Politics: Daily Briefing: White House confronts China on trade practices

Published by: Clark Barrow on Monday September 17th, 2012

Clark Barrow

By CLARK BARROW - Obama demands end to subsidies of auto part exports.

DAILY BRIEFING - SUMMARY

· DOWNGRADE - Ratings firm Egan-Jones cut its credit rating on the U.S. government to "AA-" from "AA," citing its opinion that quantitative easing from the U.S Federal Reserve would hurt the U.S. economy and the country's credit quality.

· WHITE HOUSE - The White House Monday will demand through a world trade panel that China stop subsidizing auto parts made for export, arguing the practice undercuts manufacturers in Ohio and elsewhere by reducing the cost of Chinese auto parts and encourages U.S. companies to outsource jobs, senior administration officials said.

· ATTACK - Libya officials said Sunday that 50 arrests have been made in connection with last week's "preplanned" attack on the U.S. consulate in Benghazi, Libya that left four Americans dead. The head of Libya's new national congress has blamed al Qaeda-linked militants for planning Tuesday's deadly attack on the U.S. Consulate in Benghazi, Libya.

o Libyan security officials said they met with American diplomats three days before the deadly assault on the United States consulate in Libya and warned them about deteriorating security. This comes as the U.S. ambassador to the United Nations, Susan Rice, said the attack on the U.S. Consulate in Benghazi, Libya, was a spontaneous reaction to an anti-Muslim video - not a premeditated assault.

· CHICAGO - The confrontation between the Chicago Teachers Union and Mayor Rahm Emanuel escalated on Sunday when the union extended its strike until at least Tuesday and Emanuel responded by going to court for an injunction to declare the walkout illegal.

· WISCONSIN - Wisconsin's attorney general said he will appeal a local judge's ruling that struck down parts of the state law ending most public-employee unions' collective-bargaining rights.

· ISRAEL - Israeli Prime Minister Benjamin Netanyahu warned on Sunday that Iran was just six to seven months away from the brink of being able to build a nuclear bomb, adding urgency to his demand that President Obama set a "red line" for Tehran in what could deepen the worst U.S.-Israeli rift in decades.

WHAT WE KNOW

ECONOMIC NEWS

· DOWNGRADE - Ratings firm Egan-Jones cut its credit rating on the U.S. government to "AA-" from "AA," citing its opinion that quantitative easing from the U.S Federal Reserve would hurt the U.S. economy and the country's credit quality.

o In April, Egan-Jones cuts the U.S. credit rating to "AA" from "AA+" with a negative watch, citing a lack of progress in cutting the mounting federal debt.

o Moody's Investors Service currently rates the United States Aaa, Fitch rates the country AAA, and Standard & Poor's rates the country AA-plus. All three of those ratings have a negative outlook.

· Monday morning futures on the Dow Jones Industrial Average fell 27 points, or 0.2%, to 13,495.

· Monday morning futures on the S&P 500 Index lost 3.5 points to 1,455.5.

· Monday morning futures on the Nasdaq-100 dropped 4.5 points to 2,845.75.

COMMODITIES

· The U.S. national average for a gallon of regular gasoline is $3.86.

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 109 percent higher than they were when Mr. Obama became president.

· Crude for October delivery fell 28 cents to $98.71 a barrel on the New York Mercantile Exchange during European trading hours.

· Gold for December delivery fell $1.20 to $1,771.40 an ounce on the Comex division of the New York Mercantile Exchange during European trading hours.

NEWS TO WATCH

· ELECTION - As of today, there are 50 days until the November 2012 presidential election.

· WHITE HOUSE - The White House Office of Management and Budget (OMB) released the details of how the budget cuts required under the Budget Control Act of 2011 (BCA) will be allocated. The $1 trillion in cuts, called the sequestration, over the next decade was passed by Congress to reduce the national debt.

o The Obama administration made a statement at the beginning of the OMB report about its beliefs about sequestration and what Congress should do to prevent these severe cuts from taking effect. Here is part of that statement:

§ The bill required a cut in the deficit of $1.2 trillion over 10 years. The OMB said $984 billion will come from program cuts; $216 trillion will come from interest savings. That works out to an annual cut of $109 billion $56.667 a year each from defense and other federal programs.

§ The defense cuts will come mostly from discretionary spending. Of the $56.667 billion a year, $56.6 comes from discretionary spending. The cuts amount to a 9.4% cut each year to all defense programs except those exempt from the sequestration law. A few Pentagon programs will get a 10% cut.

o Meanwhile, the Obama administration has not endorsed a measure in the U.S. House to avoid the cuts. Although Obama has proposed a 10-year budget plan to stave off the automatic cuts to defense and domestic spending scheduled to hit in 2013, the administration has not formally championed the one-year fix pushed by House Democrats this week as an alternative to the Republicans' proposals.

· WHITE HOUSE - In in his weekly radio and Internet address, President Obama paid tribute to the Americans killed in Libya and denounced the violence and anti-U.S. mob protests apparently sparked by an anti-Muslim video made in the United States.

o The theme echoed comments by the president in recent days, including at a ceremony Friday at Andrews Air Force Base marking the return of the four men's remains.

o U.S. officials say the Sept. 11 attack of the consulate in Benghazi appeared to be connected to protests elsewhere in the Arab world. U.S. investigators are trying to determine whether the strike was planned and was more than spontaneous anger over the YouTube video that denigrated the Prophet Muhammad.

· WHITE HOUSE - The White House Monday will demand through a world trade panel that China stop subsidizing auto parts made for export, arguing the practice undercuts manufacturers in Ohio and elsewhere by reducing the cost of Chinese auto parts and encourages U.S. companies to outsource jobs, senior administration officials said.

o The Obama administration also will ask the World Trade Organization, or WTO, to step up a review of what the White House says are unfair duties that China levies on American-made cars. The case is technically separate from the auto parts case but the administration says it presents another example of China's trade-policy abuse.

o Senior administration officials say they began looking at Chinese abuses in auto parts after Obama formed the Interagency Trade Enforcement Center in March to more aggressively review trade violations.

PRESIDENT’S SCHEDULE

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

· Later in the morning, the president will depart Washington, D.C. and travel to Cincinnati, Ohio.

· In the afternoon, the president will hold a grassroots campaign event at Eden Park's Seasongood Pavilion in Cincinnati, Ohio.

· Later in the afternoon, the president will hold a grassroots campaign event at Schiller Park in Columbus, Ohio.

· In the evening, the president will return to Washington, D.C.

HAPPENING IN THE U.S. CONGRESS

U.S. SENATE

· The U.S. Senate will convene for a pro forma session today.

U.S. HOUSE OF REPRESENTATIVES

· The U.S. House is not in session today.

TOPICS OF INTEREST

NATIONAL SECURITY

· ATTACK - Libya officials said Sunday that 50 arrests have been made in connection with last week's "preplanned" attack on the U.S. consulate in Benghazi, Libya that left four Americans dead.

o The head of Libya's new national congress has blamed al Qaeda-linked militants for planning Tuesday's deadly attack on the U.S. Consulate in Benghazi, Libya.

o U.S. officials said that they are investigating indications that a local group of Libyan militants, Ansar al Sharia, held a series of conversations Tuesday with al Qaeda extremists about the assault that day on the consulate, in the first sign of possible coordination in the attack between local fighters and the global terrorist movement. Several current and former U.S. officials said extremist leaders linked with al Qaeda were communicating with members of Ansar al Sharia, the Libyan militia, after seeing violent anti-U.S. protests breaking out in Cairo. These officials identified the leaders as members of al Qaeda in the Islamic Maghreb, an al Qaeda branch in North Africa known as AQIM.

o Libyan security officials said they met with American diplomats three days before the deadly assault on the United States consulate in Libya and warned them about deteriorating security. The Libyan security officials said it was not the first time he has warned foreigners about the worsening security situation in the face of the growing presence of armed jihadist groups in the Benghazi area.

o Over the weekend, the U.S. ambassador to the United Nations, Susan Rice, said an attack on the U.S. Consulate in Benghazi, Libya, was a spontaneous reaction to an anti-Muslim video - not a premeditated assault tied to the recent anniversary of the Sept. 11 attacks.

o Sudan has rejected a U.S. request to send a platoon of Marines to bolster security at the U.S. embassy outside Khartoum, the state news agency SUNA said on Saturday. The U.S. State Department declined to comment. Sudan beefed up security at some missions on Saturday. A riot police truck was parked in front of the deserted German embassy, which protesters had set on fire on Friday. An Islamic flag raised by the crowd was still flying. Three officers manned the main gate.

· THREAT - Al Qaeda's branch in Yemen praised the killing of the U.S. ambassador in Libya in a Web statement Saturday and called for more attacks to expel American embassies from Muslim nations.

o The statement suggests Al Qaeda was trying to co-opt the wave of angry protests in the Muslim world over a film produced in the United States denigrating the Prophet Muhammad.

§ FBI investigators probing the U.S. Consulate killings in Libya put off a visit there until conditions in the volatile region are safer. Agents hoped to arrive on Saturday but reconsidered because of the instability sweeping across Libya and throughout the region, federal law enforcement officials said.

§ One source said there's nothing to be gained by putting additional people in harm's way when the situation on the ground remains volatile. It's hard to say when the situation will become stable enough for the FBI to visit, the officials said.

§ The Obama administration ordered the evacuation of all but emergency U.S. government personnel, and all family members, from diplomatic missions in Tunisia and Sudan on Saturday and warned Americans not to travel to those countries.

§ After days of anti-American violence across the Muslim world, the White House is preparing itself for an extended period of turmoil that will test the security of American diplomatic missions and President Obama’s ability to shape the forces of change in the Middle East.

§ Although the tumult subsided Saturday, senior administration officials said they had concluded that the sometimes violent protests in Muslim countries may presage a period of sustained instability with unpredictable diplomatic and political consequences. While pressing Arab leaders to tamp down the unrest, Mr. Obama’s advisers say they may have to consider whether to scale back diplomatic activities in the region.

EDUCATION

· CHICAGO - The confrontation between the Chicago Teachers Union and Mayor Rahm Emanuel escalated on Sunday when the union extended its strike until at least Tuesday and Emanuel responded by going to court for an injunction to declare the walkout illegal.

o There will be no classes in Chicago public schools for a sixth day on Monday, and probably Tuesday, affecting 350,000 kindergarten, elementary and high school students.

o The showdown also left in doubt a deal on wages, benefits and education reforms for 29,000 unionized teachers that negotiators had hoped would end the biggest labor dispute in the United States in a year.

o Both sides indicated Friday that they'd almost reached a tentative agreement. The agreement calls for a 3 percent pay raise for teachers this year and 2 percent in each of the next two years. If the agreement is extended for an optional fourth year, teachers get a 3 percent increase. The increases will result in an average 17.6 increase over four years, the district said. The union still remained unhappy with the proposed teacher evaluation system.

· TURTH TOUR - The College Board reports that from 1981 to 2011, after adjusting for inflation, the average published cost of going to college is up 180% for private, nonprofit four-year colleges and 268% for in-state, public four-year colleges.

o Family income and net worth is down. The College Board indicates that the increase in median family income, adjusted for inflation, was up only 17.8% from 1981 to 2011. Largely due to the Great Recession, inflation-adjusted median family income dropped 8% and net worth dropped 39% from 2007 to 2010, according to a recent Federal Reserve study. Much of this net worth drop is attributable to a decrease in home values.

o The Project for Student Debt notes that the average amount of federal student loan debt held by two-thirds of graduating seniors has increased from $18,259 in 2005 to $25,250 in 2010 (a 38% increase). This average debt doesn't include private loans or credit card debt held by these grads. Student loan debt is now larger than total credit card, auto loan or home-equity debt. Since 2005 student loan debt has increased from $363 billion to $904 billion, according to the Federal Reserve Bank of New York, and the number of individuals with student loan debt has increased by 61%. And defaults are on the rise — the Fed estimates that there were 20 million student loan borrowers in 2010 in loan repayment mode, and 5.4 million of these borrowers were delinquent on their loans.

o The unemployment rate for all college graduates over 25 years old is currently 4.1%, less than half of the national unemployment rate of 8.3%. But a recent Economic Policy Institute study reports that the unemployment rate is 9.4% for college grads ages 21 to 24 (not currently seeking a post graduate degree), and the underemployment rate for this group is 19.1% (this includes part-time workers who want full-time jobs).

DOMESTIC ISSUES

STATE ISSUES

· WISCONSIN - Wisconsin's attorney general said he will appeal a local judge's ruling that struck down parts of the state law ending most public-employee unions' collective-bargaining rights.

o Republican Attorney General J.B. Van Hollen said in a statement Sunday that he believes the law, known as Act 10, "is constitutional in all respects." He said his office will seek a stay of the law pending an appeal to the court's decision, so the law can continue as it has for more than a year while an appellate court addresses the legal issues.

o On Friday, Judge Juan Colas of Dane County Circuit Court knocked down portions of the law on the ground that it violates constitutional rights of freedom of speech and equal protection. The law, also known as the Budget Repair Bill, went into effect in June 2011.

FOREIGN POLICY

MIDDLE EAST

· ISRAEL - Israeli Prime Minister Benjamin Netanyahu warned on Sunday that Iran was just six to seven months away from the brink of being able to build a nuclear bomb, adding urgency to his demand that President Obama set a "red line" for Tehran in what could deepen the worst U.S.-Israeli rift in decades.

o Prime Minister Benjamin Netanyahu, who sees a mortal threat to Israel from Tehran, has hinted he could resort to war unless Washington and other world powers give Iran an ultimatum on curbing its uranium enrichment program.

o While not explicitly stating when they would consider Iran close enough to the nuclear threshold to warrant a war, Israeli officials say they are watching the pace of its fortification, its uranium enrichment to 20 percent purity - just short of bomb-fuel grade, and its production of enrichment centrifuges.

· IRAN - With its economy in free fall, Iran is turning to its porous borders with Iraq and other countries to skirt increasingly effective global economic sanctions, according to congressional staffers, local journalists and advocates for tough sanctions against Tehran.

o Analysts say Iran's government and citizens have become desperate, resorting to “cash transactions” on the black market with neighboring countries — principally Iraq, with which it shares a 910-mile border.

o A July report from the Congressional Research Service noted that the value of Iran’s currency, the rial, has dropped by about 50 percent in the past year and Iran is virtually cut off from the international banking system. It said the Islamic republic increasingly is forced to trade through “barter arrangements,” with many major international firms having left the market and many Iranian firms reported to be closing and laying off workers.

o As a result, Iran, which sits on massive reserves of crude oil, lacks the capacity to refine petroleum, making it reliant on gasoline imported from other countries.

· SYRIA - In recent weeks, the growing death toll in Syria pushed that country’s civil war to the top of the Obama administration’s agenda, with some Arab leaders pressing harder for a greater American role in toppling Syria’s leader, Bashar al-Assad.

o Then came the protests of the past week in the Middle East — a vivid illustration that the United States’ support for greater democracy in the Arab world during the past two years is no guarantee against the incendiary power of Islamist sentiment and anti-American rage.

o The death toll in Syria has sharply increased in recent weeks, with some estimates putting it at more than 23,000. Regional powers like Turkey and Saudi Arabia, which now provide a trickle of light weapons to the rebels, have made it clear that they will not play a more decisive role without American support.

AFRICA

· EGYPT - Egypt’s presidential spokesman says the breaching of the U.S. embassy in Cairo during protests over an anti-Islam film was “unjustified,” denouncing it in the strongest words to date to come from the nation’s highest office.

o The comments were aimed to defuse criticism of President Mohammed Morsi, who condemned the breaching of the mission’s perimeter only two days afterward, leading to tension with the United States.

o After three days of clashes in Cairo, authorities blocked off the embassy’s street with a concrete wall. The visa section remained closed Sunday despite earlier plans to reopen.

ASIA

· AFGHANISTAN - An Afghan police officer turned his gun on NATO troops at a remote checkpoint in the south of the country before dawn Sunday, killing four American troops, according to Afghan and international officials.

o It was the third attack by Afghan forces or insurgents disguised in military uniforms against international forces in as many days, killing eight troops in all.

o Recent months have seen a string of such insider attacks by Afghan forces against their international counterparts. The killings have imperiled the military partnership between Kabul and NATO, a working relationship that is key to the handover of security responsibilities to Afghan forces as international troops draw down.

· PAKISTAN - Hundreds of Pakistanis protesting an anti-Islam video broke through a barricade near the U.S. Consulate in the southern city of Karachi on Sunday, sparking clashes with police in which one demonstrator was killed and more than a dozen injured.

o The film, which denigrates Islam's Prophet Muhammad, has sparked violent protests throughout the Muslim world in recent days, including one in Libya in which the U.S. ambassador to the country was killed.

o Police fired tear gas and water cannons at the protesters in Karachi after they broke through the barricade and reached the outer wall of the U.S. Consulate, police officer Mohammad Ranjha said. Police and private security guards outside the consulate also fired shots in the air to disperse the crowd.

EUROPE

· EURO ZONE - Tens of thousands of people marched in Spain and Portugal on Saturday to protest sharp cuts in public spending, the latest display of resistance to crisis measures that European leaders are demanding of heavily indebted euro-zone countries to shore up the common currency.

o Demonstrators converged on Madrid from all over Spain a day after the country's finance minister announced that new measures were imminent. The marches in Portugal, in more than 40 cities, were by far the largest in a country that had calmly endured more than a year of belt-tightening—until a new round of austerity was announced this week.

o Television stations estimated 50,000 marchers in Lisbon, the Portuguese capital, and at least that many in Madrid.