Economic Outlook: Bugs Bunny antics?

By ANTHONY HALL, United Press International  |  June 22, 2011 at 9:17 AM
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If the U.S. government were subjected to a vote of confidence this week, how would it do?

That depends on who was voting. Investors might say, hold on a minute … the Republican party is holding the government's debt ceiling hostage to budget cuts … and what's this? Sen. Kent Conrad, D-N.D., chairman of the Senate Budget committee, now says the cutting of $2 trillion by 2021 would not be enough, given the cost of borrowing.

Sound familiar? A year ago, the European Union struggled with the concept that government debt in Greece had grown to unsustainable levels. It also confronted the point that Greece had concealed the depth of the problem from the European Commission.

What is the depth of the debt problem in the United States? Aiming for $2 trillion in cuts, Conrad says, is woefully inadequate, The Washington Post reported Wednesday.

"A $2 trillion package sounds big," Conrad said.

Stopping right there. Yes, it does.

"But I think most serious observers will tell you it takes a package of at least $4 trillion to fundamentally change the trajectory we're on," he said.

"In the context of our debt, which is nearly $15 trillion and is headed for $25 trillion, $2 trillion over 10 years does not do the job."

If this is a political ploy, it's a good one, trumping Republicans who have declared "$2 trillion or bust!" The rationale that refusing to raise the debt ceiling over $2 trillion now sounds like Bugs Bunny changing his tune from "does," to "does not" in the middle of an argument in which, predictably, the opponent always gives a contrary answer.

Greek Prime Minister George Papandreou survived a parliamentary vote of confidence on Tuesday, which put Greece on its own budget-cutting trajectory.

Papandreou must figure out how to cut billions of dollars from the budget, having just nailed a 155-143 vote in Parliament, with lawmakers voting precisely along party lines. Papandreou's Socialist party holds a 155-145 majority in Parliament and people in the streets of Athens booed when the vote was tallied late Tuesday night, The Washington Post reported.

In international markets Wednesday, the Nikkei 225 index in Japan added 1.79 percent and the Shanghai composite index in China posted a 0.11 percent gain. The Hang Seng index in Hong Kong rose 0.04 percent and the Sensex in India fell 0.06 percent.

The S&P/ASX 200 in Australia gained 0.54 percent.

In midday trading in Europe, the FTSE 100 index in Britain slid 0.21 percent while the DAX 30 in Germany rose 0.18 percent. The CAC 40 in France shed 0.1 percent and the Stoxx Europe 600 fell 0.45 percent.

Topics: Kent Conrad
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