Both houses of Congress passed a stopgap bill that would extend funding for the federal government until March. This marks yet another stopgap bill that gives more time for Congress to come to a more permanent consensus on long-term funding plans. It seems, however, to have little effect on the overall markets, raising questions about whether or not investors truly care about fears of a shutdown.

American Action Forum President Doug Holtz-Eakin joins Yahoo Finance to discuss the recent measures taken by Congress, what they mean for investors, and what it means for the federal government's handling of its financials.

Holtz-Eakin lays out what should concern investors most: "The major concern should be that if the government gets shut down, the rating agencies take this as another piece of evidence that the US is unable to manage his finances and you get another... negative watch, downgrade to the credit rating. That's a big deal, and investors should care about that. The larger issue here is the capacity of our political system to manage the federal finances."

For more expert insight and the latest market action, click here to watch this full episode of Yahoo Finance Live.

Editor's note: This article was written by Nicholas Jacobino

Video Transcript

- So Doug, are the markets right to shrug this off again? I mean, that's sort of become the reaction, right, which is a government shutdown. OK, maybe it'll happen. It'll probably be averted. We've got another potential deadline come March. At what point does it become something that you think investors can't ignore?

DOUG HOLTZ-EAKIN: I don't think a government shutdown per se is a great threat to markets to the economy as a whole. We've had shutdowns. They have a really tiny impact on the overall growth path of the economy. Mostly, it consists of shifting things around in time. You put them off and accomplish them later, and and so you recover anything you lose during the shutdown. So I don't think that's a big concern.

I would say the major concern should be that if the government gets shut down, the rating agencies take this as another piece of evidence that the US is unable to manage its finances and you get another negative watch downgraded the credit rating. That's a big deal, and investors should care about that.

The larger issue here is the capacity of our political system to manage the federal finances. And on a short term basis that is funding the government, it doesn't seem to be able to do that. And on a long-term basis, controlling the debt, it has been unable to do that. Both are really not good signs for the US.

- And Doug, obviously, the US has gotten a bit more comfortable with running a deficit and having a bit of lax fiscal discipline because you have had the Chinese and the Saudi Arabia's of the world buying these treasuries. What would be the tipping point, though, that would let us know that we're actually in trouble here that the US does need to wake up and come up with a longer-term solution rather than these sort of stopgap measures and get some more fiscal discipline?

DOUG HOLTZ-EAKIN: Well, there are two scenarios. One is the one you just described, which is world capital markets looking at the United States and saying, OK, we no longer believe that you can repay principal and interest in a timely fashion, and you're not getting any more money, and that's the sovereign debt meltdown that we have seen around the globe, Greece, Portugal, Argentina.

That's a long way off for the US. It remains a reserve currency. The world gives us a lot more rope, and we and we use it to our own detriment. So I don't think that's the right way to think about it. I think there are other things that will trigger it first.

Number one the US really does have a growth crisis. In the 20th century up to 2000, GDP per capita grew at about 2.4% per year. And in the 21st century, it's been 1.4% per year, that means we've foregone about $19,000 a person in income in the 21st century. We'd have $19,000 more each. I would like my 19. I don't know about you.

That's the problem people have in seeing the reaching the American dream, the stagnation we feel. And it gets compounded by the fact that the big programs they're counting on, Social Security and Medicare notably, both have big financing problems. So we're going to get more political crisis out of poor growth and more sort of political crisis out of these programs financially failing, then we're going to get out of World capital markets. I think those will come first. Those need to be dealt with.