Economic Outlook: Budget talk blues

By ANTHONY HALL, United Press International  |  Nov. 26, 2012 at 9:59 AM
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Budget talks in Washington are threatening to put stock markets on a short leash, much as painfully slow bailout talks in Europe have in recent years.

It took so long for European leaders to agree on a program for bailing out Greece that by the time the first loans were approved the funds sent to Athens went to help a budget mess that nobody could recognize anymore.

Europe began assembling the second rescue program before the first was played out and studied, in part because the long delays had allowed the Greek economy to contract even further, such that few of the decimal points appeared to be in the right place anymore.

All those headlines that pronounced Germany willing to help were, by then, stretched so thin that Chancellor Angela Merkel's optimism was embarrassing the country's less optimistic finance minister. In time they began to sound like they came from different countries, let alone work in the same administration.

The White House has now issued a new report that warns the so-called "fiscal cliff," if it comes around, will be responsible for a 1.4 percent drop in the country's economic growth, which is hovering near 2 percent as it is.

After stock values took a sharp post-election dive, economists are now linking worries about the potential budget implosion to the health of retail during the holiday shopping season, which means concern has shifted to include consumers, as well as investors.

Of course, manufacturers are also looking over their shoulders, wondering if it is worth it to stick with production schedules, given gridlock in Washington threatens to cripple the economy.

It is not news the budget plan almost everybody fears is deemed an economic threat. But the Congressional Budget Office's numbers are slightly higher than previous predictions. At this point, the combined spending cuts and tax hikes in place are expected to send the unemployment rate to 9.1 percent by the end of 2013, The New York Times reported.

There are cloudy days and then there are rainy days. In between, there are dry days with thunder rumbling on the horizon. Investors, consumers and manufacturers like to know what to expect. In the meantime, the media is wondering if statements of cooperation made after the first meetings between Republicans and the White House after the election can stretch to week three without any holes appearing.

There's a humorous sentiment that goes, "Don't vote -- it only encourages them." In this vein, even negative press is press of some kind and the people who go into delirium tremens without seeing their names in the newspaper for two days might best serve their collective mission if the press would just pay attention to something else.

Someone is feeding on negative press -- voraciously, apparently.

In international markets Monday, the Nikkei 225 index in Japan added 1.8 percent while the Shanghai composite index in China fell 0.49 percent. The Hang Seng index in Hong Kong rose 0.55 percent while the Sensex in India added 0.16 percent.

The S&P/ASX 200 in Australia gained 0.25 percent.

In midday trading in Europe, the FTSE 100 index in Britain shed 0.52 percent while the DAX 30 in Germany lost 0.28 percent. The CAC 40 in France slipped 0.75 percent while the Stoxx Europe 600 gave up 0.48 percent.

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