Lessons learned from Washington's down-to-the-wire deadlines

House GOP leaders have accepted a two-month extension of payroll tax cut. Was that outcome clear?

Jeremy Hobson: The Senate has just approved the new payroll tax cut extension that House Republicans finally gave into yesterday. We're still waiting on final approval from the House. And that's where we'll start now with Chris Low. He's chief economist with FTN Financial. He's with us live from New York, as he is every Friday. Good morning, Chris.

Chris Low: Good morning.

Hobson: So as Wall Street economists like you have watched each of these Washington fights go down to the wire this year with big economic consequences -- depending on the outcome -- have you learned any lessons?

Low: Well, yeah. I guess let's put it this way: We're as frustrated as anybody with the politicking that's going on in Washington. But in this case, the outcome was so clear that we were able to focus on other things this time. It was pretty much taken for granted this one would pass.

Hobson: The outcome was clear. How did you know that?

Low: Well, I think because both sides in this case were in favor of getting something done, the only question was the time that it would take. In contrast to that, the fight in 2012, which will be over the Bush tax cut extension -- ooh -- that could get ugly. Because of course, one side thinks it will gain politically by getting rid of them, the other side thinks it gains politically by getting them extended. Who knows which way that one's going to go.

Hobson: All right Chris, since this is our last chat with you in 2011, any predictions for 2012?

Low: Yeah. I think maybe the most interesting one that's part of our forecast, we're looking at Europe, which is apparently in recession already. That's clear in the data. We're looking at an emerging market slowdown, which is already evident in the data. We're predicting that the U.S. economy is actually going to benefit from that. U.S. trade is going to slow down. There's no getting around that. But because we export so little, because U.S. manufacturing is so inward-focused and because consumers benefit from slowdown elsewhere -- because gas, food, and oil get cheaper -- I think actually the U.S. economy is going to accelerate as Europe slows.

Hobson: Chris Low, chief economist at FTN Financial. Thanks as always.

Low: Thank you.

About the author

Jeremy Hobson is host of Marketplace Morning Report, where he looks at business news from a global perspective to prepare listeners for the day ahead.

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