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Daily News Briefing: Wednesday, July 11, 2012

Published by: Clark Barrow

Clark Barrow

DAILY BRIEFING - SUMMARY

  • DEPENDENCE - The percentage of people getting some kind of means-tested government assistance jumped to 18.6% of the population in 2009 from 17.4% in 2007, according to a U.S. Census report released Tuesday.
  • TAX INCREASE - While President Obama says increasing tax rates on the wealthiest Americans will not hurt the economy, experts at Moody's Analytics estimate that allowing tax cuts for Americans who earn above $250,000 to expire would reduce gross domestic product growth in 2013 by $40 billion, or about 0.24 percentage points.
  • OBAMACARE - The U.S. House Energy and Commerce Committee has compiled a list of the economic impacts that the full implementation of Obamacare would have on the country. Key findings in their report are included in this briefing.
  • CONGRESS - On Tuesday, the U.S. House voted 240-182 in favor of a rule setting up debate for the Repeal of Obamacare Act. A full U.S. House vote is expected on Wednesday.
  • WHITE HOUSE - Over his four years in office, Obama promised that he would focus on creating "jobs that pay well and can't be outsourced." According to the Republican National Committee, President Obama has racked up trillions in new debt and billions of dollars went to create jobs that were outsourced or spent overseas. Highlights this report are include in this briefing.
  • TAX BURDEN - Wealthy Americans earn about 50 percent of all income but pay nearly 70 percent of the federal tax burden, according to the latest analysis Tuesday by the Congressional Budget Office — though the agency said the very richest have seen their share of taxes fall the past few years.
  • EGYPT - Egypt's high court moved swiftly to block the Islamist-dominated Parliament only hours after the legislature's first meeting in weeks, turning a political row between the Muslim Brotherhood and the military into a constitutional crisis. 

WHAT WE KNOW

ECONOMIC NEWS

  • DEPENDENCE - The percentage of people getting some kind of means-tested government assistance jumped to 18.6% of the population in 2009 from 17.4% in 2007, according to a U.S. Census report released Tuesday.
    • The largest percentage increase, by far, was in the Supplemental Nutrition Assistance Program — commonly called food stamps. In 2009 — the last year of the recession — some 10.5% of the nation’s noninstitutionalized civilian population was receiving food stamps, up from 7.9% in 2007 before the recession started (the recession technically began in December 2007).
    • Separate data indicate that the jump in government help shown by the Census report has increased further as the sluggish recovery and still-high unemployment has lead to stark increases in long-term unemployment.
  • LONG-TERM UNEMPLOYMENT - The rate of unemployment in developed economies will remain high for longer than previously expected, increasing the risk that a growing number of workers will find themselves permanently marginalized in the jobs market, the Organization for Economic Cooperation and Development said Tuesday.
    • A growing body of long-term unemployed whose skills have eroded would weigh on future economic growth, adding to the already profound and pernicious legacy of the financial crisis that started in 2008.
    • In its annual report on the employment outlook, the Paris-based think tank said jobless rates will fall only slightly across all developed economies over the next 18 months, and rise significantly in some European countries.
  • The Dow Jones Industrial Average fell 83.17 points, or 0.7%, to 12,653.12.
  • The S&P 500 fell 10.99 points, or 0.8%, to 1,341.47.
  • The Nasdaq Composite lost 29.44 points, or 1%, to 2,902.33, its third down day.

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 83 percent higher than they were when Mr. Obama became president.
  • Crude for August delivery declined $2.08, or 2.4%, to $83.91 a barrel on the New York Mercantile Exchange.
  • Gold for August delivery declined $9.30, or 0.6%, to end at $1,579.80 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 294th day.
  • TAX INCREASE - While President Obama says increasing tax rates on the wealthiest Americans will not hurt the economy, experts at Moody's Analytics disagree.
    • Mark Zandi, the chief economist at Moody’s Analytics, estimates that allowing tax cuts for Americans who earn above $250,000 to expire at the end of 2012 would reduce gross domestic product growth in 2013 by $40 billion, or about 0.24 percentage points.
    • Allowing the “middle class” tax cuts to expire would shave an additional 1.06 percentage points off economic growth. That means letting all of the Bush tax cuts phase out would cut about 1.3 percentage points from growth.
    • If Congress were to drive off the “fiscal cliff” entirely — that is, let every fiscal policy that’s supposed to expire this year do so — the total effect would decrease economic growth by about 3.6 percentage points.
    • The U.S. Congressional Budget Office estimates that going headlong over the “fiscal cliff” would cut economic growth next year by 3.9 percentage points. That means the United States economy would grow just 0.5 percent, rather than the 4.4 percent we would be able to expect if Congress eliminated its fiscal restraint entirely.
  • OBAMACARE - The U.S. House Energy and Commerce Committee has compiled a list of the economic impacts that the full implementation of Obamacare would have on the country. Key findings in their report include:
    • Health care premiums for an average American family have increased $1,200 in the year following enactment of the Democrats’ health care law.
    • Premiums are expected to increase 13 percent in 2016, for individuals and families who buy coverage on their own – compared to if the law hadn’t been enacted at all.
    • An additional $118 billion will be saddled onto state budgets from ObamaCare’s Medicaid expansion.
    • The national debt as a percentage of GDP is expected to hit 200 percent in 2037 despite promise of cost-control from ObamaCare advocates.
    • 1,019,810 Americans are at risk of losing their plan, because the plan was denied a waiver from ObamaCare.
    • A total of 71 Fortune 100 companies said they could save $422.4 billion by eliminating employer-sponsored health plans and instead paying the $2,000 employer mandate penalty from 2014-2023.
    • According to the CBO, as many as 20 million Americans could lose their employer-provided coverage because of President Obama's healthcare reform law.
    • There are a total of 22 new tax increases in the Obamacare bill – a dozen of which violate the President’s pledge not to raise taxes on middle-class Americans.
  • CONGRESS - On Tuesday, the U.S. House voted 240-182 in favor of a rule setting up debate for the Repeal of Obamacare Act. A full U.S. House vote is expected on Wednesday.
    • Introducing the repeal bill was just one component of a multifaceted GOP campaign against the health care law Tuesday. Also on Tuesday, Republicans held a series of congressional panels, news conferences, and interviews aimed at discrediting the law's benefits, as well as touting both Republican policies and candidates.
    • Democrats, meanwhile, argue that holding another vote to repeal the bill - this will be the 33rd vote to either repeal, defund, or dismantle the law since it was passed - is a waste of time and resources, particularly as the bill is unlikely to pass in the Senate.
  • CONGRESS - The Obama administration said Tuesday that it strongly supported a Senate proposal to give tax breaks for certain small businesses. In a statement, the administration said that targeted tax relief in the bill from Senate Democrats would spark economic growth and recovery.
    • Under the Senate bill, which is scheduled for a procedural vote on Tuesday afternoon, small businesses that add payroll — either by hiring new workers or giving existing employees pay raises — would be eligible for a 10 percent tax credit.
    • The bill also caps, at $5 million, the amount of new payroll for which a company can claim the credit, and extends a provision allowing companies to more quickly write off new purchases.
  • WHITE HOUSE - Over his four years in office, Obama promised that he would focus on creating "jobs that pay well and can't be outsourced." According to the Republican National Committee, President Obama has racked up trillions in new debt and billions of dollars went to create jobs that were outsourced or spent overseas. Highlights from the report include:
    • Obama handed over billions of dollars in loan guarantees and stimulus awards pursuant to his goal of putting one-million electric vehicles on the road by 2015. Much of that money ended up leaving our shores. A $2.4 billion stimulus program to support battery production sent nearly half of its money to foreign firms, including two South Korean companies that used their awards to hire foreign nationals in Michigan to do work that Americans easily could have done.
    • Obama's stimulus included over $8.5 billion in grants for wind farms that flowed overseas, despite Congressional criticism from both sides of the aisle. In total, over half of the money went to either foreign developers or foreign wind turbine manufacturers, creating thousands of jobs overseas with money that was supposed to create jobs within the United States. Even worse, hundreds of millions of dollars went to wind farms that began construction before the stimulus was passed. The end result of all this spending: the wind energy industry lost 10,000 jobs last year.
    • The largest recipient of Obama's program to jumpstart green energy projects was the Spanish Company Abengoa, which took in $2.7 billion in loan guarantees for three of its projects. Other projects importing foreign-made solar panels are, much in the same way as Fisker Automotive, choosing to make their products overseas.
    • North Carolina-based LED maker Cree, Inc. received over $39 million through the stimulus and later opened its first plant in China. Over half of the company’s employees are now located in China.
    • Spain-based Iberdrola Renewables received $1.5 billion in loans and grants and claimed it created over 15,000 American jobs but the company only has 850 U.S.-based employees.

PRESIDENT’S SCHEDULE

  • In the afternoon, President Obama will meet with U.S. Treasury Secretary Geithner at the White House.
  • Later in the afternoon, the president will meet at the White House with Democratic leaders to discuss their legislative agenda for the coming months and his proposals to provide small businesses new incentives to grow and hire, encourage companies to create jobs here at home, and ensure that middle class families don't see a massive tax hike at the end of the year.  

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

  • TAX BURDEN - Wealthy Americans earn about 50 percent of all income but pay nearly 70 percent of the federal tax burden, according to the latest analysis Tuesday by the Congressional Budget Office — though the agency said the very richest have seen their share of taxes fall the past few years.
    • CBO looked at 2007 through 2009 — the latest years data are available, but enough to include the early effects of the last recession — and found the bottom 20 percent of American earners paid just three-tenths of a percent of the total federal tax burden, while the richest 20 percent paid 67.9 percent of taxes.
    • The top 1 percent, whom President Obama has made a target during the presidential campaign, earned 13.4 percent of all pre-tax income but paid 22.3 percent of taxes in 2009, CBO said. When tax burden is figured in, the top 1 percent took in only 11.5 percent of income.

DOMESTIC ISSUES

STATE ISSUES

  • TEXAS - The Obama administration Monday urged a panel of judges to reject a Texas law requiring photo identification to vote, arguing it discriminates against minorities.
    • The case is part of a wave of new legal challenges to the Voting Rights Act of 1965, the landmark civil-rights legislation intended to address widespread discriminatory practices that had the effect of damping minorities' participation in elections and undercutting their political power.
    • The U.S. Justice Department says the act prohibits enactment of the 2011 Texas law requiring that voters show photo ID, such as a driver's license or passport, to cast a ballot at polling places. The department says black and Hispanic voters are more likely than whites to lack such documents.

FOREIGN POLICY

MIDDLE EAST

  • SYRIA - Russia said on Tuesday that it had dispatched a flotilla of 11 warships to the eastern Mediterranean, some of which would dock in Syria. It would be the largest display of Russian military power in the region since the Syrian conflict began almost 17 months ago. Nearly half of the ships were capable of carrying hundreds of marines.
    • The announcement appeared intended to punctuate Russia’s effort to position itself as an increasingly decisive broker in resolving the antigovernment uprising in Syria, Russia’s last ally in the Middle East and home to Tartus, its only foreign military base outside the former Soviet Union. The announcement also came a day after Russia said it was halting new shipments of weapons to the Syrian military until the conflict settled down.
    • Russia has occasionally sent naval vessels on maneuvers in the eastern Mediterranean, and it dispatched an aircraft-carrying battleship, the Admiral Kuznetsov, there for maneuvers with a few other vessels from December 2011 to February 2012. There were rumors in recent weeks that the Russians planned to deploy another naval force near Syria.
  • 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 high court moved swiftly to block the Islamist-dominated Parliament only hours after the legislature's first meeting in weeks, turning a political row between the Muslim Brotherhood and the military into a constitutional crisis.
    • The Supreme Constitutional Court suspended a decree issued on Sunday by Mohammed Morsi, Egypt's newly inaugurated president, that had reversed the military leadership's earlier order to dissolve Parliament.
    • The unusual speed with which the high court squashed Mr. Morsi's decision laid bare a new reality of Egypt's political playing field. The judicial system that was meant to set the rules of play has been dragged into the fight, potentially damaging its ability to referee the bitter feud between ascendant Islamist politicians on one side and the military on the other.

ASIA

  • AFGHANISTAN - The Taliban are prepared to accept less than full control over Afghanistan after American troops leave, but are still fighting to play a major role in the country’s future, according to an interview with a senior Taliban commander in which he lays out the movement’s long-term political views.
    • The wide-ranging interview will appear in full in the July 12 edition of the British political magazine New Statesman. The edition was guest-edited by the British Labour Party politician David Miliband, a former foreign minister who has been a proponent of a political process in Afghanistan that would give the Taliban, along with other groups, a place at the table in determining the country’s path.
    • The Taliban are an increasingly factionalized movement, and it is hard to judge how widely this particular commander’s views are held. But the interviewee’s tone and comments are consistent with public statements by the Taliban, although those tend to be less candid, more oblique and more filled with rhetoric. Perhaps most interesting, the commander, whom Mr. Semple calls Maulvi, an Islamic honorific, describes without bombast or grandstanding the Taliban’s complete lack of regard for the current Afghan government.