Politics: Daily Briefing: Congress looks to raise taxes on rich while appearing not to

Published by: Clark Barrow on Friday November 23rd, 2012

Clark Barrow

By CLARK BARROW - Rates vs. revenue.

DAILY BRIEFING - SUMMARY

· BLACK FRIDAY - Industry watchdog National Retail Federation expects holiday sales this year to rise 4.1 percent to $586.1 billion, lower than the 5.6 percent rise in 2011.

· FISCAL CLIFF - Congressional negotiators, trying to avert a fiscal crisis in January, are examining ideas that would allow effective tax rates to rise for the wealthy without technically raising the top tax rate of 35 percent. They hope the proposals will advance negotiations by allowing both parties to claim they stood their ground.

· CONGRESS - The NFIP, America’s only provider of flood insurance, faces an estimated $6 billion to $12 billion in new claims from Sandy, according to the Federal Emergency Management Agency.

· INVESTIGATION - Federal agents are investigating whether former CIA Director David Petraeus directed members of his staff to share military documents and other sensitive records with his biographer, according to a report.

· GRINCH – After asking the Salvation Army directly to stop ringing their bells near her store, a business owner asked the police to end the disturbance under the city's noise ordinance. However, the police department said the bell ringing was not a problem and declined to take action.

· ISRAEL - The top leader of Egypt's Muslim Brotherhood denounced peace efforts with Israel and urged holy war to liberate Palestinian territories on Thursday — one day after the country’s president, who hails from the movement, mediated a cease-fire between Israelis and Palestinians to end eight days of fierce fighting.

· EURO ZONE - The euro zone economy is on course for its weakest quarter since the dark days of early 2009, according to business surveys that showed companies toiling against shrinking order books in November.

NEWS TO WATCH

ECONOMIC NEWS

· BLACK FRIDAY - The nation's shoppers on Thursday put down the turkey to take advantage of Thanksgiving deals.

o Stores typically open in the wee hours of the morning on the day after Thanksgiving that's named Black Friday because that's when stores traditionally turn a profit for the year. But Black Friday openings have crept earlier and earlier over the past few years. Now, stores from Target to Toys R Us are opening their doors on Thanksgiving evening, hoping Americans will be willing to shop soon after they finish their pumpkin pie.

o A recent survey by the consulting firm Deloitte showed 23 percent plan to shop in stores on Thanksgiving Day - up from 17 percent in last year's survey. Data on the impact of stores being open on Thanksgiving Day is hard to come by, but Alison Paul, vice chairman and U.S. Retail & Distribution lead Deloitte, said it was likely that sales made that day cut into demand later in the holiday season.

o Industry watchdog National Retail Federation expects holiday sales this year to rise 4.1 percent to $586.1 billion, lower than the 5.6 percent rise in 2011.

· Friday morning futures for the Dow Jones Industrial Average rose 20 points, or 0.2%, to 12,820.

· Friday morning futures for the Standard & Poor’s 500 index rose 1.5 points to 1,389.80.

· Friday morning futures for the Nasdaq 100 index rose 7.75 points to 2,603.75.

COMMODITIES

· The U.S. national average for a gallon of regular gasoline is $3.43.

o 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 85 percent higher than they were when Mr. Obama became president.

· Benchmark U.S. crude oil for January delivery fell 19 cents, or 0.2%, to $87.19 a barrel on Globex during Asia trading hours.

· Gold for December delivery added $6.00, or 0.34%, to settle at $1,734.00 an ounce on the Comex division of the New York Mercantile Exchange.

IN THE DISTRICT

· FISCAL CLIFF - As of today, there are 39 days until the fiscal cliff takes effect on January 1, 2013.

· FISCAL CLIFF - Congressional negotiators, trying to avert a fiscal crisis in January, are examining ideas that would allow effective tax rates to rise for the wealthy without technically raising the top tax rate of 35 percent. They hope the proposals will advance negotiations by allowing both parties to claim they stood their ground.

o One possible change would tax the entire salary earned by those making more than a certain level — $400,000 or so — at the top rate of 35 percent rather than allowing them to pay lower rates before they reach the target, as is the standard formula. That plan would allow Republicans to say they did not back down in their opposition to raising marginal tax rates and Democrats to say they prevailed by increasing effective tax rates on the rich. At the same time, it would provide an initial effort to reduce the deficit, which the negotiators call a down payment, as Congressional tax-writing committees hash out a broad overhaul of the tax code.

o This comes as states and business advocates are maneuvering to use the current budget negotiations in Washington to win support for a long-sought increase in the federal gasoline tax—one of a grab bag of proposals various groups are seeking to tuck into a deal.

o The White House and Congress are trying to craft a broad deficit-reduction deal to substitute for the so-called fiscal cliff, a $500 billion combination of tax increases and spending cuts set to begin Jan. 2. State highway officials and industries that stand to benefit from increased highway spending—including road builders and heavy-equipment makers—are among those pressing lawmakers to raise the 18.4-cent-a-gallon federal gasoline tax as part of an agreement.

o Meanwhile, a multiyear farm bill that has stalled in Congress could be part of a solution to avoid the looming “fiscal cliff” — if party leaders decide they need its spending cuts to count toward an overall deficit reduction package.

o A five-year, $500 billion farm bill, approved by the Senate in June with bipartisan support, would trim at least $23 billion in agricultural subsidies, land-conservation spending and other programs over the next decade, compared with the most recent farm bill that expired at the end of September. The bill has been rejected by House Republicans.

o Another version of the bill that cleared the House Agriculture Committee in July would save $35 billion, though partisan and intraparty bickering have prevented it from receiving a full floor vote.

o Both proposals call for cuts to the $80-billion-a-year food stamps program, now known as the Supplemental Nutrition Assistance Program, or SNAP, which typically is included in farm bills.

· CONGRESS - The tea-party movement is trying to regroup after taking some licks in this month's elections. Several groups already are setting their sights on 2014 congressional races, in which they plan to promote their preferred candidates and hope to weed out Republicans they consider insufficiently conservative.

o Many tea-party activists say they remain dumbfounded by the Nov. 6 defeat of Republican presidential candidate Mitt Romney and favored GOP candidates for the Senate, and opinions are swirling over how the movement should push forward.

o Conservative groups also are considering potential challenges to GOP Sens. Lindsey Graham in South Carolina, Lamar Alexander in Tennessee and Saxby Chambliss in Georgia, whom some activists view as not conservative enough.

· CONGRESS - Hurricane Sandy-related claims are pouring into the troubled government-run National Flood Insurance Program — and Congress is girding for revived battles over the program’s debts.

o The NFIP, America’s only provider of flood insurance, faces an estimated $6 billion to $12 billion in new claims from Sandy, according to the Federal Emergency Management Agency.

o The NFIP, which is about $18 billion in debt after Hurricane Katrina, has only $2.9 billion left in borrowing authority, Edward Connor, FEMA's deputy associate administrator for federal insurance told a meeting last week, according to news reports.

o Superstorm Sandy brought mental anguish to millions. But she also left behind a surge of victims suffering from physical injuries — rashes, asthma, and even lung infections, linked to those living on the devastated South Shore — from the Rockaways to Babylon.

o Homeowners in Long Island’s flood zones have been taking precautions, using protective suits, masks, gloves and boots as they warily clear muck, sewage and mold-infested wallboard. Hundreds of residents have been seeking medical attention, among them members of the Livolsi family.

· CONGRESS - U.S. lawmakers returning to Washington, D.C. from the campaign trail are off to a slow start in resolving a series of legislative leftovers that have piled up for the lame-duck session.

o Major farm and postal reform measures, a defense authorization bill, legislation to reauthorize the Violence Against Women Act and the Foreign Intelligence Surveillance Act are all on the congressional to-do list when the House and Senate come back from their Thanksgiving recess.

o So far, those issues have fallen under the radar amid the obsessive focus on the tax increases and spending cuts that are scheduled to take effect at year’s end.

· WHITE HOUSE - In his weekly radio and Internet address, President Obama urged Americans to put aside partisan differences and come together as a nation for Thanksgiving.

o During his fourth Thanksgiving presidential address, President Obama referenced the recent, long and bruising campaign season, urged the country to unite behind his administration and, for the fourth year running, neglected to offer verbal thanks to God.

o In the GOP address, Rep. Cathy McMorris Rodgers of Washington state said Republicans are ready to work with Obama to avert impending tax increases, big spending cuts and other problems.

· WHITE HOUSE - One year and one month before President Obama won reelection, he invited seven of the world’s top economists to a private meeting in the Oval Office to hear their advice on what do to fix the ailing economy.

o There was a former Federal Reserve vice chairman, a Nobel laureate, one of the world’s foremost experts on financial crises and the chief economist of the International Monetary Fund , among others. Nearly all said Obama should introduce a much bigger plan to forgive part of the mortgage debt owed by millions of homeowners who are underwater on their properties.

o Obama was reserved in response, but U.S. Treasury Secretary Timothy Geithner interjected that he didn’t think anything of such ambition was possible.

o The meeting highlighted what today is the biggest disagreement between some of the world’s top economists and the Obama administration. The economists say the president could have significantly accelerated the slow economic recovery if he had better addressed the overhang of mortgage debt left when housing prices collapsed. Obama’s advisers say that they did all they could on the housing front and that other factors better explain why the recovery has been sluggish.

o Nearly 11 million Americans, or more than a fifth of homeowners, are buried in debt, owing more than their properties are worth after piling their life savings into their properties — a persistent and largely unaddressed problem that represents the missing link in what many economists consider the administration’s overall strong response to the recession.

PRESIDENT’S SCHEDULE

· As of this morning, President Obama did not have any public events scheduled for today.

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

· INVESTIGATION - Federal agents are investigating whether former CIA Director David Petraeus directed members of his staff to share military documents and other sensitive records with his biographer, according to a report.

o Investigators are considering the possibility that some classified information was shared with Paula Broadwell during her work on the Petraeus’s biography, the Washington Post reported on Thursday.

o The report said that Broadwell had turned over her computer to the FBI in late summer and agents had discovered “low-level classified” information.

FEDERAL GOVERNMENT

· U.S. POSTAL SERVICE - Emboldened by rapid growth in e-commerce shipping, the cash-strapped U.S. Postal Service is moving aggressively this holiday season to start a premium service for the Internet shopper seeking the instant gratification of a store purchase: same-day package delivery.

o Teaming up with major retailers, the post office will begin the expedited service in San Francisco on Dec. 12 at a price similar to its competitors. If things run smoothly, the program will quickly expand next year to other big cities such as Boston, Chicago and New York. It follows similar efforts by eBay, Amazon.com, and most recently Wal-Mart Stores Inc., which charges a $10 flat rate for same-day delivery.

o The delivery program, called Metro Post, seeks to build on the post office's double-digit growth in package volume to help offset steady declines in first-class and standard mail. Operating as a limited experiment for the next year, it is projected to generate between $10 million and $50 million in new revenue from deliveries in San Francisco alone, according to postal regulatory filings, or up to $500 million, if expanded to 10 cities.

ENERGY

· FRACKING - The drilling process that has brought U.S. energy independence within reach faces renewed scrutiny from the Obama administration and an uncertain future in many states.

o Oil and gas industry leaders remain enthusiastic yet cautious that hydraulic fracturing, commonly known as “fracking,” will be fully embraced by the newly re-elected President Obama and state leaders.

o Fracking is a controversial but highly successful practice that has unlocked massive amounts of fuel. Endorsements from Mr. Obama and state leaders would make fracking the cornerstone of U.S. energy policy for decades to come.

EDUCATION

· COLLEGE - The rising cost of a college education is hitting one group especially hard: the millions of students who drop out without earning a degree.

o A bachelor's degree remains by far the clearest path to the American middle class. Even today, amid mounting concerns about the rising cost of higher education and questions about the relevance of many college degrees, recent graduates have lower rates of unemployment, higher earnings and better career prospects than their less educated peers. But as more Americans than ever before attend college, more too are dropping out.

o The complexity of the student-loan system—a web of public, private and subsidized loans that together add up to more than $1 trillion—makes it difficult to know exactly how much debt is held by dropouts. But the scale is massive. According to a 2011 study by the Institute for Higher Education Policy, a Washington, D.C.-based research firm, 58% of the 1.8 million borrowers whose student loans were began to be due in 2005 hadn't received a degree. Some 59% of them were delinquent on their loans or had already defaulted, compared with 38% of college graduates. The problem has almost certainly worsened since, as the recession wiped out job opportunities for less-educated workers.

HUMAN INTEREST

· GRINCH – After asking the Salvation Army directly to stop ringing their bells near her store, a business owner asked the police to end the disturbance under the city's noise ordinance. However, the police department said the bell ringing was not a problem and declined to take action.

o Local shop owner Sarah Hamilton-Parker, tired after years tolling bells sounded by Salvation Army workers for hours on end during the holiday season, took matters into her own hands by reaching out to local authorities to complain about the noise.

o The frustrated business owner explained that, for five weeks out of every year, from morning to night, she hears the bells ringing as Salvation Army workers attempt to raise money for their cause.

FOREIGN POLICY

MIDDLE EAST

· ISRAEL - The top leader of Egypt's Muslim Brotherhood denounced peace efforts with Israel and urged holy war to liberate Palestinian territories on Thursday — one day after the country’s president, who hails from the movement, mediated a cease-fire between Israelis and Palestinians to end eight days of fierce fighting.

o Meanwhile, President Mohammed Morsi issued constitutional amendments granting himself far-reaching powers and ordering the retrial of leaders of the regime of deposed President Hosni Mubarak for the killings of protesters in last year’s uprising.

o In Israel and the Gaza Strip, the cease-fire held Thursday, even as Israel arrested 55 Palestinian “terror operatives” across the West Bank only hours after the truce went into effect.

o The Israeli army said that a reserves officer died Thursday of wounds sustained in a rocket attack that occurred hours before the fighting stopped. He was identified as Lt. Boris Yarmulnik, 28. His death raises the toll of Israelis killed by rocket fire from Gaza to six since Nov. 14, two of them soldiers. More than 160 Palestinians were killed.

o Israeli troops shot dead a Palestinian man and wounded nine along Gaza's border fence with Israel on Friday. But the shooting appeared to be an isolated incident and was unlikely to jeopardize the Egyptian-brokered cease-fire.

o Meanwhile, Hamas, along with the masked fighters of other Gaza militant groups, held boisterous victory rallies across the Gaza Strip on Thursday, the day after an Egypt-brokered cease-fire with Israel took effect.

o As the truce neared the 24-hour mark Thursday evening, many spoke with anticipation of the next “phase” of the agreement, in which Hamas plans to negotiate an end to Israel’s blockade of the strip and wider mobility for Palestinians in the border zone, where Israel maintains its right to shoot those who come within one mile.

· SYRIA - Syrian rebels strengthened their hold Thursday on an oil-rich province bordering Iraq, activists said, capturing a key military base that was considered one of the last bastions for President Bashar Assad's loyalists in the strategic region.

o The reported fall of the Mayadeen base, along with its stockpiles of artillery, caps a series of advances in Deir el-Zour including last week's seizure of a military airport.

o The province borders on western Iraq. Syria's rebels enjoy strong support with the Sunni tribes of Iraq's west, and many Iraqis with combat experience from their own war are believed to have crossed to fight in their neighbor.

o More than 40,000 people have been killed in 20 months of conflict between Syrian President Bashar al-Assad's forces and those fighting for his overthrow, a violence monitoring group said on Friday.

· IRAN - Iran said on Thursday a blogger who died while in police custody may have lost his life as a result of a form of shock, the official IRNA news agency reported, adding that investigations were not yet concluded.

o In a case that has sparked international outrage, 35-year-old Sattar Beheshti who wrote a blog critical of the government was arrested on Oct. 30 after receiving death threats and died some days later, having complained of being tortured.

o Under increasing pressure at home and abroad for an investigation, Iran's parliament said it had formed a committee to examine the case and the judiciary said it would deal "quickly and decisively" with those responsible.

ASIA

· RUSSIA - Two decades after the collapse of the Soviet Union, the ideas of Marx and Lenin are making a comeback in Russia with a wave of young leftists whose potential for mass appeal seems to have rattled the Kremlin.

o The most high-profile of this new generation of leftists, Sergei Udaltsov, made international headlines last month when he and two others from his Left Front political movement were charged with planning mass disorder across Russia based on accusations in a TV documentary aired by a pro-Kremlin station.

o The leftists form a key part of a loose-knit coalition of pro-democracy, economic justice and anti-corruption activists who have opposed Russian President Vladimir Putin’s increasingly authoritarian rule – opposition that Mr. Putin has attributed in part to Western interference.

EUROPE

· EURO ZONE - The euro zone economy is on course for its weakest quarter since the dark days of early 2009, according to business surveys that showed companies toiling against shrinking order books in November.

o The flash service sector PMI fell to 45.7 this month, its lowest reading since July 2009, the survey showed on Thursday, failing to meet the expectations of economists who thought it would hold at October's 46.0.

o It has been rooted below the 50 mark that divides growth and contraction for 10 months now, and survey compiler Markit said it was too soon to say if this marked the nadir.