Economic Outlook: Budget extremists

By ANTHONY HALL, United Press International  |  Dec. 21, 2012 at 8:55 AM
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House Speaker John Boehner's backup plan for the federal budget has died without the formal send-off of a vote.

Boehner's plan was to extend the Bush era tax cuts for anyone earning less than $1 million per year and to put off decisions on spending cuts until January or February. It was a "hail Mary" pass that wasn't even supposed to reach the end zone. It was supposed to buy time and avoid the so-called "fiscal cliff," which is the suicide budget that will kick in Jan. 1 if no other option is available.

Rather than slug it out with the president through the holiday, Boehner threw up his hands. He sent House members home and issued a statement that said "it is up to the president to work with Senator [Harry] Reid on legislation to avert the fiscal cliff."

There is a budget mess looming and a political mess already in play and both may have gotten short shrift with Boehner's botch-up. First, work on a real budget might have gotten done had Boehner not dappled in his fantasy plan. Second, even Republicans were dismissive of Boehner's so-called "Plan B," which amounted to suddenly going solo in the midst of a budget negotiation in which gridlock was the worst-case scenario and, in theory, the nation's economy hangs in the balance.

While it was scary for investors to contemplate a divide between Democrats and Republicans, suddenly a new adversary has been thrown into the mix -- rebellious Republicans.

Summed up by Rep. Steve LaTourette, R-Ohio, the Plan B debacle "weakens the entire Republican Party."

"We are going to be seen more and more as a bunch of extremists that can't even get a majority of our own party to support policies we're putting forward," he said.

That impression could be reversed quickly with a budget agreement, but for now investors have been harshly reminded that the Grand Old Party is being guided in part by Tea Party extremists who certainly have the speaker's attention and could turn into that docile dog that turns around and bites his owner.

A week ago it looked like a debate between Democrats and Republicans. Now it looks like a fight between Democrats and divided Republicans. Now there are three agendas on the table.

That might be only partly true if it is considered that extremists Republicans have been steering the debate all along.

The argument is clear: In the midst of a prolonged, sluggish economic recovery that, finger pointing aside, has put the federal government in an enormous hole, any group that demands action be taken on the deficit but that revenue cannot be part of the solution is an extremest, even obstructionist faction.

Such irrationality screams gridlock.

Demanding a fix to something while keeping the tools locked in the shed is just anger for anger's sake. It made no sense a year ago and it makes no sense now, 10 days away from potentially the largest single self-inflicted budget fiasco in the nation's history.

In international markets the Nikkei 225 index in Japan fell 0.99 percent and the Shanghai composite index in China lost 0.69 percent. The Hang Seng index in Hong Kong dropped 0.68 percent and the Sensex in India shed 1.09 percent.

The S&P/ASX 200 in Australia fell 0.23 percent.

In midday trading in Europe, the FTSE 100 index in Britain lost 0.66 percent while the DAX 30 in Germany dropped 0.63 percent. The CAC 40 in France gave up 0.48 percent and the Stoxx Europe 600 slid 0.58 percent.

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