The politicos seem hellbent on repeating the 1995 experience and shutting down the federal government starting Friday. A series of frantic powwows at the White House between President Barack Obama and congressional leaders have failed to secure a deal. And with the budget debate shifting from fiscal 2011 to the 2012 budget -- where the discussion has shifted from billions to trillions in spending cuts -- the two parties are headed straight for a brutal, drawn-out fight.

With the economy and corporate profits looking increasingly fragile as inflationary pressures build and consumer confidence plummeting, now is just not a good time to furlough nonessential government workers and shutter national parks.

The good news is that history shows a government shutdown doesn't really have an impact on the stock market. The bad news is that it could have a meaningful effect on Q2 GDP growth (Q1 growth is already looking pretty weak). And, of course, the acrimony sets the stage for an epic fight over the Treasury's $14.3 trillion debt ceiling, which will be reached "no later than May 16" unless Congress acts to extend it. Here's what to expect.

First, let's talk stocks. Jason Goepfert at SentimenTrader earns a living data-mining market history to see what the past can tell us about how stocks react to certain events. Goepfert went back and looked at the 17 shutdowns that have happened since 1976. Most lasted only a few days, and only one lasted longer than a week.

During the shutdowns, stocks showed a slight negative edge that peaked a week after the shutdown: The S&P 500 fell 65% of the time for a median loss of 0.2%. By a month later, stocks were back to normal and performance was more or less random.

The problem is that, unlike during the shutdowns of the mid-1980s or the mid-1990s, the economy is on a fragile footing, as I discussed in this blog post. Already, analysts are looking for Q1 growth to slow to just 1.5% -- down from 3.1% in Q4 2010 and below the rate that's needed to create jobs and pull down the unemployment rate.

Paul Ashworth, the chief U.S. economist at Capital Economics, notes that depending on how long a shutdown lasts, it can knock 1% or more off annualized GDP growth. With growth slowing, it wouldn't take much to get a quarter of economic contraction -- not unlike what the British are experiencing after enacting tough budget austerity measures.

For now, bond investors seem more worried about the risks of the budget fight jeopardizing the debt ceiling debate with U.S. Treasury bonds selling off hard over the past few days. The iShares 20+ Year Treasury Bond ETF (TLT) has sliced through uptrend support and its 50-day moving average for the first time since October. That marked the beginning of a long five-month sell-off in Treasury bonds and a steady increase in long-term interest rates. If people were concerned about the risk of a double-dip recession, they'd be snapping up bonds instead of selling them.

Between an economic slowdown and a potential debt default, traders are obviously focused on the greater evil.

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