Daily News Briefing: Tuesday, July 17, 2012

Published by: Clark Barrow

Clark Barrow

DAILY BRIEFING - SUMMARY

  • NO MORE BOOKS - A survey by the nation's largest student lender finds families are cutting back on spending for college.
  • CONGRESS - The U.S. House will vote on the defense appropriations bill this week as the warnings over the threat of $500 billion in defense cuts continue to get louder on Capitol Hill.
  • WHITE HOUSE - The Obama administration has missed another annual budget deadline, failing to send Congress a mid-session budget review before July 16.
  • WHITE HOUSE - According to an investigation by the Center for Public Integrity, more than two years after Obama took office vowing to banish “special interests” from his administration, nearly 200 of his biggest donors have landed plum government jobs and advisory posts, won federal contracts worth millions of dollars for their business interests or attended numerous elite White House meetings and social events.
  • UNFUNDED LIABILITIES - The federal government faces unfunded liabilities totaling $84 trillion, with more than $30.3 trillion owed to public debt holders, federal employees and current retirees in the form of Social Security and Medicaid benefits, according to a recent report by the nonpartisan National Center for Policy Analysis.
  • OVERREACH - The companies that determine Americans' credit scores are about to come under government oversight for the first time.
  • SYRIA - Syrian President Bashar al-Assad will use chemical weapons against opposition forces and may have already deployed them, Nawaf Fares, the first Syrian ambassador to defect, told the BBC on Monday.

WHAT WE KNOW

ECONOMIC NEWS

  • MOODY'S ANALYSIS - According to analysis from Moody's, data over the past week showed the U.S. economy is still in a summer slowdown. Business confidence is deteriorating, and hiring plans have been scaled back. Firms still appear shell-shocked from the recession, so it takes only a little setback to cause them to delay expansion. The Moody's Analytics business confidence index is back to levels reached last summer during the U.S. debt-ceiling fiasco.
    • Real GDP growth for the second quarter is tracking 1.8% annualized, according to Moody's Analytics. Moody's says this figure shows no improvement from the first quarter and is still below the economy’s potential. Factory data released over the past week corroborate the slower output growth indicated by regional manufacturing surveys. As manufacturing has been a key pillar, risks to the GDP forecast for the second half of 2012 are tilted to the downside.
    • But Moody's says there are still some bright spots. Other reports indicate the labor market is moving in the right direction, albeit slowly. Consumers, while still encumbered by weak fundamentals, have not cut back on spending drastically. All told, the last week’s data are consistent with a economy that is muddling along.
  • NO MORE BOOKS - A survey by the nation's largest student lender finds families are cutting back on spending for college.
    • More families responding to Sallie Mae's annual survey said they're making their college decisions based on the cost than in previous studies. They're choosing less expensive schools, including two-year colleges, and more students are living at home.
    • All told, the survey found parents funded 37 percent of college costs through spending or borrowing, down from 47 percent two years ago. Students accounted for 30 percent; grants and scholarships 29 percent; and relatives and friends paid for 4 percent.
  • The Dow Jones Industrial Average fell 49.88 points, or 0.4%, to 12,727.21.
  • The S&P 500 index declined 3.14 points, or 0.2%, to 1,353.64.
  • The Nasdaq Composite lost 11.53 points, or 0.4%, to 2,896.94.

COMMODITIES

  • The U.S. national average for a gallon of regular gasoline is $3.40.
    • 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 84 percent higher than they were when Mr. Obama became president.
  • Crude for August delivery advanced $1.33, or 1.5%, to end at $88.43 a barrel on the New York Mercantile Exchange
  • Gold for August delivery declined 40 cents, less than 0.1%, to settle at $1,591.60 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 300th day.
  • LAW OF THE SEA TREATY - The Law of the Sea Treaty now has 34 U.S. senators opposed and thus will not have enough U.S. Senate votes for ratification, a key opponent of the treaty announced Monday.
    • Proponents of ratification argue that member-nations are establishing rules of the sea that the U.S. would have to abide to without a vote. They also argue that by ratifying the treaty, the U.S. would protect its claims and rights to mine America’s continental sea shelves and offshore waters for natural resources, without interference from other countries or other entities. Without ratification, U.S. energy companies do not have the security they need to invest in exploring those areas for resources.
    • Critics such as Mr. DeMint argue that the U.S. is subjecting its sovereignty to an international body and said the pact would require U.S. businesses to pay royalties for resource exploitation, as well as subject the U.S. to unwieldy environmental regulations as defined in the treaty.
  • CONGRESS - U.S. Senate Republicans blocked Democratic-backed legislation requiring organizations pouring hundreds of millions of dollars into campaign ads to disclose their top donors and the amounts they spend.
    • GOP opposition prevented Democrats from getting the 60 votes needed to bring what is known as the Disclose Act to the U.S. Senate floor. The vote was 51-44.
    • Democrats revived the act during a presidential election campaign in which political action committees and nonprofit organizations, funded by deep-pocketed and largely anonymous contributors, are dominating the airwaves with largely negative political ads.
  • CONGRESS - The U.S. House will vote on the defense appropriations bill this week as the warnings over the threat of $500 billion in defense cuts continue to get louder on Capitol Hill.
    • U.S. House Republicans are expected to attack Democrats and President Obama over sequestration during the debate on the 2013 defense appropriations bill, which will likely take several days of votes to wade through potentially hundreds of amendments.
    • The U.S. House is also planning to vote on a bill that would require reports from the Obama administration explaining how the sequester cuts would be implemented. The bill received a seal of approval from House Speaker John Boehner (R-Ohio) Friday.
  • CONGRESS - U.S. House Speaker John Boehner (R-Ohio) and U.S. Senate Minority Leader Mitch McConnell (R-Ky.) chastised Democrats for threatening to take the country over the anticipated “fiscal cliff” at the end of the year unless Republicans agree to tax increases.
    • Sen. Patty Murray (D-Wash.), a member of Senate leadership, made clear on Monday that her party is willing to let an array of automatic spending cuts and tax increases — the so-called fiscal cliff — take effect if the GOP insists on extending lower tax rates for annual incomes above $250,000.
    • Unless Congress acts before Jan. 1, the George W. Bush-era tax rates will expire, and $109 billion in sequestered spending cuts will take effect, among other policy changes.
  • WHITE HOUSE - The Obama administration has missed another annual budget deadline, failing to send Congress a mid-session budget review before July 16.
    • The Office of Management and Budget (OMB) confirmed Monday that the deadline for the review, due every year on that date, was not met this year.
    • Releasing documents late has become a regular event at OMB. Obama this year released his 2013 budget past deadline for the third year in a row. Under the law, the budget is to be released on the first Monday in February, but came out on Feb. 13 this year.
  • WHITE HOUSE - According to an investigation by the Center for Public Integrity, more than two years after Obama took office vowing to banish “special interests” from his administration, nearly 200 of his biggest donors have landed plum government jobs and advisory posts, won federal contracts worth millions of dollars for their business interests or attended numerous elite White House meetings and social events.
    • Additional findings of the report include:
      • These “bundlers” raised at least $50,000 — and sometimes more than $500,000 — in campaign donations for Obama’s campaign. Many of those in the “Class of 2008” are now being asked to bundle contributions for Obama’s reelection, an effort that could cost $1 billion.
      • Overall, 184 of 556, or about one-third of Obama bundlers or their spouses joined the administration in some role. But the percentages are much higher for the big-dollar bundlers. Nearly 80 percent of those who collected more than $500,000 for Obama took “key administration posts,” as defined by the White House. More than half the 24 ambassador nominees who were bundlers raised $500,000.
      • The big bundlers had broad access to the White House for meetings with top administration officials and glitzy social events. In all, campaign bundlers and their family members account for more than 3,000 White House meetings and visits. Half of them raised $200,000 or more.
      • Some Obama bundlers have ties to companies that stand to gain financially from the president’s policy agenda, particularly in clean energy and telecommunications, and some already have done so. Level 3 Communications, for instance, snared $13.8 million in stimulus money.

PRESIDENT’S SCHEDULE

  • In the morning, President Obama will depart Washington, D.C. and travel to San Antonio, Texas.
  • In the afternoon, the president will deliver remarks at a fundraising reception at the Henry B. Gonzalez Convention Center and at a private residence in San Antonio, Texas.
  • Later in the afternoon, the president will depart San Antonio, Texas and travel to Austin, Texas.
  • In the evening, the president will deliver remarks at a fundraising reception at the Austin Music Hall in Austin, Texas.
  • Later in the evening, the president will depart Austin, Texas and travel 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

NATIONAL SECURITY

  • DEFENSE IN DANGER - U.S. House Armed Services Committee member Randy Forbes (R–VA) is working to educate the general public about the potentially dangerous defense cuts mandated by sequestration under the Budget Control Act.
    • These automatic spending cuts, became law when the Super Committee failed to negotiate a package of over $1 trillion in deficit reduction last year. Unless the President and Congress can agree on a different solution, this will leave the military absorbing yet another round of budget cuts because the President and Congress cannot agree on what to do about taxes and long overdue entitlement reform.
    • According to U.S. Representative Randy Forbes (R-Va.) and other members of the U.S. House Armed Services Committee, budget-driven cuts erode defense manufacturing, eliminate technically skilled laborers from the workforce and ultimately could sacrifice our competitive edge. Each of the services will be impacted profoundly by defense budget cuts.
    • The following bullets highlight how the budget cuts would impact specific areas:
      • NAVY - China is poised to outpace the U.S. in the Pacific as the U.S. draws down its Navy, China continues to improve the quantity and quality of its fleet.
      • MARINE CORPS - Given its current commitments in Afghanistan, the Marine Corps would be unable to meet combatant commander timelines necessary for success in a second major contingency operation.
      • AIR FORCE -  In just ten years, the United States has gone from a position of dominant air superiority over the Chinese in a conflict over the Taiwan Strait, according to a study by the RAND Corporation, to a place where the same organization says the United States ‘can no longer be confident in winning’ an air war against China.
      • DEPARTMENT OF DEFENSE & NATIONAL GUARD - Roughly 200,000 active duty service members will have to leave service.  This would be the equivalent of eliminating the entire Marine Corps.

FEDERAL GOVERNMENT

  • UNFUNDED LIABILITIES - The federal government faces unfunded liabilities totaling $84 trillion, with more than $30.3 trillion owed to public debt holders, federal employees and current retirees in the form of Social Security and Medicaid benefits, according to a recent report by the nonpartisan National Center for Policy Analysis.
    • In 2011, the federal government reported owing “$10.2 trillion in public debt, accrued federal employee pension and other retirement benefits of $5.8 trillion, and other federal liabilities of $1.5 trillion,” the report states, totaling $17.5 trillion in liabilities — or more than 117 percent of GDP.
    • When Social Security and Medicare payments owed to current retirees are counted, $12.8 trillion is added to federal liabilities, bringing the total to $30.3 trillion — or a whopping 200 percent of GDP.
    • Add in the remaining expected obligations to non-retirees for Social Security and Medicare, along with other federal obligations, and the tally rises to nearly $84 trillion.
  • OVERREACH - The companies that determine Americans' credit scores are about to come under government oversight for the first time.
    • The U.S. Consumer Financial Protection Bureau said Monday that it will start supervising the 30 largest firms that make up 94 percent of the industry. That includes the three big credit reporting firms: Equifax Inc., Experian and TransUnion.
    • The U.S. Consumer Financial Protection Bureau (CFPB) is the federal agency that holds primary responsibility for regulating consumer protection in the United States. The bureau is a result of the Dodd–Frank Wall Street Reform and Consumer Protection Act.

FOREIGN POLICY

MIDDLE EAST

  • YEMEN - Machine guns, sniper rifles, aerial drones, and two new operating bases are all part of a $75 million U.S. Department of Defense counterterrorism package for Yemen sent to Capitol Hill.
    • The weapons and equipment were financed under Section 1207 funding, a congressionally mandated stream of federal money overseen by DOD and the State Department dedicated to support counterterror operations around the world.
    • The $75 million support package for Yemen that Pentagon officials are seeking Capitol Hill approval for was appropriated in the fiscal 2012 defense spending bill.
  • SYRIA - The U.N. Security Council will vote on Wednesday on a Western-backed resolution that threatens Syrian authorities with sanctions if they do not stop using heavy weapons in towns, despite a declaration by Russia that it will block the move.
    • The resolution, proposed by Britain, the United States, France and Germany, would extend a U.N. observer mission in Syria for 45 days and place international envoy Kofi Annan's peace plan under Chapter 7 of the U.N. Charter.
    • Chapter 7 allows the 15-member council to authorize actions ranging from diplomatic and economic sanctions to military intervention. U.S. officials have said they are talking about sanctions on Syria, not military intervention.
  • IRAN - The U.S. Department of Defense is building a missile-defense radar station at a secret site in Qatar and organizing its biggest-ever minesweeping exercises in the Persian Gulf, as preparations accelerate for a possible flare-up with Iran, according to U.S. officials.
    • The radar site will complete the backbone of a system designed to defend U.S. interests and allies such as Israel and European nations against Iranian rockets, officials told The Wall Street Journal. The minesweeping exercises, in September, will be the first such multilateral drills in the region, and are expected to be announced by U.S. officials Tuesday.
    • The Pentagon's moves reflect concern that tensions with Iran could intensify as the full weight of sanctions targeting the country's oil exports takes hold this summer. Though U.S. officials described both the radar site and the naval exercises as defensive in nature, the deployments likely will be seen by Iran as provocations.

AFRICA

  • EGYPT - U.S. Secretary of State Hillary Clinton warned Monday the desert border between Israel and Egypt could become an "operational base" for jihadists if security is not maintained. Israel has raised concerns about the region in the wake of the fall of the Mubarak government.
    • Clinton said there is "the potential of jihadists and terrorists taking up an operational base in Sinai".  She said this is a dangerous situation for both Egypt and Israel and for Americans.
    • Israeli officials recently said that Egypt needs to get a handle on terror cells in the Sinai. Israel is extremely concerned about cross-border attacks over the past year or so, including a deadly attack last August. In that incident, a group of militants engaged in a string of terror strikes on buses, civilian vehicles and soldiers 20 kilometers north of the resort city of Eilat, Israel, leaving eight people dead.