Daily News Briefing: Friday, August 10, 2012

Published by: Clark Barrow

Clark Barrow

DAILY BRIEFING - SUMMARY

  • MANUFACTURING - A lot of Americans think the U.S. no longer manufactures anything domestically. In fact, the truth is the exact opposite.
  • OBAMACARE - Under President Obama's health care law, the wealthiest 2 percent of Americans will face the heaviest tax increase. The pain will be shared by some who aren't so well off, but for the vast majority of people, the health care law won't mean sending more money to the IRS.
  • WHITE HOUSE - President Obama bragged Thursday about the success of his decision to provide government assistance and said he now wants to see every manufacturing industry come roaring back. The president did not mention that taxpayers lost nearly $35 billion on the General Motors bailout.
  • U.S. POSTAL SERVICE - The U.S. Postal Service on Thursday reported a $5.2 billion loss for its fiscal third quarter, an indication that the agency's financial woes are deepening.
  • FOOD STAMPS - The U.S. Agriculture Department on Thursday came out with new steps to fight fraud in food stamps, a federal program that has taken center stage as Congress struggles to adopt a long-term farm policy bill.
  • IRAN - The United States still believes that Iran is not on the verge of having a nuclear weapon and that Iran has not made a decision to pursue one, U.S. officials said on Thursday.

WHAT WE KNOW

ECONOMIC NEWS

  • TRADE DEFICIT - The U.S. trade deficit in June narrowed to its lowest level since 2010 as exports reached a record level and imports declined due to sliding oil prices.
    • The U.S. deficit in international trade of goods and services decreased 10.7% in June to a seasonally adjusted $42.92 billion the U.S. Commerce Department said Thursday.
    • In June, U.S. exports grew 0.9% to $184.97 billion, to reach the highest level on record. Sales abroad of consumer goods, cars and parts, and industrial supplies all increased.
    • Meanwhile imports decreased 1.5% to $227.90 billion. The decline comes as Americans are paying less for fuel, but are slow to increase consumption of most other goods. Auto imports were one exception--they reached a record level.
  • MANUFACTURING - A lot of Americans think the U.S. no longer manufactures anything domestically. In fact, the truth is the exact opposite.
    • According to the Manufacturers Alliance for Productivity and Innovation, if the U.S. manufacturing sector were its own country, its $1.7 trillion worth of annual value-added would make it the ninth-largest economy in the world—bigger than the entire economies of countries such as India, Canada, Mexico, and South Korea.
    • More than 1 in 7 U.S. private sector jobs depend on manufacturing. In all, the factory sector supports almost 18 million jobs here, including nearly 12 million directly within manufacturing and roughly 6 million jobs indirectly in sectors such as professional services, wholesaling, transportation, and agriculture.
    • The Manufacturers Alliance for Productivity tracks the excessive burden that various structural costs—corporate tax liability, employee benefits, tort litigation, regulatory compliance, and energy—place on U.S. manufacturers relative to their counterparts around the world. Combined, these raise costs 20 percent higher for American manufacturers than for those producing within the borders of our nine major competitors. Without this cost disadvantage, the United States would be a lower-cost platform for manufacturing than all of our major trading partners except China, Mexico, and Taiwan.
  • The Dow Jones Industrial Average fell 10.45 points, or 0.1%, at 13,165.19.
  • The S&P 500 rose 0.58 point to 1,402.80.
  • The Nasdaq Composite added 7.39 points, or 0.3%, to 3,018.64. The

COMMODITIES

  • The U.S. national average for a gallon of regular gasoline is $3.67.
    • 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 98 percent higher than they were when Mr. Obama became president.
  • Crude oil for September delivery added a penny to end at $93.36 a barrel on the New York Mercantile Exchange.
  • Gold for December delivery advanced $4.20, or 0.3%, to settle at $1,620.20 an ounce on the New York Mercantile Exchange.

NEWS TO WATCH

  • ELECTION - As of today, there are 88 days until the November 2012 presidential election.
  • CONGRESS - U.S. House Republicans on Thursday asked government auditors for a detailed accounting of the money being used to implement President Obama's healthcare law.
    • Republican leaders on the Ways and Means Committee asked the Government Accountability Office (GAO) to investigate how much money the Obama administration has spent implementing the law — and how much it expects to spend through 2014, when most of the major provisions take effect.
    • The lawmakers asked for detailed information about the Center for Consumer Information and Insurance Oversight (CCIIO), which is handling the bulk of the implementation effort. They asked GAO to determine the total amount of money CCIIO plans to spend by 2014, and for a breakdown of spending on salaries, advertising, polling, travel and conferences.
  • OBAMACARE - Under President Obama's health care law, the wealthiest 2 percent of Americans will face the heaviest tax increase. The pain will be shared by some who aren't so well off, but for the vast majority of people, the health care law won't mean sending more money to the IRS.
    • Who are the 2 percent? They are about 2.5 million households — individuals making more than $200,000 per year, couples $250,000. Among the biggest tax increases they face are a 0.9 percent Medicare tax on wages above those threshold amounts and an additional 3.8 percent tax on investment income.
    • Some 4 million individuals without insurance are expected to pay about $55 billion over eight years, according to the Congressional Budget Office's estimates. Employers could be dinged an estimated $106 billion for failing to meet the mandate, which starts in 2014.
    • The U.S. Congressional Budget Office projected the total cost of the Obamacare tax increases to be $1,221 billion over ten years.
  • WHITE HOUSE - President Obama, while vilifying Mitt Romney for opposing the auto industry bailout, bragged about the success of his decision to provide government assistance and said he now wants to see every manufacturing industry come roaring back.
    • Obama made the remarks while pushing for the renewal of a tax credit for wind energy manufacturing – something Romney opposes – and for the creation of credits for companies who bring jobs home from overseas, as well as the elimination of loopholes for offshoring.
    • The U.S. Treasury still owns 26.5% of GM, or 500 million shares. Taxpayers are still out $26.4 billion in direct aid. But the Obama administration essentially gifted $45 billion in write-offs to GM. Include that $18 billion gift, and taxpayers' true loss climbs to nearly $35 billion.
  • WHITE HOUSE - The White House refused to comment Thursday on a bombshell Israeli media report that President Obama recently received an updated intelligence assessment that Iran has made surprising strides towards being able to build a nuclear weapon.
    • The Haaretz newspaper reported that Obama had received a new National Intelligence Estimate (NIE)—the consensus assessment of the American intelligence community—that "Iran has made surprising, notable progress in the research and development of key components of its military nuclear program." The daily cited unnamed "Western diplomats and Israeli officials."
    • Israel, widely thought to be an undeclared nuclear power, has warned it cannot tolerate a nuclear-armed Iran and reserves the right to use military force to prevent that outcome. Obama has repeatedly said America shares Israel's concerns but has pleaded for time to let the sanctions and diplomatic efforts work. Iran has steadfastly denied that it seeks the bomb, but reports from the U.N. nuclear watchdog agency have cast doubt on those claims.

PRESIDENT’S SCHEDULE

  • In the morning, President Obama will receive the presidential daily briefing at the White House.
  • In the evening, the president will host an Iftar dinner celebrating Ramadan at the White House.

HAPPENING IN THE U.S. CONGRESS

U.S. SENATE

  • The U.S. Senate is not in session today.

U.S. HOUSE OF REPRESENTATIVES

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

TOPICS OF INTEREST

NATIONAL SECURITY

  • LAYOFFS - Despite administration warnings that notices related to sequestration were unnecessary, Lockheed Martin and Pratt & Whitney are continuing their preparations.
    • Lockheed Martin and Pratt & Whitney are going forward with plans to issue layoff notices to thousands of employees due to looming defense cuts under sequestration, despite administration claims that such warnings are unnecessary.
    • U.S. defense companies planned to start handing out pink slips in November, just before the presidential election, under federal mandates outlined in the Worker Adjustment and Retraining Notification (WARN) Act, due to the anticipated $500 billion automatic cut to defense coffers are set to go in place in January.

FEDERAL GOVERNMENT

  • U.S. POSTAL SERVICE - The U.S. Postal Service on Thursday reported a $5.2 billion loss for its fiscal third quarter, an indication that the agency's financial woes are deepening.
    • The loss for the quarter ended June 30 was 68% larger than the $3.1 billion loss reported for the same period a year earlier. First-class-mail volumes continued to decline, and the Postal Service is unable to keep up with obligations to its retirees.
    • The agency projects that it will nearly run out of cash before the fiscal year ends next month. With little money on hand, the Postal Service said it plans to default on a $5.6 billion retiree health-care payment due Sept. 30. The agency already defaulted on a $5.5 billion payment due earlier this month.
  • FOOD STAMPS - The U.S. Agriculture Department on Thursday came out with new steps to fight fraud in food stamps, a federal program that has taken center stage as Congress struggles to adopt a long-term farm policy bill.
    • The actions announced by Agriculture Undersecretary Kevin Concannon include giving the department new authority to penalize retailers who traffic in food stamps and requiring states to make use of federal databases, including prison and death records, to ensure that food benefits go to those who are eligible.
    • The Supplemental Nutrition Assistance Program (food stamps) has seen participation climb from 28 million at the start of the recession in 2008 to 46 million today. The department says food stamp fraud already is at record lows due to increased oversight, but is sensitive to any reports of abuse as Congress tries to pass a five-year farm bill this year that includes nearly $80 billion a year for food stamps.
    • The rate of trafficking or fraud is currently about 1 percent, one of the lowest among federal programs, Concannon said. But in a program in which even a small amount of abuse can amount to millions of dollars, "We are very mindful of public confidence" that only those who qualify for benefits will receive them.

FOREIGN POLICY

MIDDLE EAST

  • SYRIA - Government forces backed by jets, helicopters, artillery and tanks were reported on Friday to have resumed their pursuit of rebels in embattled Aleppo who sought to highlight small gains in the midst of a withdrawal from the most contested area of the city.
    • The fighting has sent tens of thousands of Syrian fleeing to neighboring Lebanon, Turkey, Jordan and Iraq. In those countries, the United Nations refugee agency said on Friday, a total of more than 146,000 Syrians had registered as refugees or were in the process of registering since the fighting began.
    • The exodus has been particularly dramatic over the past week in Turkey, where “there has been something of a spike” because of civilians fleeing the fighting in Aleppo, according to an agency spokesman, Adrian Edwards, who said the refugee agency’s figures did not include fugitives who had not made themselves known to his organization.
  • IRAN - The United States still believes that Iran is not on the verge of having a nuclear weapon and that Iran has not made a decision to pursue one, U.S. officials said on Thursday.
    • Their comments came after Israeli media reports claimed U.S. President Barack Obama had received a new National Intelligence Estimate saying Iran had made significant and surprising progress toward military nuclear capability.
    • But a White House National Security Council spokesman disputed the Israeli reports, saying the U.S. intelligence assessment of Iran's nuclear activities had not changed since intelligence officials delivered testimony to Congress on the issue earlier this year.

SOUTH AMERICA

  • VENEZUELA - President Hugo Chavez says Venezuelan security forces have arrested a U.S. citizen and suspect he is a mercenary who could be involved in an alleged plot to destabilize the country if the opposition’s candidate loses the upcoming presidential election.
    • Chavez says the Hispanic man was detained crossing into Venezuela from Colombia. The president says the man was carrying a U.S. passport with entrance and exit stamps from countries including Iraq, Afghanistan and Libya as well as a notebook containing geographical coordinates.
    • The man’s identity has not been released. It isn’t known where the man is being interrogated.