Daily News Briefing: Wednesday, August 15, 2012

Published by: Clark Barrow

Clark Barrow

DAILY BRIEFING - SUMMARY

  • PATH TO PROSPERITY - Included in this briefing are key facts about U.S. Representative Paul Ryan's Path to Prosperity 2013 budget.
  • IMMIGRATION - The Obama administration plans to begin accepting applications Wednesday for certain young illegal immigrants to defer their deportation.
  • WHITE HOUSE - A group of former U.S. intelligence and Special Forces operatives is set to launch a media campaign, including TV ads, that scold President Obama for taking credit for the killing of Osama bin Laden and argues that high-level leaks are endangering American lives.
  • UNDETECTED - A Russian nuclear-powered attack submarine armed with long-range cruise missiles operated undetected in the Gulf of Mexico for several weeks and its travel in strategic U.S. waters was only confirmed after it left the region.
  • FREDDIE & FANNIE - Government-owned Fannie Mae and Freddie Mac are stepping up efforts to find bad home loans that they can force mortgage lenders to buy back from them, providing an increasingly bigger headache to banks.
  • SYRIA - Iran is playing a growing role supporting the Syrian regime and is helping to build and train a militia to fight opposition forces, U.S. defense officials said Tuesday.
  • EURO ZONE - The euro zone's $13 trillion economy is shrinking, data published Tuesday showed, a development that threatens to worsen a global slowdown and intensify the debate about Europe's attempts to restore confidence in the currency union.

WHAT WE KNOW

ECONOMIC NEWS

  • RETAIL SALES - Americans cracked open their wallets last month, stepping up spending on everything from clothes to cars for the first time since March and easing fears that the fragile job market and weakness overseas are stalling the U.S. economy.
    • Retail sales rose 0.8% in July from a month before, the Department of Commerce said Tuesday, ending a three-month streak of declines that included a 0.7% drop in June and a 0.1% drop in May.
    • But Moody's Analytics experts said the improvement in July retail sales should be kept in perspective. They said the 0.8% increase barely offsets June’s 0.7% decline. Over the past three months, retail sales growth has averaged 0%.
  • The Dow Jones Industrial Average ended up 2.71 points, or 0.02%, at 13,172.14.
  • The S&P 500 lost 0.18 point, or 0.01%, to 1,403.93.
  • The Nasdaq Composite fell 5.54 points, or 0.2%, to 3,016.98.

COMMODITIES

  • The U.S. national average for a gallon of regular gasoline is $3.70.
  • 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.
  • Crude oil for September delivery advanced 70 cents, or 0.8%, to end at $93.43 a barrel on the New York Mercantile Exchange.
  • Gold for December delivery was off $10.20, or 0.6%, to end at $1,602.40 an ounce on the New York Mercantile Exchange

NEWS TO WATCH

  • ELECTION - As of today, there are 83 days until the November 2012 presidential election.
  • PATH TO PROSPERITY - Included below are key facts about U.S. Representative and Chairman of the U.S. House Budget Committee Paul Ryan's Path to Prosperity 2013 budget:
    • INCREASE - Under the Ryan budget, government spending will increase almost every year over the next decade. Tax and other revenue will increase year after year. Ryan’s budget would necessitate an increase of the debt ceiling by roughly $5.5 trillion through 2022.  The increase is approximately $3 trillion less than that required by the president’s budget.
    • SEQUESTRATION - The Ryan budget turns off the automatic sequester cuts to annually appropriated (discretionary) spending that are scheduled to take effect on January 2, 2013.
    • OBAMACARE - The budget would repeal the Affordable Care Act’s (ACAs) expansion of Medicaid and CHIP that is scheduled to extend coverage to most nonelderly people. Additionally, instead of the current shared-financing system between the states and federal government, the federal share of Medicaid would be allocated to the states through block grants.
    • MEDICARE - Ryan changes to Medicare only apply to Americans younger than 55 years of age, and would give those younger individuals the option of remaining in the traditional Medicare program, or choosing a comparable private-sector insurance plan.
      • For current workers younger than 55 years old, when they become eligible, Medicare will provide a premium-support payment and a list of guaranteed coverage options – including a traditional fee-for-service option – from which recipients can choose a plan that best suits their needs.  Ryan's recent budget proposal would shift Medicare funding to a voucher-like program, a move that financial analysts and Democrats argue would increase costs for seniors.
      • President Obama’s health care law will cut $700 billion from Medicare.  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.
    • FREDDIE & FANNIE - Ryan’s proposal winds down Fannie Mae and Freddie Mac, eventually fully privatizing them.
    • INDIVIDUAL - Ryan's budget consolidates the current six individual income tax brackets into just two low brackets of 10 and 25 percent and repeals the Alternative Minimum Tax.
    • CORPORATE - Ryan's plan calls for corporate taxes to be lowered to 25%; they're now 35%, the highest in the world.
  • IMMIGRATION - The Obama administration plans to begin accepting applications Wednesday for certain young illegal immigrants to defer their deportation.
    • Under the new policy, the U.S. Department of Homeland Security (DHS) is able to exercise prosecutorial discretion for certain illegal immigrants under the age of 30 who wish to defer their deportation from the country.
    • Under the new rules, the U.S. Citizenship and Immigration Services (USCIS) will require eligible illegal immigrant applicants to apply for two-year work permits if they submit forms to be considered for deferred deportation.
  • WHITE HOUSE - A group of former U.S. intelligence and Special Forces operatives is set to launch a media campaign, including TV ads, that scold President Obama for taking credit for the killing of Osama bin Laden and argues that high-level leaks are endangering American lives.
    • Leaders of the group, the Special Operations OPSEC Education Fund Inc, say it is nonpartisan and unconnected to any political party or presidential campaign. It is registered as a so-called social welfare group, which means its primary purpose is to further the common good and its political activities should be secondary.
    • The OPSEC group says it is not political and aims to save American lives. Its first public salvo is a 22-minute film that includes criticism of Obama and his administration. The film, to be released on Wednesday, was seen in advance by Reuters.

PRESIDENT’S SCHEDULE

  • In the afternoon, the president will hold a campaign event at the Alliant Energy Amphitheater in Dubuque, Iowa.
  • Later in the afternoon, the president will hold a campaign event at the Village of East Davenport in Davenport, Iowa.
  • In the evening, the president will depart Iowa and return to Washington, D.C.

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

NATIONAL SECURITY

  • UNDETECTED - A Russian nuclear-powered attack submarine armed with long-range cruise missiles operated undetected in the Gulf of Mexico for several weeks and its travel in strategic U.S. waters was only confirmed after it left the region.
    • The stealth underwater incursion in the Gulf took place at the same time Russian strategic bombers made incursions into restricted U.S. airspace near Alaska and California in June and July, and highlights a growing military assertiveness by Moscow.
    • The Navy is in charge of detecting submarines, especially those that sail near U.S. nuclear missile submarines, and uses undersea sensors and satellites to locate and track them.
    • The Obama administration’s defense budget proposal in February cut $1.3 billion from U.S. Navy shipbuilding projects, which will result in scrapping plans to build 16 new warships through 2017. The budget also called for cutting plans to buy 10 advanced P-8 anti-submarine warfare jets needed for submarine detection.

FEDERAL GOVERNMENT

  • FREDDIE & FANNIE - Government-owned Fannie Mae and Freddie Mac are stepping up efforts to find bad home loans that they can force mortgage lenders to buy back from them, providing an increasingly bigger headache to banks.
    • The government-controlled companies are squabbling with banks over who should bear the burden of losses from the housing crunch, in particular loans made between 2005 and 2008, when the market was at its frothiest.
    • Historically, Fannie Mae and Freddie Mac have taken banks at their word when they said loans were eligible. If later there were problems (because the borrower's income was not properly verified, for example), then Fannie Mae and Freddie Mac could ask banks to buy back the mortgages at face value and absorb any losses. Those repurchase requests are increasing as Fannie and Freddie apply more scrutiny. Both companies have hired more staff to comb through loans and determine which can be sold back to banks.
    • Fannie Mae and Freddie Mac say they are trying to recover as much money as possible for taxpayers after receiving more than $188 billion of government support during the housing crunch. They have since repaid about $45 billion.

FOREIGN POLICY

MIDDLE EAST

  • SYRIA - Iran is playing a growing role supporting the Syrian regime and is helping to build and train a militia to fight opposition forces, U.S. defense officials said Tuesday.
    • U.S. Army Gen. Martin Dempsey, chairman of the Joint Chiefs of Staff, told Pentagon reporters that the militia, which is generally made up of Syrian Shiite forces, is being used to take the pressure off the Syrian regime forces, which have been at war for almost 18 months.
    • U.S. Defense Secretary Leon Panetta repeated assertions he made during an Associated Press interview Monday, saying that right now, creating a no-fly zone in the region "is not a front-burner issue" for the U.S. Instead, he said, the U.S. is focusing on providing humanitarian and non-lethal assistance and on ensuring the chemical and biological weapons in Syria are secure.
  • IRAN - U.S. Defense Secretary Leon Panetta said Tuesday that he did not believe Israel had decided yet whether it should attack Iran’s nuclear facilities, playing down reports in Israel that a strike could be near.
    • An Israeli media report last week that said Prime Minister Benjamin Netanyahu and Defense Minister Ehud Barak favored a strike against Iran in the fall has sparked a new wave of speculation in Israel about a potential unilateral attack.
    • Panetta said the U.S. still thinks there is room to continue to negotiate. The U.S. Defense secretary reiterated President Obama’s call for a diplomatic solution to the Iranian crisis, saying the window for diplomacy with Iran remained open.

AFRICA

  • EGYPT - Egypt's Islamist president has given himself the right to legislate and control over the drafting of a new constitution. He has installed at the top of the powerful military a defense minister likely to be beholden to him.
    • Under Mohammed Morsi's authority, officials have moved to silence influential critics in the media. And though a civilian, he declared himself in charge of military operations against militants in the Sinai peninsula.
    • If left unchecked, there are fears Morsi and his fundamentalist group, the Muslim Brotherhood, could turn the clock back on the country's tumultuous shift to democratic rule and pursue their goal of someday turning the most populous Arab nation into an Islamic state.

ASIA

  • NORTH KOREA - Pictures taken from orbit in recent months show that North Korea continues to make headway in building of a light-water atomic reactor at the Yongbyon complex, according to an analysis issued on Tuesday by the Washington-based Institute for Science and International Security
    • An atomic reactor specialist who analyzed the images predicted the reactor might be finished in the last six months of next year.
    • North Korea claims the experimental light-water reactor would use uranium enriched at the nearby facility to generate atomic energy for peaceful purposes.

EUROPE

  • EURO ZONE - The euro zone's $13 trillion economy is shrinking, data published Tuesday showed, a development that threatens to worsen a global slowdown and intensify the debate about Europe's attempts to restore confidence in the currency union.
    • Economic activity in the 17-country currency bloc fell at an annualized rate of 0.7% in the second quarter after stagnating in the first three months of 2012, according to the European Union's statistics arm. German growth slowed to an annualized 1.1% rate—not enough to lift the troubled region, whose southern members, including Italy and Spain, are caught in increasingly severe recessions.
    • The euro zone's return to contraction, after escaping the latest recession only in late 2009, comes as the region absorbs fewer imports from the U.S., China and other economies.