Daily News Briefing: Tuesday August 21 2012

Published by: Clark Barrow

Clark Barrow

DAILY BRIEFING - SUMMARY

  • GASOLINE - Gasoline futures have soared 19% over the past two months, setting in motion an increase in retail prices, which are up 7.2% over the same period, according to AAA Fuel Gauge Report. Pump prices tend to lag behind moves in the futures market by several weeks, meaning drivers have yet to feel the full extent of the recent rally.
  • CONGRESS - When the U.S. Senate returns in September, the first bill it is scheduled to take up would increase the job training and hiring of jobless veterans.
  • WHITE HOUSE - President Obama said he doesn't believe Congress can reach a deal before the November elections that would avoid deep cuts in military spending, but said he is optimistic that the reductions won't occur.
  • IMMIGRATION - Part of Alabama's immigration law that ordered public schools to check the citizenship status of new students was ruled unconstitutional Monday by a federal appeals court that also said police in that state and Georgia can demand papers from criminal suspects they have detained.
  • BURNED OUT - About 1 in 2 doctors are burned out, showing signs of emotional exhaustion and little interest in work as patient loads increase, U.S. researchers found.
  • BIOFUELS - The Environmental Protection Agency (EPA) delivered a blow to the petroleum industry Monday by denying a petition that would have exempted refiners from part of a biofuel blending mandate.
  • SYRIA - President Obama said Monday that the movement or use of Syria’s chemical weapons is a red line that could significantly change the U.S. calculus toward getting involved in the conflict.  Meanwhile, Russia warned the West on Tuesday against unilateral action on Syria.

WHAT WE KNOW

ECONOMIC NEWS

  • DEMAND - According to a report by Moody's Analytics, recent economic data brought some welcome surprises such as better-than-foreseen retail sales and solid growth in residential permits. This said, the U.S. economy is growing slowly. Another month of low inflation and higher unemployment in many states suggest that demand is still the missing piece.
    • Although month-to-month inflation can be erratic, long spans of flat prices are not necessarily welcome. Today’s lower inflation is a function of slow GDP growth, tepid hiring, and a stronger currency, suggesting that its source is weak demand, not healthy gains in productivity. This demand-side disinflation is a burden on the economy and should be answered by stimulative monetary policy and a predictable fiscal regime.
    • New figures on state employment for July show that hiring is uneven across the country. Gains have been strongest in states with energy investment like North Dakota, Montana and Texas, while the upper Midwest and much of the South have seen souring labor demand this year.
  • The Dow Jones Industrial Average closed down 3.56 points at 13,271.64.
  • The S&P 500 index finished virtually unchanged at 1,418.13.
  • The Nasdaq Composite slipped less than a point to 3,076.21,

COMMODITIES

  • GASOLINE - Gasoline futures have soared 19% over the past two months, setting in motion an increase in retail prices, which are up 7.2% over the same period, according to AAA Fuel Gauge Report. Pump prices tend to lag behind moves in the futures market by several weeks, meaning drivers have yet to feel the full extent of the recent rally.
    • And there is another reason for consumers to fear even higher gasoline prices: The motor fuel is still playing catch-up with its biggest input cost. Crude-oil futures are up 27% since late June as Western sanctions against producer Iran eroded global supplies.
    • Aside from higher oil prices, disruptions to U.S. output and an uptick in demand both at home and overseas mean gasoline prices could continue climbing, at least over the short term, analysts, traders and investors say.
  • 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 101 percent higher than they were when Mr. Obama became president.
  • September crude oil fell 4 cents to settle at $95.97 a barrel on the New York Mercantile Exchange.
  • Gold futures for December delivery settled at $1,623 an ounce on the Comex division of the New York Mercantile Exchange, up $3.60, or 0.2%.

NEWS TO WATCH

  • ELECTION - As of today, there are 77 days until the November 2012 presidential election.
  • CONGRESS - When the U.S. Senate returns in September, the first bill it is scheduled to take up would increase the job training and hiring of jobless veterans.
    • Before the August recess started, U.S. Senate Majority Leader Harry Reid (D-Nev.) filed cloture on the Veterans Job Corps Act, S. 3457. On Tuesday, Sept. 11, the U.S. Senate will proceed to a roll call vote on a motion to end debate on the bill.
    • The Veterans Job Corps Act would create new job-training programs to help veterans find jobs in targeted fields such as national park conservation, historic preservation projects, police officers and firefighters, among others.
  • WHITE HOUSE - President Obama said he doesn't believe Congress can reach a deal before the November elections that would avoid deep cuts in military spending, but said he is optimistic that the reductions won't occur.
    • Obama called on Congress to act and that Democrats must understand that any deal will require spending cuts. He said Republicans must also accept the need for additional tax revenue. Without a deal, the Pentagon faces $500 billion in cuts over 10 years.
    • The looming cuts are part of a deal brokered last year by Obama and congressional leaders of both parties. It was designed to force a deficit agreement, but Congress was unable to come up with a compromise.
    • Obama said he has made sure that service members don't lose pay or benefits and that veterans continue to receive their benefits.
  • WHITE HOUSE - President Obama slammed Republicans over taxes and women's rights on Monday in a surprise appearance in the White House briefing room.  The Democratic president has taken criticism from reporters and Republican political operatives for not holding a press conference in roughly two months while his opponent, former Massachusetts Governor Mitt Romney, has taken questions from his traveling press corps more regularly.
    • Obama zeroed in on those remarks by U.S. Senate candidate Todd Akin of Missouri, calling them "offensive" and saying politicians should not be making healthcare decisions on behalf of women.
    • During the press conference Obama also defended his campaign's tone and, without condemning it, distanced himself from an ad by Priorities USA Action, a Democratic "Super PAC," which ties Romney to the death of a woman whose steel-worker husband lost his job after Romney's company, Bain Capital, closed the plant where he worked.

PRESIDENT’S SCHEDULE

  • In the morning, President Obama will depart Washington, D.C. and travel to Columbus, Ohio.
  • In the afternoon, the president will deliver remarks at campaign event at Capital University in Columbus, Ohio.
  • Later in the afternoon, the president will Columbus, Ohio and travel to Reno, Nevada.
  • In the evening, the president will deliver remarks at campaign event at Truckee Meadows Community College in Reno, Nevada.
  • Later in the evening, the president will depart Reno, Nevada and travel to Las Vegas, Nevada.
  • The president will remain overnight in Henderson, Nevada.

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

  • IMMIGRATION - Part of Alabama's immigration law that ordered public schools to check the citizenship status of new students was ruled unconstitutional Monday by a federal appeals court that also said police in that state and Georgia can demand papers from criminal suspects they have detained.
    • The 11th Circuit Court of Appeals ruled that the Alabama schools provision wrongly singles out children who are in the country illegally. Alabama was the only state that passed such a requirement and the 11th Circuit previously had blocked that part of the law from being enforced.
    • The court, however, upheld parts of immigration laws in Alabama and Georgia allowing law enforcement to check documents for people they stop.

HEALTH CARE

  • BURNED OUT - About 1 in 2 doctors are burned out, showing signs of emotional exhaustion and little interest in work as patient loads increase, U.S. researchers found.
    • Doctors working in emergency, family and internal medicine were the most likely to feel drained, according to the study released today in the Archives of Internal Medicine. Researchers said burnout also was tied to long hours, with 37 percent of physicians working more than 60 hours a week.
    • The number of doctors reporting feeling burned out is surprising and troubling, said Tait Shanafelt, a professor of medicine at the Mayo Clinic and lead study author. He said the trend may cause physicians to quit or reduce their workload just as demand for doctors is increasing with the aging population. The issue may get worse as 32 million Americans are expected to get health insurance by 2014 under a new U.S. law, increasing the number of people seeking medical care, he said.

ENERGY

  • BIOFUELS - The Environmental Protection Agency (EPA) delivered a blow to the petroleum industry Monday by denying a petition that would have exempted refiners from part of a biofuel blending mandate.
    • EPA shot down the American Petroleum Institute’s (API) challenge of the renewable fuel standard (RFS), according to Monday court filings with the U.S. Court of Appeals for the District of Columbia. EPA determined that enough advanced biofuels – generally understood to be made from non-food products – existed to meet that portion of the RFS for 2012.
    • The decision will likely inflame API and its Republican allies who have said the RFS props up an industry that would not otherwise exist. They say EPA requires refiners to blend cellulosic biofuels – those made from non-edible feedstocks, such as yard waste or switchgrass – even though no such biofuels are produced domestically at commercial scale.

DOMESTIC ISSUES

STATE ISSUES

  • CALIFORNIA - Contrary to what voters were led to believe, California took the unprecedented step this month to give banks and struggling homeowners up to $100,000 in taxpayer funds to reduce underwater mortgages.
    • Originally, banks and lenders were supposed to pay 50 percent of the cost of reducing the principal for those whose homes are worth less than their mortgage. But when the banks refused, California took the controversial step of paying the entire amount, up to $100,000.
    • The program, known as the Hardest Hit Housing Market fund, is part of a $7.6 billion federal effort to help underwater homeowners in 18 states. California received $2 billion. But when banks and lenders who service loans refused to write down even a small portion of the negative equity loans, California decided to use the taxpayer money to pay 100 percent of the mortgage reduction.

FOREIGN POLICY

MIDDLE EAST

  • SYRIA - President Obama said Monday that the movement or use of Syria’s chemical weapons is a red line that could significantly change the U.S. calculus toward getting involved in the conflict.
    • Obama said the likelihood of a “soft landing” for Syrian President Bashar Assad seemed pretty remote, as the violence in Syria has raged between opposition forces and Assad’s troops.
    • He said that the Obama administration was preparing for a range of contingency plans in Syria, as the 18-month conflict has shown little sign of slowing. The administration has made clear to everyone in the region, Obama said, that the chemical weapons were a red line that would have "enormous consequences."
    • He reiterated that the United States remains focused on humanitarian aid and working with the international community to consult with the logistics of a political transition should Assad fall.
    • Meanwhile, Russia warned the West on Tuesday against unilateral action on Syria, a day after U.S. President Obama threatened "enormous consequences" if his Syrian counterpart used chemical or biological arms or even moved them in a menacing way.
    • Russia and China have opposed military intervention in Syria throughout a 17-month-old revolt against President Bashar al-Assad. They have vetoed three U.N. Security Council resolutions backed by Western and Arab states that would have put more pressure on Damascus to end violence that has cost 18,000 lives.
  • IRAN - Iran unveiled upgrades to six weapons on Tuesday, including a more accurate short-range missile and a more powerful naval engine, Iranian media reported, in what seemed to be its latest response to international pressure over its nuclear program.
    • The hardware was presented at a ceremony marking Defence Industry Day and attended by President Mahmoud Ahmadinejad and Defence Minister Ahmad Vahidi.
    • It has also threatened to block the Strait of Hormuz, the neck of the Gulf through which 40 percent of the world's sea-borne oil exports pass. Such a move would probably invite a military response from the United States.

EUROPE

  • GREECE - Details of Greece's €11.5 billion ($14.2 billion) austerity plan are emerging as Prime Minister Antonis Samaras moves to demonstrate his government is serious about cost-cutting efforts ahead of meetings with European leaders later this week.
    • Although the specifics of the cutbacks still remain a work-in-progress, senior government officials have made clear that the new measures will include across-the-board cuts in pension benefits—a politically sensitive issue—as well as wage reductions and layoffs in the broader public sector.
    • The general outline of those budget cuts will be presented by Mr. Samaras on Wednesday to Luxembourg's Prime Minister and Eurogroup chief Jean-Claude Juncker, who will arrive in Athens for a one-day visit. On Friday, in his first high-level talks since he took office in June, Mr. Samaras will travel to Berlin to meet German Chancellor Angela Merkel and a day later in Paris he will meet French President François Hollande.