Archive for November, 2012
House Speaker John A. Boehner delivered a blow Thursday to the optimism that Washington leaders have been showing over negotiations on the fiscal cliff, saying that there’s been “no substantive progress” in attempts to reach a deal and that “the White House has to get serious” on entitlement spending.
Boehner said he was “disappointed” after a phone call with Obama on Wednesday night and a meeting with Treasury Secretary Timothy Geithner on Thursday moved the two sides no closer to an agreement to avert the tax hikes and spending cuts that will be triggered at the start of 2013 unless Congress intervenes.
“I’m disappointed in where we are and disappointed in what’s happened over the last couple of weeks,” Boehner, of Ohio, told reporters after a private session with Geithner at the Capitol.
“No substantive progress has been made in the talks between the White House and the House over the last two weeks,” he said. “There’s been no serious discussion of spending cuts so far, and unless there is, there’s a real danger of going off the fiscal cliff.”
Markets dipped briefly into negative territory on Boehner’s comments, continuing a pattern of gyration based on the latest utterance or headline about the outlook for an agreement to avert the fiscal cliff.
The tone was in sharp contrast to the one expressed on November 16, the last time Obama met with congressional leaders. Boehner then stood next to Democratic leaders and voiced optimism they could find common ground in fiscal cliff negotiations.
Complicating the debate on Thursday was a renewed fight over raising the U.S. debt ceiling. That explosive issue, which could have been handled separately in the spring, was thrust into the fiscal cliff fray on Thursday in an exchange between Republicans and Democrats.
Boehner said any debt limit increase needed to be matched or exceeded by spending cuts to be proposed by Obama as part of the cliff negotiations.
White House spokesman Jay Carney responded by demanding that Congress go ahead and raise the debt ceiling as part of any year-end deal to avoid the cliff. To do otherwise, he said, would be “deeply irresponsible.”
The last partisan fight over the nation’s borrowing limit in 2011 was settled by a law that led directly to the fiscal cliff and to a downgrade of the government’s credit rating.
Geithner, Obama’s top negotiator in the talks, met with congressional leaders from both parties at the Capitol as the end-of-year deadline approaches to avoid the onset of $600 billion in tax hikes and spending cuts that analysts warn could push the U.S. economy back into recession.
The immediate issue is whether the tax cuts that originated in the administration of former President George W. Bush should be extended beyond December 31 for all taxpayers including the wealthy, as Republicans want, or just for taxpayers with income under $250,000, as Obama and his fellow Democrats want.
Republicans have said they are willing to consider new ways to raise revenue as long as Democrats and Obama agree to accompany it with significant spending cuts, particularly to entitlement programs like the government-sponsored Medicare and Medicaid healthcare plans.
“Without spending cuts and entitlement reform, it’s going to be impossible to address our country’s debt crisis. Right now, all eyes are on the White House,” Boehner said.
Boehner said Geithner and the administration had not offered any new plans during the meeting to break the impasse, while Senate Democratic leader Harry Reid said Democrats were still waiting for a “reasonable” proposal from Republicans.
Carney said the president had put forward “very specific spending cuts,” including some in the entitlement healthcare programs, but had not seen any movement from Republicans.
Despite a few cracks in Republican ranks, most notably from Republican Representative Tom Cole of Oklahoma, neither side has budged significantly in recent weeks from its position, leaving the markets and political analysts alike to grasp at wording nuances.
In the absence of progress, or any realistic understanding as to when or if Republicans and Democrats might avert the cliff or come up with some deficit reduction agreement, prodding has started to come on a regular basis from business leaders as well as Federal Reserve officials.
New York Fed President William Dudley and Richard Fisher of the Dallas Fed, highlighted the problems that U.S. lawmakers were causing for both hiring and the economy with each day they fail to strike a deal to avoid a pending fiscal crisis.
Dudley said on Thursday that if it is not addressed, the economic contraction is likely to be larger than normal because interest rates are so low.
The post-election lame-duck session of Congress also has made clear that until the two sides get over the immediate tax issue, they will not be able to move forward on the serious discussions they desire on longer-term deficit reduction and tax reform.
Keeping the nation in suspense down to a white-knuckled deadline has become the rule rather than the exception for Congress in recent years.
Argentina has vowed to continue its fight against Elliott Associates and other holdouts from its 2002 debt default, but Fitch Ratings doesn’t think it will win.
The ratings agency slashed the country’s sovereign debt rating yesterday, determining that “a default by Argentina is probable.” Argentina’s international law bonds are now rated CC. Fitch also cut its Argentine law bonds to B-minus.
Prior to the downgrade, both sets of bonds were rated B, four steps below investment grade.
Argentina is in danger of a technical default on exchange bonds it issued to creditors that accepted its debt restructuring—and a serious haircut in 2005 and 2010. A federal judge in New York has ordered the country to pay $1.33 billion into an escrow account for the holdouts, including Elliott affiliate NML Capital and Aurelius Capital Management, before it can make a $3 billion coupon payment on the exchange bonds. Argentina has vowed it will not pay the holdouts, which it calls vultures, but has also said that it will not default again.
Argentina’s eocnomy ministry said late on Monday it had filed an appeal and denounced Griesa’s ruling as “an attack on sovereignty that shows ignorance of the laws passed by our Congress.”
Any change to the terms of Argentine sovereign bonds must be approved by the country’s Congress.
The ministry said that if Griesa arranged a formula offering holdouts the same terms presented in the 2010 restructuring, Argentina’s Congress could debate it.
That proposal is unlikely to persuade the holdouts, however.
Earlier on Monday, investors holding $1 billion worth of restructured Argentine debt filed an emergency motion in a U.S. federal appeals court to fight the ruling, which they fear could prevent payment on their bonds and lead to a fresh default.
About 93 percent of bondholders agreed to swap defaulted debt from the 2002 default for new paper at a steep discount.
But holdouts, led by Elliott Management Corp’s NML Capital Ltd and Aurelius Capital Management, rejected the swaps and are fighting for full repayment in the courts.
Griesa’s order dismayed investors who took part in the two debt swaps and fear the G20 country will now enter into “technical default” on about $24 billion in restructured debt.
It was those holders who filed the motion on Monday in the U.S. 2nd Circuit Court of Appeals seeking to halt Griesa’s order.
The motion would ensure that interest payments to the bondholders continue while the appeal is decided,” said David Boies, a lawyer representing the investors. “Exchange bondholders agreed to take under 30 cents on the dollar to support Argentina’s debt restructuring.”
Argentina’s motion was filed to the same appeals court.
Aside from sparking howls from investors who participated in the debt restructurings, Griesa’s ruling was a setback for Argentina’s combative, left-leaning President Cristina Fernandez, who calls the holdout funds “vultures” and has vowed never to pay them.
Fernandez’s decision to vilify holdout creditors, who are loathed by most Argentines, makes payment a difficult prospect, and a local law prohibits offering a better deal than that given in the swaps. Doing so might expose Argentina to lawsuits from creditors who tendered their paper.
On the other hand, another default, albeit a technical default, would tarnish Fernandez’s record on managing the economy, deepen Argentina’s isolation from global financial markets and hit investment at a time of sluggish growth.
Some analysts fear the case’s implications could stretch far beyond Argentina and its creditors, hampering future debt restructurings and the operation of global payment systems.
The Argentine government is due to pay exchange bondholders at least $3.3 billion in principal and interest in December.
But if Griesa’s demand for payment of the $1.3 billion into an escrow account for holdouts is upheld by an appeals court and Argentina still refuses to pay, U.S. courts could embargo payments to the creditors who accepted the debt restructurings.
That would push Argentina into a technical default.
A controversial panel boycotted by liberals and Christians was set to rush out a draft of new Egyptian constitution on Wednesday as protests mounted over the political future nearly two years after Hosni Mubarak’s overthrow.
Islamist President Mohamed Morsi had just last week given the constituent assembly an additional two months until February to complete its work.
But as protests mounted over his decision to grant himself sweeping powers until the text is ratified in a referendum, the panel wrapped up its deliberations and readied for a vote on the text to be put to voters, panel chief Ahmed Darrag said.
“The discussions over the draft of the constitution will be finished today, to be followed by voting,” Darrag said in remarks carried by the official MENA news agency.
MENA reported that the panel would vote on the draft on Thursday morning. It will subsequently be put to a referendum.
The head of the Islamist-dominated panel, Hossam al-Gheriani, urged the liberal, leftist and Coptic members who walked out to “come back and finish the discussion on Thursday.”
“Tomorrow will be a great day,” Gheriani said.
The surprise move came in the face of deep rifts over the constituent assembly which critics have slammed for failing to represent all Egyptians.
Anger over the document was exacerbated following a decree by Morsi granting himself sweeping powers and barring the courts from dissolving the panel.
The Supreme Constitutional Court had been due to review the legality of the drafting committee on Sunday, but its fate hangs in the balance amid the constitutional vacuum created by Morsi’s decree.
Human rights groups have criticised the move to rush through the constitution.
“This is not a healthy moment to be pushing through a constitution because this is an extremely divisive moment,” Human Rights Watch Egypt director Heba Morayef said.
“Human rights groups have very serious concerns about some of the rights protections in the latest drafts we’ve seen,” she said.
Egypt’s highest court of appeal has gone on strike over Morsi’s decree putting his decisions beyond judicial scrutiny and protesters have flocked back to Cairo’s Tahrir Square, epicentre of the protest movement that toppled Mubarak in February 2011.
Clashes between police and protesters raged on Wednesday with the two sides exchanging volleys of tear gas canisters and stones.
The outskirts of the square have seen sporadic skirmishes for nine days since a protest was begun to mark the one-year anniversary of deadly confrontations with police in the same area.
Clashes also raged through Tuesday night between supporters and opponents of Morsi in the Nile Delta city of Mahalla and the canal city of Port Said.
In Mahalla, 132 people were injured while 27 were hurt in Port Said, medical sources said. According to a security official, calm in both towns had been restored by early on Wednesday.
Morsi’s decree helped consolidate the long-divided opposition, with former UN nuclear watchdog chief Mohamed ElBaradei and ex-Arab League chief Amr Mussa uniting with former presidential candidates in the face of Morsi and the powerful Muslim Brotherhood, on whose ticket the president ran for office.
The Brotherhood and the secular-leaning opposition had stood side by side in Cairo’s Tahrir Square in 2011 as they fought to bring down veteran strongman Mubarak and his regime.
But since the strongman’s ouster, the Islamist movement has been accused of monopolising politics after dominating parliament — following vows not to field candidates for a majority of the seats — and backtracking on a promise not to nominate a presidential candidate.
The movement went on to dominate a committee tasked with drafting the new constitution, prompting a string of walkouts.
Morsi’s decree is temporary, valid only until a new constitution is in place, and his Freedom and Justice Party says the measures are aimed at speeding up a seemingly endless transition.
US officials said Washington was closely following the drama unfolding in Egypt, with a warning that Cairo could put vast amounts of international aid at stake if it veers off the democratic course.
But the International Monetary Fund on Tuesday said Egypt can still get its $4.8 billion loan, agreed last week, despite the turmoil as long as there is “no major change” in its reform commitments.
President Barack Obama will host Mitt Romney for a private lunch at the White House on Thursday, their first meeting since Obama defeated him in this month’s presidential election.
The encounter follows Obama’s promise, in the aftermath of the bitterly fought November 6 election, to consult the former Republican governor of Massachusetts by the end of the year. It also comes amid Obama’s efforts to work out with congressional leaders a way to avoid a looming “fiscal cliff” that could push the U.S. economy back into recession.
“Governor Romney will have a private lunch at the White House with President Obama in the private dining room,” the White House said of the meeting, which will be closed to the media. “It will be the first opportunity they have had to visit since the election.”
Obama’s talks with Romney will be sandwiched between a series of events this week in which he is making his case to Americans to raise taxes on wealthy Americans while extending tax cuts for the middle class – an approach that his former Republican rival strongly opposed during the campaign.
Obama’s Democrats and their Republican foes remain deadlocked over dramatic, year-end tax increases and spending cuts known as the fiscal cliff that will kick in unless a deal is struck.
Seeking to make good on his post-election pledge to reach across the political aisle, Obama told a November 14 news conference he wanted to “sit down and talk” to Romney to hear his ideas and see whether they could work together.
Obama said he could envision a future role in public service for Romney but had no specific “assignment” for him.
Romney, in a conference call with donors after the election, was widely reported to have said that Obama won by using targeted initiatives to reward specific constituencies, including African-Americans, Latinos and young people.
Obama, who won a decisive victory after a bruising campaign, had sought to depict Romney as out of touch with ordinary Americans and intent on shielding the rich from higher taxes.
Romney had accused Obama of failed economic policies and wasteful spending to promote big government.