Wednesday, April 6, 2011

Economists: Gridlocked Congress 'Playing With Fire' As Failure To Legislate Could Devastate Economy

Economists: Gridlocked Congress 'Playing With Fire' As Failure To Legislate Could Devastate Economy

Political infighting in Washington may seem irrelevant to many Americans. But in the coming weeks, as Congress attempts to pass a budget and debates whether to increase the federal debt limit, these rivalries now have the potential to devastate the U.S. economy.

If lawmakers don't reach an agreement to fund the government by Friday, an array of programs will shut down. The freeze, if it lasts for several weeks, could wound Americans' confidence enough to tip the economy into recession, Mark Zandi, chief economist of Moody's Analytics, said last week.

But even that scenario wouldn't be as damaging as if the government defaulted on its debt, a consequence that could come sometime in the next several months if lawmakers, locked in a political stalemate, fail to increase the federal debt limit.

A government shutdown has the potential to cause a recession if it lasts long enough, experts say. A default would likely ravage the economy almost immediately. Both could be caused by gridlock in Congress.

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