Economic Outlook: Welcome to Washington

In many U.S. high schools, when a new kid comes to town, someone in the upper classes is likely to offer to sell him tickets to ride the escalator.

This week, many freshmen in Congress might feel they shelled out for escalator tickets when the Congressional Budget Office said that $38.5 billion in spending cuts pieced together for the 2011 budget, which passed in the House and the Senate on Thursday, turned out to be cuts of just $352 million.

The Washington Post explained Friday that the problem involves the background -- what the cuts are compared to. For example, if you hold up the budget to what was spent in 2010 a different figure emerges from the one you get if you compare the budget to the amount allocated to each department.

The Post uses the Census Bureau as an example. The Census Bureau in 2010 was allocated about $2 billion more than it spent, so there's $2 billion floating around and that makes a good punctuation point in a speech. There's certainly a robust sound bite in finding $2 billion that can go to lowering taxes, even if it's just money written down on a piece of paper somewhere.

In spite of the shenanigans, the House voted 260-167 to support the budget plan and the Senate agreed to the bill with an 81-19 vote. In the House, 59 Republicans said no thank you. In the Senate, 16 members of the GOP, three Democrats and one independent voted no.

One can only hope a few lawmakers were voting for more than a headline, but there is little doubt that President Barack Obama's forceful speech Wednesday at George Washington University swung some momentum back toward the White House, which needed a budget, any budget, to avoid a government shutdown.

Welcome to Washington. Tickets to the escalator are $10 this year, by the way or, as House Speaker John Boehner, R-Ohio, put it, "I'd be the first to admit it's flawed. But welcome to divided government."

In international markets on Friday, the Nikkei 225 index in Japan lost 0.65 percent and the Shanghai composite index in China rose 0.26 percent. The Hang Sent index in Hong Kong was flat, falling 0.02 percent and the Sensex in India dropped 1.57 percent.

The S&P/ASX 200 in Australia slipped 0.66 percent.

In midday trading in Europe, the FTSE 100 index in Britain gained a marginal 0.08 percent while the DAX 30 in Germany added 0.26 percent. The CAC 40 in France shed 0.43 percent and the Stoxx Europe 600 was flat, off 0.07 percent.