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Daily News Briefing: Thursday, August 16, 2012

Published by: Clark Barrow

Clark Barrow

DAILY BRIEFING - SUMMARY

  • UNEMPLOYMENT - First-time claims for state unemployment benefits rose in the latest week, the U.S. Labor Department reported Thursday. The number of initial claims in the week ending Aug. 11 rose 2,000 to 366,000.

  • WEAKEST RECOVERY - The recession that ended three years ago this summer has been followed by the feeblest economic recovery since the Great Depression.

  • QUESTIONABLE REFUNDS - United States IRS supervisors ignored employees who tried to warn agency higher-ups of fraud in a program designed to collect taxes from immigrants, resulting in the agency paying out potentially bogus refunds, according to an official audit released Wednesday.

  • WHITE HOUSE - President Obama's new deportation policy took effect Wednesday, allowing young illegal immigrants to apply to stay in the United States.

  • WHITE HOUSE - The outlines of a broad set of possible cuts in U.S. federal discretionary domestic and defense-related programs in early 2013 should become more clear within the next month.  Under new legislation signed into law on Aug. 7, the Obama administration must lay out how an expected $109 billion in cuts will be implemented in 2013.

  • CLIMATE MESS - According to a report by the U.S. State Department’s internal financial watchdog, U.S. State Department's spending of tens of millions of dollars to combat climate change includes inadequate oversight, lax bookkeeping, sloppy paperwork, haphazard performance agreements and missing financial documentation.

  • FUEL EFFICIENCY - The U.S. National Highway Traffic Safety Administration said on Tuesday the agency will not meet a self-imposed deadline to finalize new fuel efficiency regulation.

WHAT WE KNOW

ECONOMIC NEWS

  • UNEMPLOYMENT - First-time claims for state unemployment benefits rose in the latest week, the U.S. Labor Department reported Thursday. The number of initial claims in the week ending Aug. 11 rose 2,000 to 366,000.

    •  Claims in the previous week were revised to a decrease of 4,000 to 364,000 compared with the initial estimate of a drop of 6,000 to 361,000.

    • The number of people still receiving benefits under regular state programs after an initial week of aid fell 31,000 to 3.3 million in the week ended August 4. A total of 5.68 million Americans were receiving unemployment benefits under all programs in the week ended July 28, down 69,782 from the prior week.
  • WEAKEST RECOVERY - The recession that ended three years ago this summer has been followed by the feeblest economic recovery since the Great Depression.
    • Since World War II, 10 U.S. recessions have been followed by a recovery that lasted at least three years. An Associated Press analysis shows that by just about any measure, the one that began in June 2009 is the weakest. 
    • The following figures below detail the weak recovery:
      • America's gross domestic product - the broadest measure of economic output - grew 6.8 percent from the April-June quarter of 2009 through the same quarter this year, the slowest in the first three years of a postwar recovery. GDP grew an average of 15.5 percent in the first three years of the eight other comebacks analyzed.
      • Investment in housing, which grew an average of nearly 34 percent this far into previous postwar recoveries, is up just 8 percent since the April-June quarter of 2009.
      • Consumer spending has grown just 6.5 percent since the recession ended, feeblest in a postwar recovery. In the first three years of previous recoveries, spending rose an average of nearly 14 percent.
      • The economy shed a staggering 8.8 million jobs during and shortly after the recession. Since employment hit bottom, the economy has created just over 4 million jobs. So the new hiring has replaced 46 percent of the lost jobs, by far the worst performance since World War II. In the previous eight recoveries, the economy had regained more than 350 percent of the jobs lost, on average.
  • The Dow Jones Industrial Average ended 7.36 points lower, or 0.1%, at 13,164.78.
  • The S&P 500 was up 1.6 point, or 0.1%, at 1,405.53.
  • The Nasdaq ended 13.95 points higher, or 0.5%, at 3,030.93.

COMMODITIES

  • The U.S. national average for a gallon of regular gasoline is $3.71.
    • 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 100 percent higher than they were when Mr. Obama became president.
  • Oil for September delivery added 90 cents, or 1%, to settle at $94.33 a barrel on the New York Mercantile Exchange.
  • Gold for December delivery added $4.20, or 0.3%, to $1,606.60 an ounce on the Comex division of the New York Mercantile Exchange.

NEWS TO WATCH

  • ELECTION - As of today, there are 82 days until the November 2012 presidential election.
  • QUESTIONABLE REFUNDS - United States IRS supervisors ignored employees who tried to warn agency higher-ups of fraud in a program designed to collect taxes from immigrants, resulting in the agency paying out potentially bogus refunds, according to an official audit released Wednesday.
    • The U.S. Treasury’s inspector general for tax administration (TIGTA) said the IRS is too focused on getting out refunds quickly rather than getting them only to qualified taxpayers. Auditors also said the agency eliminated some methods employees had used to figure out questionable refund requests and doesn’t have the right training or tools to screen out bogus identity documents when immigrants apply for taxpayer numbers.
    • IRS pays out $6.8 billion in refunds to taxpayers who file using Individual Taxpayer Identification Numbers (ITINs). They generally are immigrants, here both legally and illegally. The potential amount of fraud was not stated, but the investigators detailed seven schemes that paid out $9 million in tax refunds in 2011.
    • The agency said it has put new checks in place to try to crack down on fraud, including getting training from the Homeland Security Department on how to verify documents when an immigrant applies for an ITIN.
  • CONGRESS - U.S. Democrats hoping the Solyndra issue will fade away this fall will get some bad news this week: Republican investigators may have found yet another trove of e-mails to explore.
    • U.S. Rep. Darrell Issa, Chairman of the House Oversight and Government Reform Committee, will ask for personal e-mails related to U.S. Department of Energy business from ten current and former Department of Energy employees who served during the Obama Administration and participated in the program that gave loan guarantees to Solyndra, the failed solar firm that received a $528 million loan guarantee, and other companies, according to a congressional aide familiar with the investigation.
    • The committee recently released e-mails that make it clear that some Department of Energy officials were communicating about official business using personal e-mail accounts. Federal law requires those records be preserved, but it’s not clear the officials did so by turning in paper records or forwarding them to a government e-mail address.

 

  • WHITE HOUSE - President Obama's new deportation policy took effect Wednesday, allowing young illegal immigrants to apply to stay in the United States.
    • The president's program allows eligible illegal immigrants brought to the United States as children to begin submitting applications for work authorization and a two-year deferment on deportation.
    • Under the new policy, immigrants under 30 years old who entered the United States under the age 16, have resided in the U.S. for five continuous years, don't have a criminal record and have a GED, high school diploma or are honorably discharged veterans, can apply for deferred action. The program does not create a path to citizenship.
    • The Migration Policy Institute estimates that 1.76 million illegal immigrants could attempt to benefit from an Obama administration decision to shield them from deportation.
  • WHITE HOUSE - The outlines of a broad set of possible cuts in U.S. federal discretionary domestic and defense-related programs in early 2013 should become more clear within the next month.  Under new legislation signed into law on Aug. 7, called the Sequestration Transparency Act, the Obama administration must lay out how an expected $109 billion in cuts will be implemented in 2013 unless Congress takes action to delay or stop them.
    • If they occur as required under current law, the cuts will be divided equally between discretionary defense and domestic programs. Affected programs will be subject to an across-the-board cut ranging from 7.8 to 9 percent.
    • Economists have warned that these spending cuts, combined with a simultaneous expiration of Bush-era tax cuts, could tip the economy back into recession. The Congressional Budget Office estimates that economic growth would be cut by four percentage points.
  • WHITE HOUSE - President Obama added his voice Wednesday to the escalating spat over Medicare policy between his campaign and that of Republican Mitt Romney.
    • Mr. Obama accused the Romney campaign of being "dishonest" about the changes he has made to Medicare, saying "they're just throwing everything at the wall to see if it sticks."
    • The Romney campaign has fired back with criticism that President Obama's health care law will cut $716 billion from Medicare over 10 years. Ryan's budget proposal also included the same $700 billion in cuts, however, which came from eliminating subsidies to insurance companies and cutting waste and fraud — neither of which would affect health services or benefits for seniors.

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 meet with U.S. Secretary of State Clinton at the White House.
  • In the afternoon, the president will meet with Vice President Biden for lunch at the White House.
  • Later in the afternoon, the president will meet with U.S. Treasury Secretary Geithner 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

FEDERAL GOVERNMENT

  • CLIMATE MESS - According to a report by the U.S. State Department’s internal financial watchdog, U.S. State Department's spending of tens of millions of dollars to combat climate change includes inadequate oversight, lax bookkeeping, sloppy paperwork, haphazard performance agreements and missing financial documentation.
    • The U.S. State Department’s Office of the Inspector General (OIG) report points to a host of lapses in the way the Bureau of Oceans and International Environmental and Scientific Affairs and its Office of Global Change (OES/EGC) has supervised climate change spending, based on what the OIG observed in a sampling of climate change projects between 2006 and 2010, when the overall spending tab amounted to some $214 million. The OIG sampling involved $34 million of the total.
    • According to a U.S. State Department website, the U.S. has contributed some $5.1 billion in climate change funding to developing countries in 2010 and 2011 alone, with additional money still pouring forth in 2012.
  • FUEL EFFICIENCY - The U.S. National Highway Traffic Safety Administration said on Tuesday the agency will not meet a self-imposed deadline to finalize new fuel efficiency regulation.
    • The new fuel economy proposal, announced in July 2011 after months of negotiations between the Obama administration and auto makers, would require the companies to reach an average fuel efficiency across their U.S. fleets of 54.5 miles per gallon by 2025.
    • The extent of the actual delay was not clear, and the agency was not immediately available for comment. Under the current mandate implemented in 2009, average fuel economy was to reach 35.5 miles per gallon by 2016.
    • U.S. Representative Darrell Issa (R.CA), chairman of the U.S. House Oversight and Government Reform Committee, said the proposed requirement that cars get 54.5 miles per gallon by 2025 needs to be redeveloped to better protect consumers from increases in the price of new cars.
  • PAYROLL SUBSIDY - The U.S. Labor Department announced on Monday that it will be awarding almost $100 million in grant funding to states to prevent layoffs by allowing businesses to pay employees as part-time workers and the federal government will pick up the tab for the cost of a full-time paycheck.
    • The “work-sharing” program was passed as part of a Republican-led bill in the House, H.R. 3630, and Senate Amendment 1465 to extend the payroll tax deduction and unemployment benefits. In February 2012, President Barack Obama signed the bill into law, which included the $100 million in funding.
    • The grants will be given to states that apply and meet certain requirements, including having short-term compensation programs in place that meet federal guidelines. Workers will have “wages compensated with a portion of their weekly unemployment compensation payments,” according to the Labor Department.

ENERGY

  • SHALE GAS - IHS Global Insight released a study showing that shale gas production will continue to grow and people employed in the shale gas industry will increase by 1 million by 2035.  The study entitled “The Economic and Employment Contributions of Shale Gas in the United States” expects shale gas to represent 60 percent of total U.S. natural gas production by 2035, up from 27 percent in 2010.
    • Shale gas production supported more than 600,000 jobs in 2010, and is expected to support nearly 870,000 jobs by 2015, and more than 1,660,000 jobs by 2035. The shale gas industry has a high employment multiplier which determines the indirect and induced jobs created to support an industry. For every direct job created in the shale gas sector, more than three indirect and induced jobs are created. That employment multiplier rate is higher than the rate for the financial and construction industries.
    • Shale gas jobs pay higher wages on average than those paid to workers in manufacturing, transportation and education—currently $23.16 per hour.

DOMESTIC ISSUES

STATE ISSUES

  • PENNSYLVANIA - A judge on Wednesday rejected an effort by civil rights groups to block Pennsylvania’s voter-ID law. The measure, approved by the Republican-controlled legislature this spring, requires voters to show a state-approved photo ID such as a driver’s license in order to vote.
    • Thirty-two states have introduced voter-ID measures this year, either new proposals or legislation to strengthen existing laws. Republicans argue that the laws are necessary to prevent fraud, including voting by people who aren’t U.S. citizens.
    • The U.S. Justice Department of the Obama administration is suing to block similar voter-ID laws in Texas and South Carolina, and is evaluating whether to file a lawsuit against the Pennsylvania measure.

FOREIGN POLICY

MIDDLE EAST

  • ISRAEL - A former Israeli national security adviser said Wednesday that the prime minister and the defense minister told him this week they had not yet decided to attack Iran’s nuclear facilities and could be dissuaded from a strike if President Obama approved stricter sanctions and publicly confirmed his willingness to use military force.
    • This comes during a week of intensifying public discussion about the possibility of a unilateral Israeli attack on Iran, fueled by a series of leaks to journalists by supporters and opponents of such a strike. The media blitz seems to have awakened the Israeli public — left-leaning intellectuals staged protests, and there were long lines at gas mask distribution centers — and to have engaged Washington, where two top defense officials tried to tamp down the talk on Tuesday.
    • Meanwhile, two explosions shook a southern Israeli city near Egypt on Wednesday, and the military suspected a cross-border rocket attack though searches have thus far turned up no evidence.
  • SYRIA - Bashar Assad's Syrian regime and rebel forces have each continued to commit crimes against humanity in the nation's armed conflict, with “the most brutal tactics” coming in recent months, according to a United Nations report.
    • The UN Commission of Inquiry report, issued Wednesday, expands on findings initially released in June. While the rebel forces have engaged in “murder, extrajudicial killing and torture,” the report finds that the Assad regime has committed crimes against humanity in a larger fashion.
    • The report found government forces engage in “murder and torture, war crimes and gross violations of international human rights and humanitarian law, including unlawful killing, indiscriminate attacks against civilian populations and acts of sexual violence,” according to the report.
  • IRAN - Iran hosts a foreign ministers' conference on Thursday to seek a resolution to the intensifying conflict in Syria but its latest diplomatic foray into the crisis has been met with deep skepticism by Western nations.
    • Along with Russia and China, Iran has strongly supported Assad whose forces have launched crushing operations against anti-government protesters and armed opposition groups since the crisis erupted 17 months ago.
    • Iran has resisted an agreement on Syria that requires Assad to quit as part of any political transition. There is no sign that Tehran is ready to adopt a new approach, despite setbacks for Assad including the defection this week of his prime minister.

ASIA 

  • PAKISTAN - Top Pakistani military officials plan to conduct a major militant clearing operation next month similar to the 2009 Swat valley operation that purged one of the most Taliban-infested regions of Pakistan.
    • The news confirmed a Monday disclosure from U.S. Defense Secretary Leon Panetta, who said Pakistan had indicated its military was planning an operation against terrorists in a militant hotbed in the northwest. Now, U.S. military officials in Kabul and Washington say that Pakistan’s army chief Pervez Kayani recently told the top U.S. commander in Afghanistan, Gen. John Allen, that it would be a large-scale offensive designed to sweep the Waziristan tribal agencies.
    • The officials, who have close knowledge of the meeting between Allen and Kayani, requested anonymity due to the fragile status of relations between the U.S. and Pakistan. They described the operation as similar to the clearing of Swat, in which Pakistan sent in thousands of troops for an 18-month rout of a mountain region where the military is still positioned today to prevent the Taliban from returning.