Economic Outlook: Controlled spin

By ANTHONY HALL, United Press International  |  July 20, 2011 at 8:32 AM
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Spin doctors will have a field day with the deficit reduction plan in Washington, where the ability to say, "We won" is as critical as the plan itself.

This is all contingent on the passage of a plan of some kind, and that is not guaranteed yet.

Nevertheless, the plan forwarded by the Gang of Six senators that would reduce the deficit by $3.7 trillion in a decade, looks conservative and progressive at the same time, depending on the assumptions behind it.

No doubt, the George W. Bush era tax cuts slashed revenue to the point that two wars and an historic economic downturn created the bipartisan frustration now at the nation's door. With that as a starting point, Republicans could get behind the Gang of Six plan, as it would cut an additional $1.5 trillion in taxes over 10 years if it is assumed that all of the Bush era tax cuts expire in 2012.

However, given the possibility that the some of the tax cuts would continue, Democrats could point to the same bill and say the Gang of Six plan raises taxes by $1 trillion over 10 years, The Wall Street Journal reported.

The same fun house mirror could be used to explain the bill's appeal to Republicans, because it lowers tax rates, and its appeal to Democrats, because it closes critical corporate and personal tax loopholes.

President Barack Obama's second term may hang in the balance, but he also may be the only politician above the spin, as his popularity would likely do well no matter what plan was in place, so long as the Aug. 2 debt ceiling deadline was not compromised or entitlement programs, such as Social Security or Medicare were not entirely gutted in the process. At this point, a recent poll said 38 percent of U.S. voters indicated the debt ceiling should be raised, while 31 percent indicated it should not be raised. The numbers are a reversal of voter sentiment a month ago.

On Tuesday, Obama said he could support the bipartisan plan, the most appealing aspect of which is clear as crystal: It is bipartisan.

House Speaker John Boehner, R-Ohio, sought a dignified response, given his own plan to negotiate a solution crumbled more than a week ago. "This plan shares many similarities with the framework the speaker discussed with the president, but also appears to fall short in some important areas," his office said in a statement.

To date, the negotiations have left so many hash marks in the sand that it is going to take some creative spinning to sweep the ultimatums back into obscurity. The Gang of Six has blasted at least through the Republican challenge to reduce the deficit without raising revenue, as 26 percent of the plan relies on raising revenues.

But the ultimatum that looms largest remains the Aug. 2 deadline.

"I'm happy to work and use anything in the Gang of Six that we can," said Senate Majority Leader Harry Reid of Nevada. "But remember we only have 13 days -- 13 days -- and there's a number of senators who have said they'll do everything they can to stop the debt ceiling from being increased, that they would in effect allow us to default on our debt."

In international markets Wednesday, the Nikkei 225 index rose 1.17 percent, while the Shanghai composite index in China fell 0.1 percent. The Hang Seng index in Hong Kong added 0.46 percent, while the Sensex in India fell 0.81 percent.

In Australia, the S&P/ASX 200 index rose 1.83 percent.

In midday trading in Europe, the FTSE 100 index in London rose 0.97 percent, while the DAX 30 in Germany rose 0.51 percent. The CAC 40 in France gained 1.71 percent, while the Stoxx Europe 600 rose 0.19 percent.

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