Economic Outlook: Motivation, D.C. style

By ANTHONY HALL, United Press International  |  July 6, 2011 at 8:02 AM
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There's a lot of rejection going on in Washington and the outcome of the defiance could be disastrous.

First came the Republicans' rejection of a possible tax hike to help reduce the nation's enormous deficit over a 10-year period.

Granted, 10 years in politics is like playing hide-and-seek and putting the blindfolded seeker in the wrong house. So many assumptions can play themselves out incorrectly. A budget deficit plan that assumes average annual economic growth of 3 percent for 10 years -- except the 3 percent turns out to be an incumbent's fantasy. This can go very, very wrong.

The next rejection was the Democrats rejecting the Republicans' tax hike rejection. Pulling this off by wiping out programs intended to help the poor meant the poor, once again, would pay the price for deficit reduction and the rich, who do not use social programs, would get off scot-free.

That said, the Republicans drew their line in the sand and the Democrats drew theirs. Then the Senate canceled the Fourth of July holiday break, which accomplished one clear thing: Everyone is now a little bit grumpier.

This week President Barack Obama said he would reject any plan that raised the government's borrowing limit for only a short term, saying, in effect, "If we're going to play chicken, then let's do it right."

"Some in Congress … want to kick the can down the road when it comes to solving the larger problem of our deficit. I don't share that view," Obama said.

Then Obama said a discussion at the White House with the top leaders of both parties from both the House and the Senate would be best served if everyone left "their ultimatums at the door."

Tempted to say, "a lawmaker with a large stock portfolio will make sure the deal gets done," was, it could be said, not entirely negated by the source of the latest call for compromise, which came from Sen. John Cornyn, R-Texas.

Why is that telling? The nation could fall into default not for lack of a deal but for lack of a reason to make one. But Cornyn, who heads up 2012 Republican Senate campaign strategy, The Washington Post reported, can supply the reason to make a deal, summed up this way: Failure to do so would turn the world's finances upside down … no response. Oh, and it might not be good for your re-election hopes. That gets some heads to turn.

In international markets Wednesday, the Nikkei 225 index in Japan rose 1.1 percent while the Shanghai composite index fell 0.21 percent. The Hang Seng index in Hong Kong dropped 1.01 percent while the Sensex in India was flat, off 0.09 percent.

In Australia, the S&P/ASX 200 rose 0.15 percent.

In midday trading in Europe, the FTSE 100 index fell 0.67 percent while the DAX 30 in Germany lost 0.32 percent. The CAC 40 in France fell 0.42 percent while the Stoxx Europe 600 lost 0.4 percent.

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