The federal government posted its largest monthly deficit in history in February at $223 billion, according to preliminary numbers the Congressional Budget Office.

Yet Democrat Senate Majority leader Harry Reid refuses to pass a budget that would include Republican proposals to cut the Federal budget by $61 billion a year.

The proposed cuts amount to less then two percent of the $3.8 trillion Federal budget. This year’s deficit is $1.4 trillion (that’s $1,400,000,000,000), which means that this year’s tax revenue will cover only 2/3rds of Federal Government spending. And while it’s obvious that even the proposed cuts are much too small, President Obama and the Senate Democratic leadership seem prepared to shut down the government rather than pass a budget with these modest reductions.

Because of this political impasse, we have no Federal budget and we’re limping along week to week with “Continuing Resolutions” that cut our deficit a paltry $6 billion at a time.

Instead of a serious debate about a looming financial catastrophe, we see the Democratic leadership spreading fear about a government shutdown if an agreement to reduce government spending cannot be reached. Their aim seems to be: replay the political theater of 1995 and shift blame for a shutdown to Republicans even though Democrats would be the responsible party.

The state of our political debate has now deteriorated to the point that serious people in the Republican controlled House, who would attempt to deal responsibly with the Country’s fiscal train wreck, are threatened with blame for doing the right thing.

Isn’t this madness?

I’ve spent the last 35 years in the finance and investment industry and if this scene were being played out in business, the owners would fire management immediately and bring in a turnaround expert to get expenses in line with revenues, or else the next conversation would be about calling the lawyers to begin filing for bankruptcy.

Jack Welch, who delivered a 23 percent compounded annual shareholder return over his 20-year tenure as CEO of General Electric, articulated these six rules to guide his organization:

1. Face reality as it is, not as it was or what you wish it to be.
2. Be candid with everyone.
3. Don’t manage…lead.
4. Change before you have to.
5. If you don’t have a competitive advantage, don’t compete.
6. Control your own destiny or someone else will.

I believe these rules can be readily applied to today’s budget crisis.

“Facing reality as it is” means that we need to deal seriously with total federal debt that has reached $14 trillion and deficits projected to be $1.4 trillion. Some people wish we could go on spending without limit but we cannot. Even taxing every last dime from “the rich” would not make a dent in these numbers.

“Candor” would be an honest debate about real issues. See the above.

“Leading, not managing” is about providing meaningful solutions, not squabbling over legislative minutia. Outside of Washington, there are not many people who could tell you what a “continuing resolution” is, but there are a lot of people who do understand massive deficits and the consequences of failing to deal with them. Even the Republican proposals are a small fraction of what is needed.

“Changing before you have to” starts with remembering the message voters delivered in November 2010. Republicans won a massive victory because they promised serious action to address our fiscal problems. If Congress does not heed these voters concerns, look for a lot of incumbents to be voted out of office in 2012.

How hard is it to change? Cuts starting at the $100 billion level – still only seven percent of this year’s budget deficit - need not be that hard nor so politically challenging. Last month the General Accounting Office, a non-partisan government watchdog, reported that “reducing or eliminating duplication, overlap, or fragmentation could potentially save billions of taxpayer dollars annually and help agencies provide more efficient and effective services.” Senator Tom Coburn has estimated that the GAO’s recommendations amount to over $100 billion a year. Moreover, the GAO looked at only a fraction of the federal budget and only a handful of missions of varying scope.

We have now reached the state where we have GAO bureaucrats telling us how and where to cut bureaucracy.

“Competitive advantage” no longer lies with politicians who know how to play the Washington budget games. Voters are on to them. The competitive edge is with courageous leaders who propose real solutions to our very real fiscal problems.

And “we must take control of our own financial destiny now, or someone else will.” If we want to get serious about cutting the deficit, the GAO has given us a great road map. Let’s start there. We need to stop governing by “continuing resolutions.”

A government “shutdown” can be avoided if President Obama and Senator Reid get serious about cutting government spending and reducing the size of the federal government.

Mr. Walton served as Chairman and CEO of Allied Capital Corporation for 13 years and is a trustee of the American Enterprise Institute.