Politics: Daily Briefing: Another downgrade looms, and Obama snubs Netanyahu

Published by: Clark Barrow on Wednesday September 12th, 2012

Clark Barrow

By CLARK BARROW - Moody's hints it may downgrade the U.S. credit rating, and Obama refuses to meet with Netanyahu.

DAILY BRIEFING - SUMMARY

· JOBS - Job openings at U.S. workplaces decreased to 3.66 million in July from 3.72 million in June, the U.S. Labor Department reported Tuesday. There were more than 4 million jobs open when the recession began in December 2007.

· DOWNGRADE - Moody's Investors Service said Tuesday it could downgrade the U.S. government's credit rating next year if steps aren't taken to tackle the rising debt.

· WHITE HOUSE - The White House rejected a request by Israeli Prime Minister Benjamin Netanyahu to meet President Obama during a United Nations conference in New York City later this month. The White House denied any snub on their behalf and said President Obama spoke to Netanyahu on the phone for an hour on Tuesday.

· THREAT - A number of critical gaps in America's network of early warning systems and missile interceptors could put the continental United States at risk of a potential missile attack, according to a new report by the National Research Council.

· FAST & FURIOUS - A new U.S. Justice Department Inspector General report on Operation Fast and Furious found that dozens of senior-level U.S. government officials turned a blind eye to public safety as they pursued an ill-conceived and poorly managed investigation into gun trafficking in Mexico.

· PREMIUMS - Annual premiums for employer-sponsored family health coverage reached $15,745 this year, up 4 percent from last year, with workers on average paying $4,316 toward the cost of their coverage, according to the Kaiser Family Foundation/Health Research & Educational Trust 2012 Employer Health Benefits Survey released Tuesday.

· LIBYA & EGYPT - Demonstrators attacked a U.S. consulate in Libya, killing one American, and breached the walls of the U.S. Embassy in Cairo, mounting angry protests over a film by a U.S. producer that portrays the Prophet Muhammad as a womanizer, pedophile and fraud.

WHAT WE KNOW

ECONOMIC NEWS

· JOBS - Job openings at U.S. workplaces decreased to 3.66 million in July from 3.72 million in June, the U.S. Labor Department reported Tuesday. Compared with the prior year, job openings rose 9% -- private openings increased 8% to 3.28 million, and government openings rose 20% to 388,000. There were more than 4 million jobs open when the recession began in December 2007.

o With about 12.79 million unemployed people in July, there were about 3.5 potential job seekers for each opening, up from 3.4 in June.

o Meanwhile, the total number of hires decreased to 4.23 million from 4.28 million. The level of hires was about 5 million when the recession began.

· DOWNGRADE - In its latest report Outlook for the U.S. Government Debt Rating, Moody's Investor Service said budget negotiations during the 2013 Congressional legislative session will likely determine the direction of the US government's Aaa rating and negative outlook.

o If those negotiations lead to specific policies that produce a stabilization and then downward trend in the ratio of federal debt to GDP over the medium term, the rating will likely be affirmed and the outlook returned to stable, says Moody's. If those negotiations fail to produce such policies, however, Moody's would expect to lower the rating, probably to Aa1.

o Moody's views the maintenance of the Aaa with a negative outlook into 2014 as unlikely. The only scenario that would likely lead to its temporary maintenance would be if the method adopted to achieve debt stabilization involved a large, immediate fiscal shock—such as would occur if the so-called "fiscal cliff" actually materialized—which could lead to instability. Moody's would then need evidence that the economy could rebound from the shock before it would consider returning to a stable outlook.

o For the first time, S&P downgraded the U.S. credit rating from AAA to AA+ in 2011. Moody's and Fitch Ratings did not downgrade the U.S credit rating in 2011, but both changed their U.S. outlook to negative in 2011.

· The Dow Jones Industrial Average closed up 69.07 points, or 0.5%, at 13,323.36.

· The Nasdaq Composite rose 0.5 point to 3,104.53.

· The S&P 500 ended 4.48 points, or 0.3%, higher at 1,433.56.

COMMODITIES

· GASOLINE - Energy companies in the U.S. Gulf of Mexico have brought back nearly all of the region's offshore oil and gas production capacity in the wake of Hurricane Isaac.

o Some 4% of the Gulf's oil production and 5% of the region's natural gas output remained offline, according to U.S. regulators, which noted that shut-in production has been somewhat slow to return because of damage to onshore processing facilities.

o But economists and analysts said that Isaac's impact on the economy is expected to be little more than a blip, especially compared with the havoc wrought by big hurricanes like Katrina and Rita in the last decade.

· The U.S. national average for a gallon of regular gasoline is $3.85.

o When President Obama was inaugurated, in January 2009, the U.S. national average for a gallon of regular gasoline was $1.85. Average gasoline prices are currently 107 percent higher than they were when Mr. Obama became president.

· Oil for October delivery rose 63 cents, or 0.7%, to settle at $97.17 a barrel on the New York Mercantile Exchange.

· Gold for December delivery rose $3.10, or 0.2%, to $1,734.90 an ounce on the Comex division of the New York Mercantile Exchange.

NEWS TO WATCH

· ELECTION - As of today, there are 55 days until the November 2012 presidential election.

· CONGRESS - Congress appears on track to avert a politically perilous fight over a government shutdown, but U.S. House Speaker John Boehner (R., Ohio) said Tuesday he has little confidence that lawmakers will be able to prevent an economically damaging combination of tax increases and spending cuts due to take effect in the new year.

o Congress, which returned to work this week after a five-week recess, is preparing to pass just one major bill before returning to the campaign trail next month: a $550 billion measure to fund the government through March. This would prevent the government from halting nonessential services when its fiscal year ends Sept. 30, even though Congress failed to pass a single one of the 12 spending bills that are required each year to fund the various departments and agencies.

o Under current law, the Bush-era tax cuts are scheduled to expire at year-end, raising tax rates on 100 million Americans. Many analysts say these tax increases, combined with roughly $100 billion of spending cuts imposed by a deficit-fighting deal last year, would likely tip the economy into a recession in 2013.

o The White House and members of Congress say they want to avoid the cliff, but disagree on how to do so. The Obama administration has called for extending all the Bush-era tax cuts except for those on families with incomes above $250,000 a year, and reducing the federal budget deficit through a combination of tax increases and a smaller amount of spending cuts.

· CONGRESS - The Obama administration is lobbying for renewal of a controversial 2008 surveillance law, warning that the U.S. would lose a critical intelligence-collection tool if Congress allows the measure to expire at year's end.

o As President Obama emphasizes his national-security record in his re-election campaign, he's facing strong resistance from some lawmakers who say the law lacks sufficient privacy protections.

o The U.S. House is expected as soon as Wednesday to pass the bill, which would extend the law for five years. But its fate is less clear in the U.S. Senate, where Sen. Ron Wyden (D, Ore.) is blocking U.S. Senate consideration, because the government hasn't provided an estimate of the number of Americans who have been spied on under the law.

· CONGRESS - The U.S. House Judiciary Committee will hold a hearing Wednesday morning on the Obama administration's "Abuse of Power." The hearing will highlight the numerous ways in which the Obama Administration and the U.S. Justice Department have overstepped the Constitution's limitations on Executive power.

o The hearing is expected to cover the following instances in which the Administration has ignored Congress's constitutional role:

§ Asserting the power to suspend the application of Congressionally-enacted laws

§ Evading the Senate’s Advice and Consent power

§ Repeatedly making regulations for which it lacks authority

§ Flouting Congress’s oversight function

§ Trampling individual rights under the Constitution

· WHITE HOUSE - The White House has rejected a request by Israeli Prime Minister Benjamin Netanyahu to meet President Obama during a United Nations conference in New York City later this month, an Israeli official said on Tuesday, after a row erupted between the allies over Iran's nuclear program.

o The Israeli paper Haaretz first reported Tuesday that the White House had declined to meet with Netanyahu in New York City, citing a scheduling conflict. CNN reported later that Israeli sources said the White House rejected a meeting, even when Netanyahu offered to travel to Washington D.C., after his time in New York.

o Late Tuesday, the White House released a statement denying that any formal offer was made for a meeting in Washington, D.C. The White House said there was "never a request for Prime Minister Netanyahu to meet with President Obama in Washington, nor was a request for a meeting ever denied.”

o The White House also said President Obama spoke with the prime minister on the phone for an hour on Tuesday night and that the two leaders discussed the threat posed by Iran’s nuclear program.

o Netanyahu is pushing for the administration to take a more confrontational stance on Iran, declaring Tuesday that Israel will not wait for the Obama administration to approve military action against Iran.

PRESIDENT’S SCHEDULE

· In the morning, President Obama will receive the Presidential Daily Briefing at the White House.

· In the afternoon, the president will depart Washington, D.C. and travel to Las Vegas, Nevada.

· In the evening, the president will deliver remarks at a campaign event at the Cashman Center in Las Vegas, Nevada.

· Later in the evening, the president will depart Las Vegas, Nevada and travel to Denver, Colorado.

· The president will remain overnight in Denver, Colorado.

HAPPENING IN THE U.S. CONGRESS

U.S. SENATE

· The U.S. Senate is in session today.

U.S. HOUSE OF REPRESENTATIVES

· The U.S. House is in session today.

TOPICS OF INTEREST

NATIONAL SECURITY

· THREAT - A number of critical gaps in America's network of early warning systems and missile interceptors could put the continental United States at risk of a potential missile attack, according to a new report by the National Research Council.

o The council, a division of the National Academy of Sciences, recommended the White House adopt a more aggressive missile defense strategy, similar to the one proposed by former President George W. Bush.

o Key elements of the plan include establishing new detection systems and missile interceptors, focused specifically on the eastern seaboard of the United States, according to the report. The program, according to council members, would carry a price tag of $10 billion a year, for as long as it takes to develop and deploy the new missile defense systems.

· FAST & FURIOUS - A new U.S. Justice Department Inspector General report on Operation Fast and Furious found that dozens of senior-level U.S. government officials turned a blind eye to public safety as they pursued an ill-conceived and poorly managed investigation into gun trafficking in Mexico.

o The report and accompanying accounts cite a failure in leadership and a lack of accountability and oversight up and down the chain of command at the Bureau of Alcohol, Tobacco, Firearms and Explosives (ATF), the Justice Department itself and other offices. It says many senior executives knew the U.S. was helping traffic guns to Mexico that killed people but did nothing to stop it.

o Fast and Furious was the anti-gunrunning sting that helped send some 2,000 assault weapons to Mexico under the guise of stopping illegal trafficking. The operation ended only after the death of Border Patrol Agent Brian Terry -- two of the weapons associated with the investigation were found at his murder scene.

o Much of the blame in the report is directed at three ATF managers: Phoenix Agent in Charge Bill Newell, Supervisor Dave Voth and Case Agent Hope MacAllister.

HEALTH CARE

· PREMIUMS - Annual premiums for employer-sponsored family health coverage reached $15,745 this year, up 4 percent from last year, with workers on average paying $4,316 toward the cost of their coverage, according to the Kaiser Family Foundation/Health Research & Educational Trust 2012 Employer Health Benefits Survey released Tuesday.

o This year's premium increase is moderate by historical standards, but outpaced the growth in workers' wages (1.7 percent) and general inflation (2.3 percent).

o Family health insurance premiums rose 51 percent from 2002 to 2007, but increased only 30 percent in the following years, according to the study. Kaiser and the nonprofit Health Research & Educational Trust surveyed more than 2,000 small and large employers for the study.

o The survey estimates that 2.9 million young adults are currently covered by employer plans this year as a result of a provision in the 2010 Affordable Care Act that allows young adults up to age 26 without employer coverage of their own to be covered as dependents on their parents' plan. That's up from the 2.3 million in the 2011 survey.

EDUCATION

· CHICAGO - The president of the Chicago Teachers Union says teachers and the school district are still far apart in their contract dispute and that the walkout will almost certainly extend into a third day on Wednesday.

o Representatives from the union and the district returned to the bargaining table Tuesday, but union President Karen Lewis says only six of 48 articles in the contract have been resolved.

o More than 25,000 teachers walked out of the classroom Monday over issues that include performance evaluations and recall rights for laid-off teachers.

o The strike has idled more than 350,000 students in the nation's third-largest district

FOREIGN POLICY

MIDDLE EAST

· ISRAEL - Israeli Prime Minister Benjamin Netanyahu on Tuesday said the United States had forfeited its moral right to stop Israel taking action against Iran's nuclear program because it had refused to be firm with Tehran itself.

o In comments which appeared to bring the possibility of an Israeli attack on Iran closer, Netanyahu took the Obama administration to task after Washington rebuffed his own call to set a red line for Tehran's nuclear drive.

o Netanyahu has been pushing Obama to adopt a tougher line against Iran, arguing that setting a clear boundary for Iran's uranium enrichment activities and imposing stronger economic sanctions could deter Tehran from developing nuclear weapons and mitigate the need for military action. But on Monday U.S. Secretary of State Hillary Clinton said the United States would not set a deadline in further talks with Iran, saying there was still time for diplomacy to work.

· IRAN - The U.N. atomic agency has received new and significant intelligence over the past month that Iran has moved further toward the ability to build a nuclear weapon, diplomats tell the Associated Press.

o They say the intelligence shows that Iran has advanced its work on calculating the destructive power of an atomic warhead through a series of computer models that it ran sometime within the past three years.

o The diplomats say the information comes from Israel, the United States and at least two other Western countries and concludes that the work was done sometime within the past three years.

· SYRIA - International relief officials reported an increasingly grim aid crisis stemming from the Syria conflict on Tuesday, with two million people there not getting desperately needed help, and a sudden acceleration of refugees overwhelming the ability of neighboring countries to absorb them.

o The United Nations refugee agency in Geneva said the number of people fleeing Syria had increased almost exponentially, from 18,500 in June to 35,000 in July to 102,000 in August. Roughly 2,000 Syrians were crossing daily into Jordan alone, trying to evade air and artillery attacks on towns near the southern border, said Adrian Edwards, a spokesman for the refugee agency.

o The World Health Organization said that a United Nations mission to Homs last week had found that more than half a million people needed aid, including health care, food and water. The mission found that the biggest hospital in Homs had been destroyed, and that only 6 of the 12 public hospitals and 8 of the 32 private hospitals were still functional.

AFRICA

· EGYPT - Ultraconservative Islamist protesters climbed the walls of the U.S. Embassy in Egypt's capital Tuesday and brought down the flag, replacing it with a black flag with an Islamic inscription to protest a video attacking Islam's prophet, Muhammad.

o Hundreds of protesters marched to the embassy in downtown Cairo, gathering outside its walls and chanting against the movie, which was reportedly produced in the United States.

o The U.S. embassy in Cairo put out a statement early Tuesday that apologized for an anti-Muslim film being circulated by an Israeli-American real estate developer. But the Obama administration disavowed the statement and said the statement by Embassy Cairo was not cleared by the Obama administration and that it does not reflect the views of the United States government.

o Roughly 2,000 protesters gathered outside the embassy on Tuesday and about 20 scaled the walls.

o The protest was sparked by outrage over a video being promoted by an extreme anti-Muslim Egyptian Christian campaigner in the U.S., clips of which are available on the social website YouTube and dubbed in Egyptian Arabic. The video depicts Muhammad as a fraud, showing him having sex and calling for massacres.

o The U.S. has continued a huge annual aid program to Egypt that followed Egypt's signing of a peace treaty with Israel in 1979. Since then, the United States gives $1.3 billion to Egypt's military each year and offers the nation other aid.

· EGYPT - U.S. intelligence agencies recently monitored a secret meeting between Egypt’s intelligence chief and a senior Iranian spy that is raising new fears the Muslim Brotherhood government in Cairo could begin covertly supporting global terrorism.

o According to U.S. officials, the head of the Egyptian General Intelligence Service, Maj. Gen. Murad Muwafi, met in early August with a senior official of Iran’s Ministry of Intelligence and Security (MOIS).

o The Obama administration is said to be seeking closer ties to the new regime in Cairo, following the ouster in February 2011 of long-time ally Hosni Mubarak.

· LIBYA - U.S. Secretary of State Hillary Clinton confirmed that a U.S. State Department officer and three other Americans were killed in an attack on the U.S. consulate in Benghazi, Libya on Tuesday. Clinton condemned the attack in the strongest terms and called the Libyan president to coordinate additional support to protect Americans in Libya.

o President Obama also condemned the attacks and ordered increased security to protect U.S. diplomatic personnel around world.

o In the eastern Libyan city of Benghazi, a large mob stormed the U.S. Consulate, with gunmen firing their weapons. A witness said attackers fired automatic weapons and rocket-propelled grenades at the consulate as they clashed with Libyans hired to guard the facility. The crowd overwhelmed the facility and set fire to it, burning most of it and looting the contents, witnesses said.

o The protests in Libya and Egypt were sparked by outrage over a film ridiculing Muhammad produced by an American in California and being promoted by an extreme anti-Muslim Egyptian Christian campaigner in the United States.

EUROPE

· EURO ZONE - Germany's highest court Wednesday threw out attempts to delay the country's ratification of the European Stability Mechanism and the so-called "Fiscal Pact" but placed strict conditions on expanding it beyond its foreseen limits.

o The ruling, which was broadly as expected, removes a major question mark over two crucial elements of the euro zone's plan to manage its debt crisis. It paves the way for the creation of a permanent bailout mechanism in the region that will be able to provide large-scale financial assistance to heavily indebted euro-zone economies.

o The news was welcomed by European and German politicians. The head of the euro zone's college of finance ministers, Jean-Claude Juncker, who is also Prime Minister of Luxembourg, said that following the court's decision he will convene the first meeting of the ESM's board of governors on Oct. 8 in Luxembourg.