Daily News Briefing: Tuesday, July 10, 2012

Published by: Clark Barrow

Clark Barrow

DAILY BRIEFING - SUMMARY

  • DISABILITY - More workers joined the federal government’s disability program in June 2012 than got new jobs, according to two new government reports, a clear indicator of how bleak the nation’s jobs picture is after three full years of economic recovery.
  • FAST & FURIOUS - The U.S. Justice Department on Monday unsealed an indictment charging five individuals allegedly involved in Border Patrol agent Brian Terry's death, and announced a reward of up to $1 million for information leading to the arrest of those suspects still at large.
  • WHITE HOUSE - President Obama called on Congress to pass a one-year extension of the Bush-era tax cuts for people earning less than $250,000 a year while allowing tax rates to return to 1990s levels for those earning more.
  • THE SPENDING - The federal government ran a $60 billion deficit in June and is already more than $900 billion in the red this fiscal year, but there is some bright news: basic government spending appears to be dropping, the Congressional Budget Office estimated Monday.
  • OVERPAID - The federal government and states overpaid an estimated $14 billion in benefits in fiscal 2011, or roughly 11% of all the jobless benefits paid out, according to reports from the U.S. Labor Department.
  • TEXAS - Texas Gov. Rick Perry said Monday his state won't expand Medicaid or set up an insurance exchange, joining a growing number of Republican governors who are rejecting two key parts of President Obama's health care law.

WHAT WE KNOW

ECONOMIC NEWS

  • DISABILITY - More workers joined the federal government’s disability program in June 2012 than got new jobs, according to two new government reports, a clear indicator of how bleak the nation’s jobs picture is after three full years of economic recovery.
    • The U.S. economy created just 80,000 jobs in June, the U.S. Bureau of Labor Statistics reported Friday. But that same month, 85,000 workers left the workforce entirely to enroll in the Social Security Disability Insurance program, according to the Social Security Administration.
    • The disability ranks have outpaced job growth throughout President Obama’s economic recovery. While the economy has created 2.6 million jobs since June 2009, fully 3.1 million workers signed up for disability benefits.
  • The Dow Jones Industrial Average fell 36.18 points, or 0.3%, to 12,736.29.
  • The S&P 500 fell 2.22 points, or 0.2%, to 1,352.46.
  • The Nasdaq Composite lost 5.56 points, or 0.2%, to 2,931.77.

COMMODITIES

  • The U.S. national average for a gallon of regular gasoline is $3.38.
    • 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 80 percent higher than they were when Mr. Obama became president.
  • Crude for August delivery added $1.54, or 1.8%, to settle at $85.99 a barrel on the New York Mercantile Exchange
  • Gold for August delivery rose $10.20, or 0.7%, to end at $1,589.10 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 293rd day.
  • FAST & FURIOUS - The U.S. Justice Department on Monday unsealed an indictment charging five individuals allegedly involved in Border Patrol agent Brian Terry's death, and announced a reward of up to $1 million for information leading to the arrest of those suspects still at large.
    • For the first time, federal officials also revealed that Terry and an elite squad of federal agents initially fired bean bags -- not bullets -- at a heavily armed drug cartel crew in the mountains south of Tucson in December 2011. During the exchange, Terry was shot and killed.
    • The announcement comes amid an intensifying debate over the department's failed Fast and Furious anti-gunrunning operation. Weapons from that program were found at Terry's murder scene -- Republicans seeking documents pertaining to Fast and Furious last month escalated their probe by voting to hold Attorney General Eric Holder in contempt of Congress.
  • CONGRESS - The U.S. House will hold five hours of debate on Tuesday and Wednesday on legislation that would completely repeal the 2010 healthcare law, which is being called up by Republicans in light of the Supreme Court's decision that the individual health insurance mandate is constitutional.
    • The U.S. House Rules Committee approved a rule late Monday setting out the lengthy debate on a bill that is expected to pass with Republican support, but very little if any Democratic support. The Repeal of Obamacare Act, H.R. 6079, was formally introduced by U.S. House Majority Leader Eric Cantor (R-Va.) on Monday.
    • Later Monday evening, the White House put out a statement saying President Obama would veto the bill if it were presented for his signature, something that won't happen given U.S. Senate opposition.
  • WHITE HOUSE - President Obama called on Congress to pass a one-year extension of the Bush-era tax cuts for people earning less than $250,000 a year while allowing tax rates to return to 1990s levels for those earning more.
    • President Obama threatened to veto any legislation that extends all the tax cuts set to expire at the end of the year and promised to only extend tax cuts for incomes less than $250,000.
    • In December 2010, President Obama reached a compromise with U.S. Republicans and extended all of the Bush tax cuts for two years.
    • U.S. Senator Chuck Schumer (D-N.Y) and U.S. House Minority Leader Nancy Pelosi (D-Calif.) have previously pushed for an extension of the Bush tax cuts to households earning up to $1 million, breaking from President Obama’s proposal to make the cut-off $250,000. But shortly after the president announced his tax policy on Monday, both Schumer and Pelosi issued statements pledging full support of the president's policy.
    • Meanwhile, the Small Business & Entrepreneurship Council said raising taxes on individuals who earn more than $250,000 annually will hurt entrepreneurs and S-corporations. The small business advocacy organization said the president is just playing politics, and the extension he is pushing for will really just be taxing high-income earners, rather than helping the middle class, as upper income earners tend to overwhelmingly be entrepreneurs and investors.
    • U.S. Senate Republican Whip Jon Kyl said President Obama’s push to raise taxes on those earning more than $250,000 will raise taxes on 940,000 business owners across America who report their income in individual returns as so-called flow-through enterprises.
    • The nonpartisan Joint Committee on Taxation (JCT) found that the amount of flow-through business income that would be subject to President Obama’s proposed tax hike increased from 50 percent in 2011 to 53 percent in 2013, with the number of entities subject to the tax increase going up from under 750,000 in 2011 to approximately 940,000 in 2013.

PRESIDENT’S SCHEDULE

  • In the morning, President Obama will depart Washington, D.C. and travel to Cedar Rapids, Iowa.
  • In the afternoon, the president will deliver remarks on the economy at a grassroots campaign event at Kirkwood Community College in Cedar Rapids, Iowa.
  • Later in the afternoon, the president will depart Cedar Rapids, Iowa. and return to Washington, D.C.

HAPPENING IN THE U.S. CONGRESS

U.S. SENATE

  • The U.S. Senate is in session today.

U.S. HOUSE OF REPRESENTATIVES

  • The U.S. House is in session today. 

TOPICS OF INTEREST

FEDERAL GOVERNMENT

  • THE SPENDING - The federal government ran a $60 billion deficit in June and is already more than $900 billion in the red this fiscal year, but there is some bright news: basic government spending appears to be dropping, the Congressional Budget Office estimated Monday.
    • CBO said the government has paid out $2.7 trillion so far in fiscal year 2012, about the same level as it had by this point in fiscal year 2011. But when technical adjustments from the 2008 Wall Street bailout are subtracted, spending has actually dropped 2 percent.
    • CBO said Medicaid, education and unemployment benefit spending are both down significantly, chiefly because Mr. Obama's stimulus has winded down and its higher spending levels are expiring. Defense spending is also down in 2012.
    • On the other side, revenue ticked up, running 5 percent higher than at this point in fiscal year 2011, powered in part by workers earning higher wages and thus more money being withheld by the government. With nine months elapsed, the deficit this fiscal year stands at $905 billion, compared to $971 billion in 2011.
  • OVERPAID - The federal government and states overpaid an estimated $14 billion in benefits in fiscal 2011, or roughly 11% of all the jobless benefits paid out, according to reports from the U.S. Labor Department.
    • Of the states, Indiana was the worst offender, making more improper payments than it did correct ones. Now, the U.S. Department of Labor and the states are in the midst of a massive effort to try to recoup some of their lost funds and avoid future overpayments.
    • About 5.8 million people received some kind of state or federal unemployment benefit in June 2012.

ENERGY

  • ENERGY JOBS - Energy development on federal lands contributed $275 billion to the economy last fiscal year and created 1.5 million jobs, according to a report released Monday by the U.S. Interior Department.
    • The U.S. Interior Department claimed its activities contributed a total of $385 billion to the economy in fiscal 2011, with energy development comprising more than 71 percent of that amount.
    • Oil, gas and coal production were the biggest economic drivers for Interior’s Bureau of Land Management, generating an estimated economic contribution of $119.6 billion last year and supporting 558,976 jobs, according to the report. Wind energy on federal lands added $100 million in economic activity, along with 688 jobs. On-site solar construction yielded $1.4 billion in economic activity to go with 6,747 jobs.

HEALTH CARE

  • DOCTOR IS OUT - Eighty-three percent of American physicians have considered leaving their practices over President Obama’s health care reform law, according to a survey released by the Doctor Patient Medical Association.
    • The DPMA, a non-partisan association of doctors and patients, surveyed a random selection of 699 doctors nationwide. The survey found that the majority have thought about bailing out of their careers over the legislation, which was upheld last month by the U.S. Supreme Court.
    • Even if doctors do not quit their jobs over the ruling, America will face a shortage of at least 90,000 doctors by 2020. The new health care law increases demand for physicians by expanding insurance coverage. This change will exacerbate the current shortage as more Americans live past 65.

DOMESTIC ISSUES

STATE ISSUES

  • MARYLAND - A new report says wealthy Maryland residents may be moving out due to recent tax hikes – a finding that is sure to escalate the battle over taxing the American rich.
    • The study, by the anti-tax group Change Maryland, says that a net 31,000 residents left the state between 2007 and 2010, the tenure of a "millionaire's tax" pushed through by Gov. Martin O'Malley. The tax, which expired in 2010, in imposed a rate of 6.25 percent on incomes of more than $1 million a year.
    • The Change Maryland study found that the tax cost Maryland $1.7 billion in lost tax revenues. A county-by-county analysis by Change Maryland also found that the state’s wealthiest counties also had some of the largest population outflows.
    • In total, Maryland has added 24 new taxes or fees in recent years, Change Maryland says. Florida, which has no income-tax, has been a large recipient of Maryland's exiled wealthy.
  • TEXAS - Texas Gov. Rick Perry said Monday his state won't expand Medicaid or set up an insurance exchange, joining a growing number of Republican governors who are rejecting two key parts of President Obama's health care law.
    • Gov. Perry joins more than half-dozen GOP governors who have already said they won't increase the size of their Medicaid programs to cover Americans up to 133 percent of the poverty level, after the Supreme Court upheld most of the law last month but said states could opt out of the Medicaid expansion.
    • Under the court's decision, states can still collect all of their existing Medicaid funding even if they don't expand their programs to cover Americans up to 133 percent of the federal poverty level. But if they don't set up exchanges, the law allows the federal government to step in and run them.

FOREIGN POLICY

MIDDLE EAST

  • SYRIA - Russia on Monday signaled that it would not sign new weapons contracts with Syria until the situation there calms down. Russia will continue with previously agreed exports, but will not be selling new arms to Syria.
    • Putting it in conflict with the West, Russia has blocked the U.N.'s Security Council from taking strong, punitive action against Syrian President Bashar Assad's regime and is seen as Syria's key arms supplier. Syrian activists say about 14,000 people have been killed in the uprising that began March 2011.
    • U.S. Secretary of State Hillary Clinton last month issued a harsh reprimand to Russia, saying that Moscow "dramatically" escalated the crisis in Syria by sending attack helicopters there. The State Department acknowledged later that the helicopters were actually refurbished ones already owned by the Syrian regime.
  • IRAN - Tough Western sanctions are forcing Iran to take drastic action and shut off wells at its vast oilfields, reducing production to levels last seen more than two decades ago and costing Tehran billions in lost revenues.
    • Iran struggled to sell its oil in the run-up to the European Union ban on July 1, yet it managed to sustain oilfield flows at lofty rates above 3 million barrels per day (bpd) by stashing unwanted barrels in tanks on land and on ships in the Gulf.
    • But oil sales have now slumped to half the rate of last year and storage is running out. As a last resort, Tehran is carrying out "enforced" maintenance at its ageing reservoirs, say Iranian and Western oil sources, dropping output below 3 million bpd.

AFRICA

  • EGYPT - Egypt's Islamist-dominated parliament convened Tuesday in defiance of a ruling by the country's highest court and swiftly voted to seek a legal opinion on the decision that invalidated the chamber over apparent election irregularities.
    • The lawmakers' session was brief—it lasted just five minutes—but it pushed Egypt deeper into a potential power struggle between new President Mohammed Morsi and the powerful military, which has vowed to uphold the judicial ruling that led to parliament being dissolved.
    • The crisis atmosphere has grown steadily since Mr. Morsi issued an order Sunday to reconvene the 508-seat legislature. His executive order said it was revoking the military's June 15 order to disband the chamber based on the previous ruling by the Supreme Constitutional Court. The court said a third of the chamber's members were elected illegally by allowing candidates from political parties to contest seats set aside for independent candidates.

ASIA

  • RUSSIA - President Vladimir Putin said on Monday the West's influence was waning as its economy declines but warned Russian diplomats to be on their guard against a backlash from Moscow's former Cold War enemies.
    • In a biennial speech to Russian ambassadors, Putin also took a shot at the West by condemning any unilateral actions to solve international disputes and underlined the importance of resolving such conflicts through the United Nations.
    • His remarks suggested that Russia, a veto-wielding permanent member of the Security Council, would keep on defending ally Syria at the United Nations over its military crackdown on an popular uprising that has evolved into an armed insurgency.

EUROPE

  • FRANCE - France's government sold (EURO)6 billion in short-term bonds at negative interest rates Monday, as investors flock to the perceived safety of Europe's larger economies. It was the first time rates entered negative territory, according to the French Treasury.
    • France's borrowing costs have been dropping in recent months as those in neighboring Spain have soared and raised fears that it, too, will need a bailout.
    • Monday's bond sale, the treasury sold three-month bonds at -0.005 percent, and six-month bonds at -0.006 percent. The treasury agency says it's the first time they have registered negative yields.

SOUTH AMERICA

  • VENEZUELA - Venezuela's President Hugo Chavez declared himself fully recovered from cancer on Monday, three months before an election in which he is seeking another six-year term.
    • The 57-year-old socialist leader was first diagnosed with cancer in the pelvic region in mid-2011. He wrongly declared himself cured at the end of that year before having a recurrence of the disease in February.
    • But after repeated cycles of treatment in Cuba and Venezuela, Chavez is once again declaring himself fully fit at a crucial time when his health is the main wild card before the October 7 presidential vote.