians solely if the government shuts down is ludacris. BOTH parties need to work at some sort of a compromise. If the government does indeed shut down I personally think that congress and the presidents pay should be suspended as well. why are we paying then if they cant do their job? In the real world you don't get paid if the job does not get done. See how fast their tune changes when money is at steak. This country is in DEEP crap no matter what party you belong to.

February 21 2011 at 2:10 PM Report abuse +2 rate up rate down Reply
5 replies to melgoodmel's comment
ccm989

O good. Shut down the Federal Government and then old people won't receive their Social Security checks. Serve those folks right for voting for Tea Party candidates when their check doesn't come in. You reap what you sow.

February 21 2011 at 12:17 PM Report abuse -5 rate up rate down Reply
1 reply to ccm989's comment
danbol1237

Mr. Lazzaro should go back to journalism school to learn there is a differnece between news and editorial columns. His liberal biase comes out through his entire artcle.

February 21 2011 at 11:18 AM Report abuse +1 rate up rate down Reply