Economic Outlook: Elections open doors

By ANTHONY HALL, United Press International  |  Updated Nov. 8, 2012 at 9:36 AM
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Who won the national election? That's right: Republicans in the House of Representatives.

Republicans held onto a majority in the House, but Speaker John Boehner, R-Ohio, still saw the writing on the wall. And that prophetic graffiti said lawmakers must learn to work together.

So he did what GOP nominee Mitt Romney could not do, which is to translate the phrase "close loopholes," into something with a touch less jargon and a touch more substance.

Before the election, "close loopholes," as pronounced by Romney, meant "hire lawyers." Now, it means revenue. The era of the verbal fine print perfected by the GOP candidate, who could inhale and say "if necessary," at the same time, appears to be over.

What investors saw Wednesday was little of that. Investors quickly interpreted the national election as what it looks like on the surface, which is gridlock in capital letters.

There is always a carrot and a stick in an election, sometimes subtle, sometimes not. Romney's carrot was tax breaks for all, including the wealthy. President Barack Obama's carrot was an extension of middle class tax breaks and a payroll tax break, which the White House let known loud and clear it was considering.

The economic stick both candidates used was the so-called fiscal cliff, which is the mandate -- no kicking the can down the road this time -- to cut spending and raise taxes to reduce the federal deficit using a plan neither Republicans nor Democrats like.

What will the re-elected Obama give up in order to get around the impasse? It may well be his repeated assertions that the wealthy must pay a greater share.

The Wall Street Journal said Thursday that, while Boehner was giving an inch of ground, agreeing that more revenue might be acceptable, Obama was reaching out to congressional leaders with the message that it was time to work together. What was missing from these phone conversations was any mention of higher taxes for the rich, the Journal said.

"In order to garner Republican support for new revenues, the president must be willing to reduce spending and shore up the entitlement programs that are the primary drivers of our debt," Boehner said Thursday.

Sounds like the door is open, if only just ajar.

In international markets Thursday, the Nikkei 225 index in Japan lost 1.51 percent, while the Shanghai composite index in China shed 1.63 percent. The Hang Seng index in Hong Kong dropped 2.41 percent, while the Sensex in India shed 0.3 percent.

The S&P/ASX 200 in Australia lost 0.72 percent.

In midday trading in Europe, the FTSE 100 index in Britain added 0.24 percent, while the DAX 30 in Germany gained 0.37 percent. The CAC 40 in France rose 0.69 percent, while the Stoxx Europe 600 climbed 0.41 percent.

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