Daily News Briefing: Friday, August 3, 2012

Published by: Clark Barrow

Clark Barrow

DAILY BRIEFING - SUMMARY

  • JOBS - Job growth picked up a bit last month, but the unemployment rate increased for July 2012, the U.S. Labor Department said Friday.
  • CONGRESS - The U.S. House approved (232-189) legislation Thursday that would set up an expedited process for considering a tax reform bill in 2013 that cuts and reduces the number of individual and corporate tax rates, eliminates the Alternative Minimum Tax and ends special-interest tax breaks.
  • CONGRESS - A cybersecurity bill sought by President Obama as critical to national defense was blocked Thursday in the U.S. Senate. According to the Heritage Foundation, the concern is now whether the president will enact the reforms through executive orders.
  • WHITE HOUSE - President Obama's administration doesn’t see the need for defense contractors to warn employees about possible layoffs from across-the-board budget cuts, but in 2007, then-Senator Obama railed against employers for failing to notify workers who were in danger of losing their jobs.
  • INTERNAL REVENUE SERVICE - The Inspector General for the IRS said the IRS is paying out billions of dollars in fraudulent tax refunds to identity thieves, an issue that is a “growing problem” involving numbers that are increasing “exponentially.”
  • MEDICAID - One in every 20 health providers getting taxpayer money from Medicaid is delinquent on their federal taxes, and in some cases the tax cheats are years behind in paying the IRS, according to a new audit by Congress’s investigators.
  • ISRAEL - Obama administration insiders have grown increasingly worried that Israel might be readying plans to launch an independent assault against Iran -- possibly as soon as this autumn -- in light of open declarations and closed-door indications issued in past weeks by top Israeli officials.

WHAT WE KNOW

ECONOMIC NEWS

  • JOBS - Job growth picked up a bit last month, but the unemployment rate increased for July 2012, the U.S. Labor Department said Friday.
    • Total nonfarm payrolls increased by 163,000, higher than the 100,000 gain expected by Wall Street economists. The unemployment rate increased higher to 8.3% in July from 8.2% in the previous month. This is the highest rate since February.
    • The national underemployment rate increased in July. The U-6 measurement, meaning the total number of unemployed, plus all persons marginally attached to the labor force, plus total employed part time for economic reasons, plus all persons marginally attached to the labor force, increase to 15.0 percent, from 14.9 percent in June 2012.
    • The change in total nonfarm payroll employment for June 2012 was revised from a gain of 80,000 to a gain of 64,000.
  • The Dow Jones Industrial Average lost 92.18 points, or 0.7%, to end at 12,878.88.
  • The S&P 500 index shed 10.32 points, or 0.8%, to 1,365.
  • The Nasdaq Composite declined 10.44 points, or 0.4%, to 2,909.77.

COMMODITIES

  • The U.S. national average for a gallon of regular gasoline is $3.56.
    • 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 92 percent higher than they were when Mr. Obama became president.
  • Crude for September delivery declined $1.78, or 2%, at $87.13 a barrel on the New York Mercantile Exchange.
  • Gold for December delivery retreated $16.60, or 1%, to settle at $1,590.70 an ounce on the Comex division of the New York Mercantile Exchange.

NEWS TO WATCH

  • PROTESTORS – The Occupy Wall Street protests continue around the world, now in their 317th day.
  • SOLYNDRA - A report by Republicans on the U.S. House Energy and Commerce Committee found that political pressure by a White House eager to tout its stimulus agenda was largely to blame for fast-tracking the ill-fated $535 million Solyndra loan guarantee.
    • An overriding theme in Thursday's report is that the U.S. Department of Energy was under pressure from the beginning in 2009 to approve the Solyndra loan guarantee despite warning signs.
    • This report found that DOE pushed forward with the guarantee despite these warnings because of the Obama administration's desire to use the Solyndra guarantee to highlight its stimulus.
  • CONGRESS - The U.S. House approved (232-189) legislation Thursday that would set up an expedited process for considering a tax reform bill in 2013 that cuts and reduces the number of individual and corporate tax rates, eliminates the Alternative Minimum Tax and ends special-interest tax breaks.
    • Passage of the Pathway to Job Creation Through a Simpler, Fairer Tax Code Act is likely the Republicans' last significant attempt to shape the tax debate before the elections, and will probably be used by the GOP during the rest of campaign season as a promise for real reform next year. It followed Wednesday's vote to extend current tax rates for all taxpayers, which they said would serve as a "bridge" to tax reform in 2013.
    • The vote sends the bill to a U.S. Senate that has adjourned for the August break, and regardless, is not expected to take up the House bill even when it returns.
  • CONGRESS - A cybersecurity bill sought by President Obama as critical to national defense was blocked Thursday in the U.S. Senate, drawing an angry response from the White House.
    • The legislation failed to advance amid opposition from an unusual coalition of civil libertarians -- who feared it could allow too much government snooping -- and conservatives who said it would create a new bureaucracy.
    • The U.S. Chamber of Commerce argued that the bill "could actually impede US cybersecurity by shifting businesses' resources away from implementing robust and effective security measures and toward meeting government mandates."
    • According to the Heritage Foundation, the concern is now whether the president will override the will of the people and their representatives and simply enact an onerous regulatory structure through executive orders.
  • WHITE HOUSE - President Obama's administration doesn’t see the need for defense contractors to warn employees about possible layoffs from across-the-board budget cuts, but in 2007, then-Senator Obama railed against employers for failing to notify workers who were in danger of losing their jobs.
    • The Obama administration said Monday in guidance from the Labor Department that federal contractors don’t need to warn their employees that they could lose their jobs because of the looming budget cuts that are slated to begin Jan. 2. The agency said it would be “inappropriate” for employers to send such warnings because the $110 billion in cuts are still speculative. Defense programs would be the target of about half of the cuts.
    • The U.S. Labor Department’s letter came after a Pentagon official said Defense Department contractors could be sending layoff notices days before the Nov. 6 presidential election. Some industry groups predict the budget cuts could cause as many as 1 million workers in the U.S. to lose their jobs. Lockheed Martin, for example, has told Congress it might be forced to lay off 10,000 of its 120,000 employees.
  • WHITE HOUSE - In July 2012, the Obama for America Campaign, the Democratic National Committee and the Ohio Democratic Party filed suit in Ohio to strike down part of that state's law governing voting by members of the military. Their suit said that part of the law is "arbitrary" with "no discernible rational basis."
    • Currently, Ohio allows the public to vote early in-person up until the Friday before the election. Members of the military are given three extra days to do so.
    • The National Defense Committee responded to the lawsuit by citing reports that found the number one reason for military voter disenfranchisement is inadequate time to successfully vote. The National Defense Committee said the Democrat lawsuit is intended to disenfranchise some unknown number of military voters and that the judge should reject it with prejudice.
    • The National Defense Committee is a grass roots, pro-military organization supporting a larger and stronger military and the election of more veterans to the United States Congress.

PRESIDENT’S SCHEDULE

  • In the morning, President Obama will meet with senior advisors and receive the Presidential Daily Briefing at the White House.
  • Later in the morning, the president will deliver remarks at the Eisenhower Executive Office Building on the need for Congress to act to ensure that taxes don't go up on 98 percent of Americans at the beginning of next year.

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 in session today.

TOPICS OF INTEREST

FEDERAL GOVERNMENT

  • INTERNAL REVENUE SERVICE - The Inspector General for the IRS said the IRS is paying out billions of dollars in fraudulent tax refunds to identity thieves, an issue that is a “growing problem” involving numbers that are increasing “exponentially.”
    • The report said that tax thieves are stealing the identities of taxpayers and then filing bogus returns on their behalf and collecting fraudulent refunds as a result.
    • The inspector general estimates that the IRS could issue as much as $21 billion in fraudulent tax refunds over the next five years.
  • MEDICAID - One in every 20 health providers getting taxpayer money from Medicaid is delinquent on their federal taxes, and in some cases the tax cheats are years behind in paying the IRS, according to a new audit by Congress’s investigators.
    • The Government Accountability Office looked at about 7,000 providers in three large states who Medicaid reimbursed more than $6 billion in 2009 and found that they had nearly $800 million in unpaid federal taxes.
    • GAO said the IRS is usually allowed to deduct unpaid taxes from other government payments, but said the IRS does not believe Medicaid reimbursements for care qualify as federal payments. GAO said if IRS had used those tools, than it could have recovered up to $330 million of the money owed in 2009.

FOREIGN POLICY

MIDDLE EAST

  • ISRAEL - Obama administration insiders have grown increasingly worried that Israel might be readying plans to launch an independent assault against Iran -- possibly as soon as this autumn -- in light of open declarations and closed-door indications issued in past weeks by top Israeli officials.
    • An imminent Israeli armed campaign against Iran is not necessarily in the making, though, and Tel Aviv might be open to permitting U.S. leadership in any direct clash with Tehran, certain Obama sources suggested in an optimistic note following a series of trips to Israel by Defense Secretary Leon Panetta and other key dignitaries. The United States would employ armed force no sooner than 2013.
    • The United States and Israel both suspect Iranian nuclear activities are geared toward development of a weapon capability; Tehran insists its atomic ambitions are strictly peaceful. The Obama administration has said it is ready to curb Iran's nuclear ambitions through military force should a strategy of intensified sanctions and diplomatic engagement fail to resolve the longstanding impasse, but Israeli officials have voiced concern that delaying action would give Tehran time to render key atomic assets less vulnerable to attack by transferring them to better protected sites.
  • SYRIA - Former U.N. Secretary-General Kofi Annan is stepping down as the U.N.-Arab League mediator in the 17-month-old Syria conflict at the end of the month, the United Nations said on Thursday, the latest sign that the outlook for a diplomatic solution is bleak.
    • The White House says Kofi Annan's resignation as United Nations envoy to Syria highlights the failure of Russia and China to support action against Syrian President Bashar Assad.
    • U.N. Security Council diplomats have said privately that the United States and Gulf Arab states have become increasingly frustrated in recent weeks with what they saw as Annan's dogged commitment to diplomacy at a time when they believe all avenues for dialogue with Syrian President Bashar al-Assad have been exhausted.
  • IRAN - In a speech published on his website Thursday, Iranian President Mahmoud Ahmadinejad said the ultimate goal of world forces must be the annihilation of Israel.
    • The Iranian president said that Israel reinforced "the dominance of arrogant powers in the region and across the globe" and that Arab countries in particular - he cited Bahrain, Yemen, Libya, Syria and Turkey - were affected by Israel's "plots."
    • Ahmadinejad, who has called the Holocaust a myth, has previously called for Israel's annihilation, in a 2005 speech in which he used a Persian phrase that translates literally as "wiped off the page of time."