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Politics vs. Economics: Why John Mauldin Is Worried

No matter what the topic of debate on Capitol Hill these days, one thing is for certain: It's going to be brutal.

While "gridlock is good" was a mantra of the 1990s, the chasm between today's political parties is causing great uncertainty for individual investors and businesses, says John Mauldin, author of Endgame.

Gone are the days of relying heavily on long-term valuations, inflation/deflation, currencies, price-to-earnings ratios and business plans. "It seems like we have to pay more and more attention to politicians and what they are doing and less and less to our economic theory," he writes in his weekly e-letter, Thoughts from the Frontline.

Historically, politicians did not engage in too much "stupid" behavior, Mauldin says. The most extreme thing Congress might do is marginally change tax rates. "The problem [today] is we've come to the endgame," he tells Aaron in the interview above. "When you are in a deleveraging period, which we are in now, the rules change."

As the U.S. nears its borrowing limits, everyone agrees the problem needs to be fixed; the big question is how. "How we fix this problem is incredibly important for our investment and our finances, our well-being, how our business run and what our markets look like," he says.

If we keep kicking the can down the road then the U.S. becomes Greece, he cautions. (See: Shades of 2008: A Greek Default Won't Be 'Contained', John Mauldin Says).

Mauldin is optimistic that Congress will eventually come together to work through this spending crisis. "I think there is a 75% chance that we actually fix it and by fix it I mean that we get on a glide path to where we balance the budget in 5 to 6 years."

Or, least he hopes for his own sake. "I want to know the rules of the game and I want to get back to my game, rather than watching politicians," he says.

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