Politics: Daily Briefing: Get ready for another downgrade

Published by: Clark Barrow on Thursday December 20th, 2012

Clark Barrow

By CLARK BARROW - Fitch is the latest rating agency ready to take away AAA.

DAILY BRIEFING - SUMMARY

· DOWNGRADE - Fitch warned that the U.S. is more likely to lose its top-notch "AAA" rating if lawmakers cannot agree on how to cut the deficit and avoid the broad government spending cuts and tax increases that go into effect next year if no deal is reached.

· TAX INCREASE - Neither the Obama administration nor congressional Republicans want to increase taxes on everyone, but most workers are likely to see lower take-home pay in 2013, eating away at economic growth.

· WHITE HOUSE - President Obama would veto U.S. House Speaker John Boehner’s proposed “Plan B,” which would let the Bush tax cuts expire for income over $1 million to avoid major tax hikes on most Americans.

· WHITE HOUSE - President Obama declared Wednesday that he would make gun control a “central issue” as he opens a second term, submitting broad new gun control proposals to Congress no later than January and committing the power of his office to overcoming political opposition in the wake of last week’s school massacre.

· DEPENDENCE - The Pew Research Center recently determined that 55 percent of Americans have dipped into federal entitlement programs at some point.

· GOVERNMENT MOTORS - The Obama administration said Wednesday it will sell 200 million shares— or 40 percent of its remaining stake in General Motors Co. — back to the automaker and announced plans to completely exit the Detroit automaker by March 2014.

· RESIGNATION - Three U.S. State Department officials resigned under pressure Wednesday, less than a day after a damning report blamed management failures for a lack of security at the U.S. diplomatic mission in Benghazi, Libya, where militants killed the U.S. ambassador and three other Americans on Sept. 11.

DOMESTIC POLICY

ECONOMIC NEWS

· DOWNGRADE - Fitch warned that the U.S. is more likely to lose its top-notch "AAA" rating if lawmakers cannot agree on how to cut the deficit and avoid the broad government spending cuts and tax increases that go into effect next year if no deal is reached.

o But the credit ratings agency said in a report Wednesday that if lawmakers can agree on a deficit-cutting plan, the U.S. would likely keep its "AAA" debt rating. Fitch would then raise its outlook to stable from negative.

o In November Fitch Ratings said that President Barack Obama must work toward a credible plan to avoid the fiscal cliff or risk losing its "AAA" rating. Fitch changed its outlook for the U.S. rating to negative last year after Congress and the Obama administration failed to meet a deadline for a plan.

· TAX INCREASE - Neither the Obama administration nor congressional Republicans want to increase taxes on everyone, but most workers are likely to see lower take-home pay in 2013, eating away at economic growth.

o The White House, in its latest offer Monday to resolve the fiscal cliff, made a key concession that would be felt by every U.S. wage earner: allowing the expiration of the payroll tax cut, a provision that has lowered the workers’ share of Social Security taxes by two percentage points for the past two years. That translates into an average tax increase of about $1,000 a year for the typical American household making about $50,000 annually.

o Letting the payroll tax rate revert to 6.2% from the current 4.2% would raise government revenue by about $125 billion next year, equivalent to 0.8% of total U.S. economic output, according to J.P. Morgan Chase.

o Many forecasters say an increase in the payroll tax rate would damp consumer spending, weighing on the recovery. J.P. Morgan forecasts it would slow growth in 2012 by 0.6 percentage point, a sizable drag for an economy projected to expand by around 2% next year.

IN THE DISTRICT

· FISCAL CLIFF - As of today, there are 11 days until the fiscal cliff takes effect on January 1, 2013.

· CONGRESS - U.S. Senate Majority Leader Harry Reid (D-Nev.) called for swift action Wednesday by Congress on an emergency-spending bill for victims of Hurricane Sandy.

o The U.S. Senate started consideration this week of H.R. 1 as a vehicle to provide $60 billion to Hurricane Sandy recovery efforts, but some conservatives have said the bill has unnecessary spending measures, during a time when lawmakers are trying to make spending cuts.

o Reid said he hopes the package is completed in the next day or two. He also said Republicans might offer a substitute package.

· CONGRESS - Senior U.S. House Democrats insist they won’t leave Washington until Congress extends jobless benefits for the long-term unemployed.

o Rep. Sandy Levin (D-Mich.), the U.S. House Ways and Means Committee ranking member, said Tuesday that he is determined to see a yearlong extension passed before the benefits expire on Dec. 29.

o President Obama has called for an extension as part of a deficit-reduction package he is negotiating with Speaker John Boehner (R-Ohio), who has not agreed to the provision.

· WHITE HOUSE - President Obama would veto U.S. House Speaker John Boehner’s proposed “Plan B,” which would let the Bush tax cuts expire for income over $1 million to avoid major tax hikes on most Americans.

o Boehner has said his approach would buy time so he could reach a final deal with Obama early next year to address the remaining portions of the cliff, which includes automatic cuts in government spending and tax hikes.

o In addition to permanently extending the George W. Bush-era tax cuts for households making less than $1 million, Boehner’s plan would permanently rein in the alternative minimum tax and maintain the tax on inherited estates worth more than $5 million at 35 percent. The bill would permit the top income tax rate to rise from 35 percent to 39.6 percent on income over $1 million and restore limits on exemptions and itemized deductions. But the tax on dividends would be held to 20 percent rather than rising to 39.6 percent, as under current law.

o The conservative groups Heritage Action and Club for Growth on Wednesday came out strongly against Speaker John Boehner’s (R-Ohio) "Plan B" for avoiding the "fiscal cliff."

· WHITE HOUSE - President Obama declared Wednesday that he would make gun control a “central issue” as he opens a second term, submitting broad new gun control proposals to Congress no later than January and committing the power of his office to overcoming political opposition in the wake of last week’s school massacre.

o The president’s pledge came as House Republicans restated their firm opposition to enacting any new limits on firearms or ammunition, setting up the possibility of a philosophical clash over the Second Amendment early in Mr. Obama’s second term.

o U.S. House Democrats, coming out in force in the wake of the Newtown, Conn., shooting massacre, called on U.S. House Speaker John Boehner to bring a ban on high-capacity ammunition magazines to a vote by Saturday as a first step in a broader effort to rein in guns next year.

· WHITE HOUSE - When President Obama took office he vowed that his administration would be “the most open and transparent in history.” Now on the cusp of his second term, the president’s declaration is proving false.

o More than half of President Obama’s cabinet agencies continue to defy open-government rules by not disclosing the cost of travel by top officials. Nine of 15 cabinet offices have yet to release details of their out-of-town travel records six months after Bloomberg News filed requests for those documents under the Freedom of Information Act.

o The law requires agencies to respond to requests within 20 working days. Watchdogs say the delays show that the president hasn’t fulfilled his promise of greater transparency, and one group found that more than half of 99 federal offices ignored a directive to overhaul the way they respond to filings.

FEDERAL GOVERNMENT

· DEPENDENCE - For anybody wondering why the fiscal cliff negotiations are so tedious and combative, the Pew Research Center has just published a report that provides many clues.

o Pew conducted a poll to determine how many Americans have received benefits from six federal entitlement programs: Social Security, Medicare, Medicaid, food stamps, welfare and unemployment insurance. It's even worse than Mitt Romney thought. Pew found that 55 percent of Americans have dipped into those programs at some point, while 32 percent have drawn benefits from two or more. So a majority of the U.S. population has relied on government aid.

o This affects the fiscal cliff negotiations, and the long-term instability of the federal budget, because the majority of government spending goes toward people, not toward subsidies for Solyndra or bridges to nowhere or the silly stuff that politicians feign outrage about. Americans castigate Washington for reckless spending, but they also reach in for their share whenever there are taxpayer funds to be had. In some respects, the nation is dependent on practices it derides, like some sort of self-loathing addict.

· GOVERNMENT MOTORS - The Obama administration said Wednesday it will sell 200 million shares— or 40 percent of its remaining stake in General Motors Co. — back to the automaker and announced plans to completely exit the Detroit automaker by March 2014.

o The Detroit automaker said it will purchase 200 million shares of GM stock held by Treasury for $5.5 billion — or $27.50 per share — nearly $2 above the stock's closing price on Tuesday. GM shares jumped sharply on the news and were up 6.7 percent to $27.10, or $1.59.

o The U.S. Treasury — after more than a year of refusing to say when it might start selling its remaining stake in GM — said it willannounce a written plan in January to shed its remaining 300 million shares over the next 12 to 15 months — likely in a series of small stock sales.

o Still, taxpayers will almost certainly lose billions of dollars in the $49.5 billion GM bailout. If the government sold the rest of its stock at current prices, taxpayers would lose more than $13 billion.

o The GM sale will raise the proceeds that Treasury has recovered to $28.6 billion. With $20.9 billion left from the original bailout, the government would have to sell its remaining shares at an average price of $69.72 to break even.

o The U.S. Treasury Department said in August 2012 that it expects to lose more than $25 billion on the $85 billion entire auto bailout.

NATIONAL SECURITY

· RESIGNATION - Three U.S. State Department officials resigned under pressure Wednesday, less than a day after a damning report blamed management failures for a lack of security at the U.S. diplomatic mission in Benghazi, Libya, where militants killed the U.S. ambassador and three other Americans on Sept. 11.

o Obama administration officials said those who had stepped down were Eric Boswell, the assistant secretary of state for diplomatic security, Charlene Lamb, the deputy assistant secretary responsible for embassy security, and Raymond Maxwell, the deputy assistant secretary of state who oversees the Maghreb nations of Libya, Algeria, Tunisia and Morocco.

o U.S. Secretary of State Hillary Clinton was to have appeared at Thursday's congressional hearings, but canceled after fainting and sustaining a concussion last week while recovering from a stomach virus. Clinton is under doctors' orders to rest.

o Senate Republicans and Democrats said they hoped Clinton would testify on the Hill even though she is planning to step down from her Cabinet post.

HEALTH CARE

· OBAMACARE - A religious order of nuns is concerned about its future presence in the United States because of Obamacare’s impact on its charitable operations. The Little Sisters of the Poor told The Daily Caller that it may not qualify for a long-term exemption from Obamacare’s healthcare mandate. The law requires the order to provide government-approved health insurance to its 300 sisters who tend to the elderly in 30 U.S. cities.

o The exception is needed, said Sister Constance Carolyn Veit, the Little Sisters’ communications director, because Catholic teaching opposes contraception and medical treatments that cause sterility or can cause abortions.

o President Obama’s health-care overhaul law requires employers to include those services in qualifying health care plans they provide for their employees. Failure to comply will bring hefty fines — even for religious orders whose members have taken vows of poverty.

o The one concession the Obama administration made to religious groups like hers was a one-year extension of time before they would be expected to provide their staff with health insurance that met with the White House’s approval. That extension will expire at the end of 2013, but the sisters have only a few weeks left to make their case for an exemption beyond the end of next year.

o The Little Sisters of the Poor take care of elderly patients in 31 countries, but on Dec. 16 a representative told the congregation of Saint Raymond of Peñafort Church in Springfield, Va., that her order could conceivably be forced to pull out of the United States if paying fines and penalties is the only alternative to compromising on the doctrines of their religion.

FOREIGN POLICY

MIDDLE EAST

· ISRAEL - Israel has given final approval to 1,000 new homes for Israelis in Jewish settlements in the West Bank.

o Israeli officials say the housing units are among 3,000 new settlement homes Israel promised to build in in response to the Palestinians' bid for upgraded status at the United Nations last month.

o The planned construction on occupied territories claimed by the Palestinians has drawn fierce international condemnation.

· IRAN - A 32-year-old Iranian who is a U.S. citizen and a Christian convert has been imprisoned without notice of any formal charges while visiting his family in Iran, according to his wife and attorneys in the U.S., who are now hoping that a media campaign will help set him free.

o The Rev. Saeed Abedini, who lives in the U.S. with his wife and two young children, was making one of his frequent visits to see his parents and the rest of his family in Iran, his country of origin and where he spent many years as a Christian leader and community organizer developing Iran's underground home church communities for Christian converts.

o On this last trip, the Iranian government pulled him off a bus and said he must face a penalty for his previous work as a Christian leader in Iran.

o He is currently awaiting trial at Iran's notoriously brutal Evin Prison, where he has been incarcerated since late September.