GOVERNMENT DEBT, THE ECONOMY, WHAT THE HECK IS GOING ON? late July 2011 As I write this article, on July 28 2011, we don't know how or when the federal debt crisis will be resolved and what kind of damage will be caused by such political shenanigans. However I look on all this as a sort of good thing, like growing pains. You see dear readers, the nation cannot continue on this path of unbridled spending, waste and massive debts. However it plays out, we will spend less and reduce our debt - eventually, and it's important to keep some facts in mind: No debt agreement is ever cast in stone, nor does it usually last longer than the next congress or administration, sometimes a lot less. Future congresses and administrations are not bound by it. There's lots of pandering and political nonsense going on. One member of congress suggested on the senate floor that it was a race issue because our president is black. Folks, that's another ridiculous statement. On the same day, I saw video clips of President Ronald Reagan in the eighties and President Obama a few days ago, saying that Social Security checks would be threatened if their debt bills are not passed. Both were being disingenuous (When politicians say something that is not true, it's called disingenuous, when ordinary folks like you and I do the same, it's called a lie.) Still it was interesting, a right wing conservative president (Reagan) and a left wing liberal (Obama) spouting the same untrue scare tactic for the exact same issue nearly three decades apart. Reminds me of that old French saying: The more things change, the more they stay the same. Even if legislation is not passed in time, the world doesn't end. Social Security checks will go out, the military will be paid and our monthly debt bill will also be paid. It's like a household budget with too much month left over at the end of the money. You pay your mortgage, utilities, food and you're late on Mastercharge. So you pay it late, cut back and get back on track, same thing with government. Yes, it's not a good thing, but it's not Armaggedon either. Make no mistake about the importance of this fight in the long run. We must cut back on stupid, wasteful spending and get on a balanced budget. To do otherwise is to invite financial disaster in the future for our kids. Just look at the mess in Greece, Portugal, Italy and many other places - that will be us in a few years if we don't fix it. On the other hand look how well the economy did during the Clinton administration when the budget was balanced, The Bottom Line: It's a long, cross country relay race, with the financial baton passed on from administrations and congresses, not a 50 yard dash. The markets and investments: It's going to be a short term blip. It might drop for a while or it might jump up if the situation is resolved favorably. Either way it will be a short-lived event. Stay invested for the long term, don't play that classic fool's game of trying to time the market for the short term. I believe the markets will finish the year ahead and I'm in good company with this. None other than Allen Sinai, America's top economist, forecasts the Dow and S&P 500 will end the year up by 11% to 15% So don't fall for the panic from CNN, and CNBC. Watch Two and a Half Men instead and worry about who will replace Charlie Sheen. Coming next: Economic and jobs update.