Daily News Briefing: Tuesday, July 24, 2012

Published by: Clark Barrow

Clark Barrow

DAILY BRIEFING - SUMMARY

  • IMPENDING REGULATION - The next four years could bring a tidal wave of costly federal regulations impacting U.S. businesses and consumers, according to new analysis by the National Federation of Independent Business' coalition.
  • CONGRESS - The U.S. House is expected to vote on an anti-regulations bill this week. The Red Tape Reduction and Small Business Job Creation Act would impose a freeze on all new significant federal regulations until the unemployment rate dips below 6 percent.
  • CONGRESS - The U.S. Senate showdown over the Bush tax cuts is expected on Wednesday. U.S. Senate Majority Leader Harry Reid (D-Nev.) filed cloture on the Senate Democrats’ tax plan Monday, which sets up a key procedural vote on the bill on Wednesday morning unless an agreement is reached with Republicans for an earlier vote.
  • WHITE HOUSE - President Obama said on Monday that there was no reason billions in across-the-board federal budget cuts should occur at the end of this year, saying lawmakers in Congress ought to agree on a balanced plan to avoid the widely feared pinch.
  • DEBT - By the end of the third quarter of fiscal 2012, the new debt accumulated in this fiscal year by the federal government had already exceeded $1 trillion, making this fiscal year the fifth straight in which the federal government has increased its debt by more than a trillion dollars, according to official debt numbers published by the U.S. Treasury.
  • SYRIA - Syrian officials warned Monday that they would deploy chemical weapons against any foreign intervention, a threat that officials in the United States called the most “direct confirmation” ever that Syria possesses a stockpile of unconventional armaments.
  • IRAQ - For Iraqis, bombings and shootings like those that killed more than 100 people throughout the country Monday have become a grim part of daily life since the departure of U.S. troops in December. The question facing U.S. officials is whether the mass killings represent a return to sectarian war or a resurgence of Iraq’s al-Qaeda affiliate.

WHAT WE KNOW

ECONOMIC NEWS

 

  • IMPENDING REGULATION - The next four years could bring a tidal wave of costly federal regulations impacting U.S. businesses and consumers, according to new analysis by the National Federation of Independent Business' coalition, Small Businesses for Sensible Regulations. There are currently 4,128 federal regulations in the pipeline which, if implemented, will impose costs of more than $515 billion on the U.S. economy.
    • Over the past four years, regulations have cost American businesses and taxpayers more than $138 billion, according to NFIB's analysis of the Office of Management and Budget's semi-annual regulatory agenda and a recent report by the Heritage Foundation. NFIB estimates that regulations under consideration in Washington could cost more than a half trillion dollars when implemented, quadrupling the cost of regulations finalized during the previous four years.
    • Notable regulations estimated to carry significant costs include new government controls on air quality and emissions from power plants, among other rules. For example, EPA is planning to update National Ambient Air Quality Standards for Ozone in 2013 following President Obama's decision to delay issuing a new standard in 2011 citing significant costs. When finalized in 2013, this rule is projected to cost the economy between $19 billion and $90 billion annually. Another example is the Utility MACT regulation, that was finalized in February, but held up in court, and requires both existing and new power plants to install pollution control technology to further restrict emissions. Estimated to cost as much as $90 billion over 10 years, this regulation would be the most expensive in U.S. history if implemented, a cost that would be passed on to consumers, including small businesses, through higher energy costs. 
  • HOUSING MARKET - Home prices in the second quarter rose from the year-ago period for the first time since 2007, according to a closely watched index, the latest indication the housing market is starting to recover.
    • The report, which is scheduled to be released Tuesday by real-estate firm Zillow Inc., found that for the quarter ending in June, home values were up 0.2% from the same period in 2011.
    • According to Zillow, markets with the biggest declines between the second quarters of 2011 and 2012 included Atlanta, where values were down by 6%, and Chicago, down 5%. Both cities have had weak demand and a glut of homes.
  • The Dow Jones Industrial Average lost 101.11 points, or 0.8%, to 12,721.46.
  • The S&P 500 lost 12.14 points, or 0.9%, to 1,350.52.
  • The Nasdaq Composite fell 35.15 points, or 1.2%, to 2,890.15.

COMMODITIES

  • The U.S. national average for a gallon of regular gasoline is $3.47.
    • 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 87 percent higher than they were when Mr. Obama became president.
  • Crude oil for September delivery fell $3.69, or 4%, to settle at $88.14 a barrel on the New York Mercantile Exchange.
  • Gold for August delivery lost $5.40, or 0.3%, to $1,577.40 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 307th day.
  • CONGRESS - A U.S. House Republican introduced a bill Monday that attempts an end-run around President Obama’s approval to pave the way for construction of the northern stretch of the controversial Keystone XL Pipeline.
    • The proposal by Republican U.S. Representative Lee Terry would cover the Canada-to-Nebraska stretch, the permit for which remains under federal review.
    • Obama has already approved the southern leg of the roughly 2,000-mile-long pipeline that would take crude oil from Canada and mineral-rich Western states to refineries along the Gulf Coast of Texas. The legislation would allow the northern section to be approved under the same State Department environmental impact study that allowed for construction of the southern section. Still, Obama would have to sign off on construction of the northern stretch as he did on the southern part.
  • CONGRESS - The U.S. House is expected to vote on an anti-regulations bill this week. The Red Tape Reduction and Small Business Job Creation Act would impose a freeze on all new significant federal regulations until the unemployment rate dips below 6 percent. It would also ban regulations from being issued during the lame-duck session of Congress and force the Securities and Exchange Commission and Commodity Futures Trading Commission to conduct cost-benefit evaluations on regulations.
    • The U.S. Congressional Budget Office said that the bill would affect revenue and spending but it and the Joint Committee on Taxation "cannot estimate the sign or magnitude of those effects." It said it expects the agencies would increase user fees to cover any additional costs imposed by the regulations, but the costs would be small. It estimated that the addition cost to the private sector would be below $146 million.
    • The GOP argued that the bill will remove burdens on small business and help spur hiring. Moving the bill now helps the party pin the blame for the lackluster economic recovery on President Obama and his administration's actions. The White House argues that the pace of regulation under Obama is historically low
  • CONGRESS - The U.S. Senate showdown over the Bush tax cuts is expected on Wednesday. U.S. Senate Majority Leader Harry Reid (D-Nev.) filed cloture on the Senate Democrats’ tax plan Monday, which sets up a key procedural vote on the bill on Wednesday morning unless an agreement is reached with Republicans for an earlier vote.
    • The Democrats’ plan would only continue existing tax rates for household income under $250,000. For the top 2 percent of earners, income above $250,000 would be taxed at a higher, 39.6 percent rate.
    • The U.S. House is expected to vote next week to extend all expiring tax rates.
  • LEAKS - The Democratic leader of the U.S. Senate Intelligence Committee said Monday that the White House appears to be responsible for some leaks of classified information.
    • The California lawmaker said she was certain that President Barack Obama, who receives a daily intelligence briefing, isn't disclosing secret information, but she was uncertain about others at the White House. "I think the White House has to understand that some of this is coming from their ranks," Sen. Dianne Feinstein told a World Affairs Council forum.
    • Republicans have criticized the disclosures, arguing that members of the Obama administration were intentionally leaking classified material to enhance the president's reputation in an election year. Attorney General Eric Holder has appointed two attorneys to lead the investigation into who leaked information about U.S. involvement in cyberattacks on Iran and about an al-Qaida plot to place an explosive device aboard a U.S.-bound airliner.
  • WHITE HOUSE - President Obama said on Monday that there was no reason billions in across-the-board federal budget cuts should occur at the end of this year, saying lawmakers in Congress ought to agree on a balanced plan to avoid the widely feared pinch.
    • A year-end deadline looms for Congress over the "fiscal cliff" of major tax hikes and spending cuts, and Republicans and Democrats need to reach a consensus in the lame duck session - the period between the November election and the start of the new Congress in January. Without a deal, many domestic and military programs face about $100 billion total in across-the-board cuts next year.
    • Obama wants to end Bush-era tax cuts for very wealthy Americans to help reduce the U.S. deficit. Republicans argue that all tax cuts should be extended to avoid an adverse affect on the tepid economy.

PRESIDENT’S SCHEDULE

  • In the morning, President Obama will depart San Francisco, California and travel to Portland, Oregon.
  • In the afternoon, the president will attend a campaign event at the Oregon Convention Center in Portland, Oregon.
  • Later in the afternoon, the president will depart Portland, Oregon and travel to Seattle, Washington.
  • In the evening, the president will hold campaign events at two private residences in Hunts Point, Washington.
  • The president will remain overnight in Seattle.

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

  • DEBT - By the end of the third quarter of fiscal 2012, the new debt accumulated in this fiscal year by the federal government had already exceeded $1 trillion, making this fiscal year the fifth straight in which the federal government has increased its debt by more than a trillion dollars, according to official debt numbers published by the U.S. Treasury.
    • Prior to fiscal 2008, the federal government had never increased its debt by as much as $1 trillion in a single fiscal year. From fiscal 2008 onward, however, the federal government has increased its debt by at least $1 trillion each and every fiscal year.
    • The federal fiscal year begins on Oct. 1 and ends on Sept. 30. At the close of business on Sept. 30, 2011—the last day of fiscal 2011—the total debt of the federal government was $14,790,340,328,557.15. By June 29, the last business day of the third quarter of fiscal 2012, that debt had grown to $15,856,367,214,324.44—an increase for this fiscal year of $1,066,026,885,767.29.
    • Meanwhile, the U.S. Government Accountability Office estimated that delays in raising the debt limit in 2011 led to an increase in Treasury’s borrowing costs of about $1.3 billion in fiscal year 2011.
  • DODD-FRANK - Two years after President Obama signed the 848-page Dodd-Frank Wall Street Reform and Consumer Protection Act, only a third of the nearly 400 required regulations have been finalized, and critics say the ensuing uncertainty is retarding economic growth.
    • According to a July 18 report from law firm Davis Polk, 123 of the 398 rules required by Dodd-Frank have been finalized, but 141 rules have not been proposed at all. Regulators have missed more than 60 percent of the stipulated rulemaking deadlines, the report states.
    • Dodd-Frank has cost the finance industry $7 billion in compliance costs alone since its passage by mandating thousands of pages of regulatory paperwork, according to a July 17 Financial Services Roundtable report.
    • The Financial Services Roundtable report also estimated that one key provision of Dodd-Frank, the Volcker Rule, could cost American businesses $315 billion and increase annual borrowing costs by $43 billion.

FOREIGN POLICY

MIDDLE EAST

  • SYRIA - Syrian officials warned Monday that they would deploy chemical weapons against any foreign intervention, a threat that appeared intended to ward off an attack by Western nations while also offering what officials in the United States called the most “direct confirmation” ever that Syria possesses a stockpile of unconventional armaments.
    • The warning came out of Damascus, veiled behind an assurance that the Syrian leadership would never use such weapons against its own citizens, describing chemical and biological arms as outside the bounds of the kind of guerrilla warfare being fought internally.
    • Over the past four decades, Syria has amassed huge supplies of mustard gas, sarin nerve agent and cyanide, according to unclassified reports by the U.S. Central Intelligence Agency.
  • IRAN - Talks on the Iranian nuclear program continue at a low level, even as prospects for a peaceful outcome grow increasingly grim.
    • Senior-level, US-led negotiations to win guarantees that Iran does not seek nuclear weapons have foundered. Meanwhile, there are disturbing developments. Concern is running high that last week's suicide bombing attack on Israeli civilians in Bulgaria could signal a significant escalation in the covert war between Israel and Iran. The debacle in Syria may threaten Iran's umbilical-cord relationship with Hezbollah, something which would have unforeseen consequences in the Middle East.
    • And yet, with all this going on, and after the senior-level talks broke down in Moscow in June, deputies to the European Union and Iranian negotiators are to meet Tuesday in Istanbul. Diplomats said these talks will not be affected by the dramatic developments in Bulgaria and Syria, or even what happens in Vienna where the UN watchdog International Atomic Energy Agency (IAEA) is stymied in its investigation of Iran's nuclear program.
  • IRAQ - For Iraqis, bombings and shootings like those that killed more than 100 people throughout the country Monday have become a grim part of daily life since the departure of U.S. troops in December.
    • The question facing U.S. officials is whether the mass killings, which have accelerated this summer, represent a return to sectarian war or a resurgence of Iraq’s al-Qaeda affiliate.
    • More than 570 Iraqis have been killed in major attacks this year, a significant uptick in violence in the wake of the U.S. departure from the country. Over the weekend, the leader of Iraq’s al-Qaeda affiliate warned that the network was returning to its old strongholds and called for new recruits to launch attacks against the Shiite-led government and its security forces.

AFRICA

  • EGYPT - President Mohamed Mursi has asked Hisham Kandil, a relatively young water minister little known outside Egypt, to form a new government, disappointing investors who had hoped for a high-profile economy specialist.
    • Kandil was a senior bureaucrat in the ministry until he was appointed minister in July last year after the fall of President Hosni Mubarak. He obtained a doctorate in irrigation from the University of North Carolina in the United States in 1993, according to the water ministry's Facebook page.
    • A spokesman for Mursi, the Muslim Brotherhood politician sworn in as Egypt's first freely elected president on June 30, described Kandil as an "independent patriot" who had not belonged to a party either before or after the popular uprising against Mubarak, according to the state news agency.

SOUTH AMERICA

  • VENEZUELA - Venezuela's Hugo Chavez has signaled a preference in the U.S. presidential campaign by comparing Mitt Romney to his own challenger.
    • Chavez, who is up for re-election a month before U.S. President Barack Obama, has in recent weeks expressed a clear preference for the man currently in the White House.
    • In a campaign speech Saturday night, Chavez equated the agenda of his challenger, Henrique Capriles, with that of Romney, saying both men represent the callously selfish capitalist elite.