Daily News Briefing: Friday, July 6, 2012

Published by: Clark Barrow

Clark Barrow

 

DAILY BRIEFING - SUMMARY

  • JOBS - The U.S. added a meager 80,000 jobs in June 2012, the U.S. Labor Department reported Friday, falling short of market expectations and confirming that the labor market cooled off considerably in the second quarter.
  • OBAMACARE - Starting January 1, 2013, Obamacare will impose a 2.3% excise tax on gross receipts in excess of $5 million for domestically-sold medical devices. The device tax is a tax on gross receipts (sales, essentially) instead of a tax on profits, so the tax will be imposed even if a company sells its products at a loss.
  • OBAMACARE – U.S. Congressional sources say the U.S. Health and Human Services Department has already received a billion dollars implementation money for Obamacare and 13,000 pages of regulations have already been written - and they are not finished yet.
  • CONGRESS - Last week, lawmakers in the U.S. Congress approved a bill that keeps highway and transit spending at current levels for the next two years, but there was a catch: They came up nearly $20 billion short. Rather than cut spending or raise taxes to make up the difference, they tapped the U.S. Treasury, something they’d done three times already.
  • INFRASTRUCTURE - U.S. Transportation Secretary Ray LaHood argued Saturday that China outpaces the U.S. in building major transportation infrastructure because of its authoritarian system and because they don't have the Republican Party holding up progress.
  • EMISSIONS - According to a new report from the International Energy Agency, the United States has had the largest reduction of emissions of all countries or regions since 2006, cutting greenhouse gas emissions by a staggering 7.7 percent.
  • IRAQ - Iraq has "solid information" that al Qaeda militants are crossing from Iraq into Syria to carry out attacks and Iraq has begun to amass troops along the Syrian border.

WHAT WE KNOW

ECONOMIC NEWS

  • JOBS - The U.S. added a meager 80,000 jobs in June 2012, the U.S. Labor Department reported Friday, falling short of market expectations and confirming that the labor market cooled off considerably in the second quarter.
    • The unemployment rate for June 2012 was unchanged at 8.2%.
    • The number of new jobs created in May was revised up to 77,000 from an original estimate of 69,000, while April's figure was revised down to 68,000 from 77,000.
  • BILLIONAIRE TAX - The United Nations Department of Economic and Social Affairs Thursday proposed introducing an international tax and other financing mechanisms, including a 1% tax on individuals with holdings over one billion dollars, to raise money for critically underfunded international development programs.
    • The 2012 edition of the World Economic Social Survey report found that donor countries have cut back on development assistance in 2011 due to economic instability, marking the first year in which international aid flows have substantially declined.
    • In addition to international taxes on consumption, the survey also suggests a billionaire’s tax, which would require individuals to pay 1% of their wealth holdings of $1 billion or more to finance international development.
  • GLOBAL OUTLOOK - The head of the International Monetary Fund expressed concern on Friday at a deterioration in the global economy, saying the outlook has become more worrying as developed and big emerging nations show signs of slowing down.
    • In the IMF's April report, it revised upward its global growth forecast for this year to 3.5 percent from 3.3 percent in January, and to 4.1 percent for 2013 from 3.9 percent previously.
    • The IMF said that the two main concerns for Japan's economy were a further appreciation of the yen and risks posed by Europe's debt crisis to demand for Japanese exports. The IMF will publish an update to its World Economic Outlook report on July 16.
  • The Dow Jones Industrial Average closed down 47.15 points, or 0.4%, at 12,896.67.
  • The S&P 500 Index fell 6.44 points, or 0.5%, to close at 1,367.58.
  • The Nasdaq Composite Index barely finished higher, up 0.04 point to close at 2,976.12.

COMMODITIES

  • The U.S. national average for a gallon of regular gasoline is $3.35.
    • 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 81 percent higher than they were when Mr. Obama became president.
  • Crude oil for August delivery was off 44 cents, or 0.5%, to settle at $87.22 a barrel on the New York Mercantile Exchange.
  • Gold for August delivery declined $12.40, or 0.8%, to settle at $1,609.40 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 289th day.
  • OBAMACARE - Starting January 1, 2013, Obamacare will impose a 2.3% excise tax on gross receipts in excess of $5 million for domestically-sold medical devices. The device tax is a tax on gross receipts (sales, essentially) instead of a tax on profits, so the tax will be imposed even if a company sells its products at a loss. This one detail ensures that the 2.3% tax is deceptively large: the medical device industry’s tax burden is expected to double because of the Taxmageddon increase; some companies will see their profit margins shaved by up to 40%.
    • A bipartisan outcry has been raised over the device tax, and for good reason. The tax was enacted to help fund the $1.76 trillion in new spending authorized under Obamacare, and it will actively undermine production of and improvement on medical devices which are crucial to patient outcomes.
    • According to Americans for Tax Reform, investment in medical research and development will fall by $2 billion per year because of the device tax—and that is a cautious estimate. R&D dollars drive innovation and innovation lowers costs, so the tax’s adverse effect on investment will keep expensive medical devices from becoming affordable and widely available in the future.
  • OBAMACARE - With the U.S. Supreme Court giving President Obama's new health care law a green light, federal and state officials are turning to implementation of the law -- a lengthy and massive undertaking still in its early stages, but already costing money and expanding the government.
    • According to U.S. Representative Denny Rehberg (R-MT), the U.S. Health and Human Services Department was given a billion dollars implementation money and 13,000 pages of regulations have already been written - and they are not finished yet.
    • The health department is still writing regulations, which can be controversial in and of themselves. One already written, for instance, requires insurance plans to cover contraception. It has been legally challenged by Catholic groups in a case likely to end up in the Supreme Court.
  • CONGRESS - Last week, lawmakers in the U.S. Congress approved a bill that keeps highway and transit spending at current levels for the next two years, but there was a catch: They came up nearly $20 billion short. Rather than cut spending or raise taxes to make up the difference, they tapped the U.S. Treasury, something they’d done three times already.
    • For half a century, revenue from federal taxes on gasoline and diesel fuel paid for the nation’s highway projects. But since 2008, lawmakers have transferred $35 billion in general funds into the Highway Trust Fund to keep it from going bankrupt.
    • There are potential solutions on the table, including increasing the gasoline tax or replacing it with another dedicated source of funding. Other proposals would shift more responsibility for funding transportation projects to the states. Some states have acted already. But it took three years for Congress to agree to a two-year bill, and transportation experts say it’s a shortsighted measure that delays making hard choices.

PRESIDENT’S SCHEDULE

  • In the morning, President Obama will tour Summer Garden Food Manufacturing in Boardman, Ohio.
  • Later in the morning, the president will deliver remarks at a campaign event at Dobbins Elementary School in Poland, Ohio.
  • In the afternoon, the president will deliver remarks at a campaign event at Carnegie Mellon University in Pittsburgh, Pennsylvania.
  • Later in the afternoon, the president will depart Pittsburgh, Pennsylvania and travel to Washington, D.C.
  • Later, the president will hold an event at the White House with construction workers and college students to sign H.R.4348, the "Moving Ahead for Progress in the 21st Century Act" (the transportation and student loan interest rate bill).
  • In the evening, the president will depart the White House and travel to Camp David in Sabillasville, Maryland.

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

  • AUTOMATIC TRIGGER - A group of U.S. Senate defense hawks are asking 15 of the biggest defense contractors to explain how $500 billion in defense cuts could impact them, the latest effort in a campaign to pry information from the White House and Pentagon about the automatic cuts.
    • Of course, the defense industry has already joined its allies in Congress expressing extreme opposition to sequestration cuts taking effect in January and urging Congress to undo them.
    • Industry leaders, such as Lockheed Martin CEO Bob Stevens, have warned of layoffs, and Stevens said last month that all 100,000-plus employees in his companies could receive layoff notices right before the election due to federal reporting requirements.

FEDERAL GOVERNMENT

  • STIMULUS FOR WOMEN - The U.S. Labor Department announced last week that the Obama administration will be providing nearly $2 million in grants to place women in “nontraditional occupations,” such as carpentry, welding, and masonry.
    • According to the U.S. Labor Department, the funding will support “innovative projects that improve the recruitment, hiring, training, employment and retention of women in apprenticeships in industries such as advanced manufacturing, transportation and construction.”
    • Six nonprofit groups will receive grants of $300,000 each, for a total of $1.8 million. Among them is West Virginia Women Work, which offers two work placement programs for women, including “Step Up.” This training program is “designed to prepare adult women for entry-level positions in the construction industry and registered apprenticeships.”
  • INFRASTRUCTURE - U.S. Transportation Secretary Ray LaHood argued Saturday that China outpaces the United States in building major transportation infrastructure like high-speed rail because of its authoritarian system and because the Chinese don't have the Republican Party holding up progress.
    • At the 2012 Aspen Ideas Festival, LaHood said the Chinese are more successful in building infrastructure because in their country, only three people make the decision. In our country, 3,000 people do.
    • During his conference session at the festival, LaHood blamed Republicans in Congress, especially the Tea Party freshman class elected in 2010, for the relative lack of progress in moving forward with high-speed rail even though the administration has obligated more than $11 billion to the effort.

ENVIRONMENT

  • EMISSIONS - According to a new report from the International Energy Agency, the United States has had the largest reduction of emissions of all countries or regions since 2006, cutting greenhouse gas emissions by a staggering 7.7 percent.
    • The drop in emission is a result of the increased development of natural gas from shale.  In fact, the environmental benefits of natural gas from shale are so significant that carbon emissions dropped last year to levels not seen since 1996. Based on data from the Energy Information Administration, emissions this year are declining even further – with some suggesting that 2012 levels may come in below 1990 levels – the target set under Kyoto.
    • Global carbon-dioxide (CO2) emissions from fossil-fuel combustion reached a record high of 31.6 gigatonnes (Gt) in 2011, according to preliminary estimates from the International Energy Agency (IEA). This represents an increase of 1.0 Gt on 2010, or 3.2%. Coal accounted for 45% of total energy-related CO2 emissions in 2011. China made the largest contribution to the global increase.

FOREIGN POLICY

MIDDLE EAST

  • SYRIA - France and the United States pushed for tougher sanctions on Syria at an international conference of some 100 countries Friday as a top general with close ties to President Bashar al-Assad defected.
    • General Munaf Tlass, the son of a former defence minister, has become the highest-ranking military officer to have abandoned the Syrian regime, spurring Western hopes of an exodus of top brass.
    • The 16-month uprising against Assad's regime in which over an estimated 16,500 people have died is now a threat to international security, French President Francois Hollande said, echoing US calls for stronger UN sanctions.
  • IRAQ - Iraq has "solid information" that al Qaeda militants are crossing from Iraq into Syria to carry out attacks and Iraq has begun to amass troops along the Syrian border to stop the migration.
    • Iraq has deployed hundreds of Iraqi national security forces to the country's 400-mile border with Syria, making it the most heavily guarded Iraqi frontier.
    • The U.S. Defense Department confirmed in May that elements of al Qaeda in Iraq were on the ground in Syria, but has no proof that members have infiltrated the ranks of Syrian rebel forces.
    • The threat of Syrian rebel forces being co-opted by terror groups like al Qaeda has been the main crux of the Pentagon's argument against providing arms and military support to the rebellion.
  • IRAN - Iran and the United States might be talking up their readiness for war in the Gulf but beneath the rhetoric, all sides are appear keen to avoid conflict and prevent accidental escalation - at least for now.
    • Western military officials and analysts say Tehran does have the capability to wreak regional havoc. But the current saber-rattling, they believe, is more about moving markets and trying to give the West second thoughts over the ever-tightening oil sanctions aimed at cutting back Tehran's nuclear program.
    • A European Union ban on trading Iranian oil announced earlier in the year entered force on July 1, while the United States is also tightening financial restrictions. Even Asian buyers such as China that had hoped to keep taking Iranian crude appear to be scaling back purchases, struggling to find shipping insurance or banking - leaving Iran increasingly isolated.

ASIA

  • PAKISTAN - The United States has lifted restrictions on roughly $2.5 billion in foreign aid to Pakistan following Islamabad's decision to reopen critical military supply routes in the country to American and NATO forces.
    • Over half of that U.S. aid, or $1.5 billion, will be distributed to Pakistan under the Coalition Support Fund. A portion of the remaining $1 billion in fiscal aid will be sent to Pakistan as part of the Pentagon's foreign military financing program.
    • The decision by Washington to release the funds comes two days after Pakistani leaders allowed access to key supply lines in the country to U.S. and coalition forces stationed in Afghanistan. Pakistan shut down the supply lines last November after an errant airstrike by U.S. and NATO warplanes killed 24 Pakistani soldiers.