Daily News Briefing: Wednesday, July 25, 2012

Published by: Clark Barrow

Clark Barrow

DAILY BRIEFING - SUMMARY

  • FEDERAL RESERVE - U.S. Federal Reserve officials, impatient with the economy's sluggish growth and high unemployment, are moving closer to taking new steps to spur economic growth.
  • OBAMACARE – The U.S. Congressional Budget Office said the U.S. Supreme Court ruling on President Obama’s healthcare overhaul will cause three million fewer Americans to gain health insurance. The CBO also said the law is now expected to cost $84 billion less over a decade, for a total cost of $1.168 trillion during that time. Repealing the law would increase the deficit by $109 billion over the next decade.
  • WHITE HOUSE - The White House has launched a new offensive in its fight with congressional Republicans over taxes, arguing 114 million middle-class families will see their taxes rise without action by Congress.
  • SEQUESTER - According to the Bipartisan Policy Center, the automatic cuts in non-defense government spending that are scheduled to begin on January 2, 2013 will cause an economic downturn and put hundreds of thousands of workers out of work.
  • INSURANCE - Around one in 10 employers in the U.S. plans to drop health coverage for workers in the next few years as the bulk of the federal health-care law begins, and more indicated they may do so over time, according to a study by consulting company Deloitte.
  • SYRIA - Despite a dire need for intelligence about the groups fighting to overthrow the Syrian government, the CIA has little if any presence in the country, seriously limiting its ability to collect information and influence the course of events, according to current and former U.S. officials.
  • SPAIN & GREECE - Spain paid the second highest yield on short-term debt since the birth of the euro at an auction on Tuesday, and EU officials said Greece had little hope of meeting the terms of its bailout, casting fresh doubt on its future in the euro zone.

WHAT WE KNOW

ECONOMIC NEWS

  • FEDERAL RESERVE - U.S. Federal Reserve officials, impatient with the economy's sluggish growth and high unemployment, are moving closer to taking new steps to spur economic growth.
    • Since their June policy meeting, officials have made clear—in interviews, speeches and testimony to Congress—that they find the current state of the economy unacceptable. Many officials appear increasingly inclined to move unless they see evidence soon that activity is picking up on its own.
    • Fed officials could take some actions in combination or one after another. Fed Chairman Ben Bernanke, in testimony to Congress last week, listed several options under consideration, including a new program of buying mortgage-backed or Treasury securities, new commitments to keep short-term interest rates near zero beyond 2014 or an effort to push already-low benchmark short-term interest rates even lower.
  • HOPE & CHANGE - U.S. student loan debt totaling more than $900 billion may be hurting home sales, said Neal Soss, chief economist at Credit Suisse in New York.
    • Soss said higher requirements for down payments and rising debt of college graduates are preventing younger potential buyers from entering the housing market.
    • Sales of previously owned U.S. homes unexpectedly declined in June to an eight-month low, showing the recovery in residential real estate will take time to develop. In 2011, first-time home buyers, with a median age of 31, fell to the smallest percentage of total home purchasers since 2006, according to data from the National Association of Realtors. Their median income climbed 6.5 percent from 2006 to 2010, compared with a 13 percent gain for repeat buyers, the figures show.
  • The Dow fell 104.14 points, or 0.8%, to 12,617.32.
  • The S&P 500 lost 12.21 points, or 0.9%, to 1,338.31.
  • The Nasdaq Composite lost 27.16 points, or 0.9%, to 2,862.99.

COMMODITIES

  • The U.S. national average for a gallon of regular gasoline is $3.48.
    • 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 88 percent higher than they were when Mr. Obama became president.
  • Crude for September delivery added 36 cents, or 0.4%, to settle at $88.50 a barrel on the New York Mercantile Exchange.
  • Gold for August delivery declined $1.20, or 0.1%, to settle at $1,576.20 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 308th day.
  • OBAMACARE - Three million fewer Americans will gain health insurance as part of the health-care overhaul because the U.S. Supreme Court loosened the law's requirement that states expand Medicaid coverage, the U.S. Congressional Budget Office said Tuesday.
    • The new report is the first federal assessment to show how the court's decision to strike down part of the Medicaid expansion will change the contours of the law. The law is now expected to cost $84 billion less over a decade, for a total cost of $1.168 trillion during that time.
    • The nonpartisan office estimated that overall, repealing the law would increase the deficit by $109 billion over the next decade because voiding it would eliminate new taxes and cuts to Medicare expenditure that are greater than the law's spending to expand insurance coverage.
    • The overhaul had required states to prepare to enroll around 17 million more low-income Americans in the federal-state Medicaid program starting in 2014, with the federal government picking up most of the costs.
    • The court ruled in June that states couldn't be required to choose between expanding Medicaid or losing their existing federal funding for the program. Some governors already have signaled that they don't intend to go ahead with the expansion.
  • CONGRESS - In the face of a White House veto threat, U.S. House Republicans are on track to take up legislation that would replace President Obama’s offshore drilling plan with a more relaxed initiative.
    • U.S. House Democrats and Republicans traded barbs on Tuesday over H.R. 6082, a Republican offshore drilling plan meant to replace a narrower vision put in place by the Obama administration. Many U.S. House Democrats blasted the House majority for being quick to forget the environmental disaster that plagued the Gulf Coast for months following the explosion of the Deepwater Horizon oil rig in 2010.
    • The measure would supersede a moratorium the Obama administration put in place that prohibits drilling off the Atlantic and Pacific coasts for the next five years. Additionally, the bill would require a more aggressive approach to selling leases off the coast of Alaska. Under the current administration’s plan, new lease sales and development in the Arctic have been paused until 2016.
  • CONGRESS - U.S. House Republicans and the nation's head consumer watchdog sparred Tuesday over an agency proposal to simplify mortgage documents that runs more than 1,000 pages.
    • Republicans expressed astonishment at the length of the proposed rule and argued the page count is evidence that the Consumer Financial Protection Bureau (CFPB) is taking the heavy-handed approach to regulation that it has long feared.
    • The CFPB rule, unveiled earlier this month, would combine two forms that most borrowers fill out to apply for a mortgage. The bureau wants to replace those applications with a single, easy-to-understand document that lays out important loan information. But while the end result would be a simplified form, Republicans said the more than 1,000 pages of regulations required to implement it would burden banks and stifle lending.
  • CONGRESS - The U.S. Senate’s leading defense hawks are preparing to launch a barnstorming trip to battleground states so they can build support for rolling back billions of dollars in budget cuts set to hit the Pentagon early next year. The idea: Rile up military constituencies in states like Florida, North Carolina, Virginia and New Hampshire to intensify pressure on President Obama and wayward lawmakers into cutting a pre-election deal to soften the blow on defense programs.
    • The new pressure campaign, under development by Sens. John McCain (R-Ariz.) and Lindsey Graham (R-S.C.), comes at a crucial moment on Capitol Hill, as senators are trying to near an agreement before the August recess on overhauling the first year of cuts to defense and domestic programs, worth roughly $109 billion.
    • Both parties are keenly aware of the political ramifications of $1.2 trillion in cuts set to take effect over the next decade, known on the Hill as sequestration, which were mandated by the 2011 debt limit law after a special bipartisan committee failed to reach a deficit accord. What worries lawmakers are the serious prospects that many companies that rely on federal dollars, especially defense contractors, will soon begin sending layoff notices to their employees in the run-up to the November elections.
  • WHITE HOUSE - The White House has launched a new offensive in its fight with congressional Republicans over taxes, arguing 114 million middle-class families will see their taxes rise without action by Congress.
    • A report from President Obama’s National Economic Council released Monday contends the families would see their taxes rise by an average of $1,600 if the George W. Bush-era tax cuts expire as scheduled at the end of the year.
    • The GOP has argued that all of the Bush-era rates should be extended for a year, and the House is expected to vote to approve that extension next week.

PRESIDENT’S SCHEDULE

  • In the morning, President Obama will depart Seattle, Washington and travel to New Orleans, Louisiana.
  • In the afternoon, the president will host a fundraising reception at the House of Blues in New Orleans, Louisiana.
  • In the evening, the president will address the 2012 National Urban League Conference at the New Orleans Ernest N. Morial Convention Center in New Orleans, Louisiana.
  • Later in the evening, the president will depart New Orleans, Louisiana 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

FEDERAL GOVERNMENT

  • SEQUESTER - According to the Bipartisan Policy Center, the automatic cuts in non-defense government spending that are scheduled to begin on January 2, 2013 will cause an economic downturn and put hundreds of thousands of workers out of work.
    • According to the research group, beginning on January 2 of next year, the Fiscal Year 2013 sequester will cut $55 billion from non-defense spending. Of this, $39 billion will come from discretionary accounts. This will amount to an indiscriminate 12-percent cut to almost every domestic discretionary program.
    • Most low-income support and income security programs – which comprise a large portion of the federal budget – are exempt from the sequester, including: Social Security, federal (including military) retirement, veteran’s benefits, Medicaid, the Children’s Health Insurance Program (CHIP), unemployment insurance, food stamps (SNAP), and a host of other programs.
    • Based on U.S. Congressional Budget Office data, the Bipartisan Policy Center projected that the non-defense and defense sequester combined could:
      • Reduce gross domestic product (GDP) by approximately 0.5% in 2013;
      • Cause more than one million jobs to be lost in 2013 and 2014.
      • The majority of the jobs lost will be in the private sector.
    • The BPC said agencies are unable to effectively plan because they are uncertain if the sequester cuts will occur.
    • The cuts are also expected to negatively impact businesses. Unable to plan accurately, businesses will begin making guesses about where they think cuts will hit so that they can tighten their belts accordingly. In a highly uncertain environment, contractors will have to make personnel, investment, and other significant decisions.

HEALTH CARE

  • INSURANCE - Around one in 10 employers in the U.S. plans to drop health coverage for workers in the next few years as the bulk of the federal health-care law begins, and more indicated they may do so over time, according to a study by consulting company Deloitte.
    • The majority of Americans under age 65 who have health insurance get it through an employer. A big question about the law is whether companies will continue to offer coverage after a slate of changes starting in 2014 will give Americans more options for buying coverage without the help of an employer.
    • Deloitte's findings differ from estimates by rival firm McKinsey & Co. last year that found 30% of employers say they would "definitely or probably" stop offering health insurance after 2014, as well as calculations by the Congressional Budget Office that estimated around 7% of workers could lose coverage under the law by 2019.
    • In all, 9% of companies in the Deloitte study said they expected to stop offering insurance in the next one to three years. Around 81% were planning to continue providing benefits, and 10% weren't sure.

DOMESTIC ISSUES

STATE ISSUES

  • MARYLAND - After a poor June jobs report, Maryland has lost more jobs in the first six months of 2012 than any other state in the nation, according to numbers released from the U.S. Department of Labor.
    • A report by non-partisan grassroots organization Change Maryland compiled with preliminary numbers from the Bureau of Labor Statistics shows that Maryland has lost a little over 10,000 jobs in 2012 and is one of 12 states in the nation to suffer job loss this year.
    • According to BLS numbers, a June drop of 11,000 jobs pulled the numbers down. Between January and May, the state had gained 700 jobs this year, said Maureen O'Connor, Maryland Department of Labor, Licensing and Regulation spokeswoman. She said that BLS‘ monthly data is volatile and can often be revised.

FOREIGN POLICY

MIDDLE EAST

  • SYRIA - Despite a dire need for intelligence about the groups fighting to overthrow the Syrian government, the CIA has little if any presence in the country, seriously limiting its ability to collect information and influence the course of events, according to current and former U.S. officials.
    • American intelligence agencies have kept tabs on Syria's chemical weapons stockpiles, using spy satellites and other forms of electronic eavesdropping as well as information from allied nations and U.S. personnel in Turkey and other neighboring countries. The CIA also has some understanding of President Bashar Assad's government, officials said.
    • But more than 16 months into the Syrian uprising, the U.S. government still is struggling for details about who the main opposition groups are and what motivates them, say the current and former officials, who spoke on condition of anonymity in discussing covert intelligence activities.
  • IRAN - Iran's supreme leader urged his country's politicians to show more unity as he warned the West that sanctions imposed over Tehran's disputed nuclear program would only make the government more determined to pursue it, Iranian media reported.
    • The sanctions imposed against Iran since the beginning of this year have taken an enormous toll on its economy, which suffers from a weaker currency, rampant inflation and high unemployment.Ayatollah Ali Khamenei, who is unelected and holds ultimate authority over Iran's foreign policy and nuclear program, told Iranian officials not to bicker publicly.

EUROPE

  • SPAIN & GREECE - Spain paid the second highest yield on short-term debt since the birth of the euro at an auction on Tuesday, and EU officials said Greece had little hope of meeting the terms of its bailout, casting fresh doubt on its future in the euro zone.
    • Spain's increasingly desperate struggle to put its finances right has seen its borrowing costs soar to levels that are not manageable indefinitely, reflecting a growing belief that it will need a sovereign bailout the euro zone can barely afford.
    • It has become the recent focus for investors, but Greece - where the sovereign debt crisis began - remains a powder keg. If Athens were to default or exit the euro zone, the knock-on effects could push Spain and even Italy over the edge.