Archive for November, 2012

Speaker Boehner sounds warning over lack of progress on Fiscal Cliff Talks

John Boehner

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.

, , , , , , , , , , , , ,

Leave a comment

President Obama wants Tax Hikes but ignores talk of spending cuts.

Barack Obama

In another type of campaign by President Obama just over a month after his marathon presidential campaign, the president is now appealing directly to the public for ta increases while not mentioning spending cuts.

Rather than persuade independent voters, as he did during his 2012 re-election campaign, Obama now seeks to pressure congressional Republicans into backing a debt reduction plan that includes higher taxes on the nation’s wealthiest.

To that end, Obama spoke Wednesday with an invited group of middle class Americans who would see their taxes go up if the White House and congressional Republicans are unable to strike a deal before the end of the year.

Obama and Congress are looking to head off the so-called “fiscal cliff,” a series of tax hikes and budget cuts that kick in next year if the parties can’t reach an agreement.

the president does seem willing to allow the across-the-board tax increases and spending cuts to kick in at the end of the year if House Republicans refuse to allow tax rates to go up for top earners.

Obama is treating the negotiations over tax rates and spending as a continuation of the debt-ceiling fight that created the automatic spending cuts in the first place.

Having won re-election and with current tax rates set to expire, Obama is looking to do a deal limited in scope to those issues. If Republicans would like to avoid automatic, long-term reductions in defense spending, Obama believes that the money should come from higher rates for top earners.

And if Republicans won’t agree, Obama is sending strong signals that he will let the hikes and cuts occur and then resume negotiations amid a deeper crisis.

Promoting an agreement that includes higher taxes on the rich as well as budget cuts, Obama and aides have begun a public relations campaign that takes many forms.

On Monday, the administration issued a report on the economic impact of the fiscal cliff, including average tax hikes of $2,200 for the kinds of families invited to the White House on Wednesday.

On Friday, Obama visits the kind of business that would see its sales drop if the government drops off the fiscal cliff: A toy factory near Philadelphia.

The White House is also trying to drum up support through social media, including the new Twitter hastag “My2K.”

These events take place amid rising concern that the parties will be unable to reach an agreement, and the economy will face the sudden shock of automatic tax hikes and budget cuts.

“I think the probability is we’re going over the cliff,”said Erskine Bowles, the former co-chairman of President Obama’s debt commission.

Republicans say they support the idea of new government revenues, but by closing tan loopholes, not by increasing tax rates.

GOP officials are also deriding Obama’s campaign effort, saying he should be using the time to negotiate.

“Every week he spends campaigning for his ideas is a week that we’re not solving the problem,” said Senate Minority Leader Mitch McConnell, R-Ky.

All political leaders are now resembling actors out of Hollywood trying to talk tough and appeal to their bases meanwhile, American and their national interest continue to be ignored in favor of party politics. Where’s the new start President Obama promised if elected to a 2nd term? a forgotten memory on the campaign trail.

, , , , , , , , , , , , , , ,

Leave a comment

European nations differ over Palestinian bid

Palestine

France and Spain said it will back the Palestinians’ bid to win recognition as a state at the United Nations while the U.K. set conditions for its vote and Germany ruled out support.

France said on Tuesday it would vote in favour of Palestinian non-member status at the United Nations, an important boost in Palestinian efforts to secure greater international recognition. “This Thursday or Friday, when the question is asked, France will vote yes,” French Foreign Minister Laurent Fabius announced in the French National Assembly, the lower house of parliament. “It is only with negotiations between the two sides that we demand immediately without any preconditions that a Palestinian state can become a reality,” he said.

U.K. Foreign Secretary William Hague said Britain will abstain unless the Palestinians commit to talks without preconditions and agree not to sign up to the International Criminal Court.

He was speaking after Spanish Foreign Minister Jose-Manuel Garcia-Margallo told the national parliament in Madrid that Spain will vote in favor. Germany won’t vote for the resolution and will work “closely” with European Union allies on the UN Security Council, government spokesman Steffen Seibert said today.

“Up until the time of the vote itself we will remain open to voting in favor if we see public assurances from the Palestinians,” Hague told lawmakers in the House of Commons in London today. “In the absence of assurances we will abstain on the vote.”

Delegates are set to vote tomorrow on a resolution circulated Nov. 8 by the Palestinian Authority that would put the Palestine Liberation Organization on par with the Holy See as a non-member state at the UN. Israeli Finance Minister Yuval Steinitz told Army Radio today that “surprises” are in store for the Palestinians if they proceed with the move.

France and Russia have already said they will support the proposal. No country has veto power in the General Assembly, so the U.S., which opposes the initiative, can’t block it.

Hague said Britain’s support is contingent on Palestinian statements and redrafting of the resolution to guarantee the restart of talks without preconditions, that the International Criminal Court will not be called in to adjudicate on activities in the occupied territories and that nothing in the resolution prejudges deliberations by the UN’s Security Council.

“It’s important that we use our vote to try to say to both sides in this conflict we need talks without preconditions,” Prime Minister David Cameron told lawmakers today. “The only way we’re going to see a peace process that works is if Israelis and Palestinians come to the table.”

, , , , , , , , , , ,

Leave a comment

Argentina facing likely debt default

English: Argentine President Cristina Fernande...

 

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.

, , , , , , , , ,

Leave a comment

Egypt tries to rush out new constitution to quell discontent

IMG00598-20110130-1630

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.

, , , , , , , , , ,

Leave a comment

President Obama to meet Romney at White House

Romney Obama

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.

, , , , , , , , , ,

Leave a comment

Both Sides and; Their Constituencies Aim for Fiscal Cliff Resolution

English: US Congress on Capitol Hill, Washingt...

Negotiations over the so-called ‘fiscal cliff’ resume in earnest as Congress returns today. Both sides have struck cooperative tones since Obama’s re-election. Even so, he and House Speaker John Boehner, R-Ohio, the GOP’s pivotal negotiator, have spent most of the past two years in a toxic political climate in which both sides have fought stubbornly to protect their constituencies.

A big coalition of business groups says there must be give-and-take in the negotiations to avoid the “fiscal cliff” of massive tax increases and spending cuts. But raising tax rates – a White House priority – is out of the question, the group adds.

The homebuilding industry says it won’t tolerate even a nick in the mortgage interest deduction. It doesn’t matter, industry leaders say, if it’s part of a broad, spread-the-pain package designed to tame the soaring debt.

And there’s no ambiguity in the views of the top lobbying arm for retirees.

“AARP to Washington: No cuts to Medicare and Social Security in last-minute budget deal” the group’s Web site declares. AARP nixes the notion of slowing the cost-of-living formula for Social Security recipients, even if it’s part of a big, bipartisan compromise package. And President Barack Obama should drop his idea of raising Medicare’s eligibility age, AARP adds.

So much for the notion of shared sacrifice as Congress and the White House face a Dec. 31 deadline to craft a far-reaching deficit-reduction plan. If they fail, the government tips over the so-called fiscal cliff, at least for a time. Nearly everyone’s taxes will rise, and federal programs will be whacked. Financial markets might quake, and a new recession could begin, economists say.

In Washington, meanwhile, it’s virtually every group for itself, scrambling to protect 100 percent of each tax break and government payout it now enjoys.

America is split down the middle politically, as the last half dozen presidential races have shown. Aside from a few think tanks and civic-minded groups, there’s almost no talk of splitting the pain among interest groups, populations and professions in a manner that seems inevitable if lawmakers are to achieve the trillions of dollars in deficit-reduction both parties call for.

The old adage, “Don’t tax thee, don’t tax me, tax the man behind the tree” was never more in vogue.

Of course, some of the tough talk may be posturing. No one wants to show a willingness to compromise at the start of a long, tough negotiating season.

Still, the adamant positions that major interest groups are taking – and their insistence that sacrifices hit others, not them – underscore the difficulty Obama and congressional leaders face. The tougher a group talks to its members and the public, the harder it is to back down later when a bit of shared pain for everyone emerges as the only path to a deal.

The line-in-the-sand talk begins, of course, with top politicians themselves.

“Raising tax rates is unacceptable,” House Speaker John Boehner, R-Ohio, said shortly after Obama won re-election. He seemed unfazed by Obama’s campaign promise to let the Bush-era tax cuts expire for couples making over $250,000 a year.

Washington insiders think both men might bend, as they did last year when they nearly struck a “grand bargain” combining major spending cuts with tax increases. Boehner’s conservative colleagues rebelled before the package took final shape.

Boehner’s House caucus seems slightly less restive now. But outside groups are gearing up to fight virtually every idea being floated to reduce spending or raise revenues. To reach a deficit-cutting package big enough to replace the fiscal cliff, lawmakers will have to stare down these groups, which pour millions of dollars into political campaigns and flood congressional offices with constituents’ phone calls.

Interest groups, like many politicians, talk warmly of compromise in the abstract. But they dig in when the talk turns to specific ideas that run counter to their philosophies or profitability.

“There has to be give” in the negotiations, said Jade West, who heads the decade-old Tax Relief Coalition, comprised of major business groups. But on the question of raising tax rates on the rich – probably the most-discussed issue on the fiscal cliff table – West said her group is adamantly opposed.

“I don’t care what he said,” she said of Obama’s campaigning on the topic. “The sound bite, `tax the rich, tax the rich, tax the rich'” ignores the harm such a policy would do, she said.

“Taxing the people who hire is just nuts,” West said.

AARP is equally firm in opposing changes to Social Security and Medicare, the mammoth “entitlement” programs that economists say must be reined in soon to avoid disastrously large deficits in future years.

Seventeen months ago, AARP showed more flexibility. Its policy chief said the group would consider modest cuts in Social Security for future retirees, noting that such changes seem all but inevitable at some point. AARP members complained, the official left, and the organization resumed the stance it holds today: no reductions in Social Security or Medicare benefits.

Itemized tax deductions are another area where Democrats and Republicans are looking for possible ways to generate more government revenue. Here, too, powerful lobbying groups are rallying to oppose any changes that would cost their members money.

The home mortgage interest deduction saves borrowers $99 billion a year in taxes, making it easier to buy and sell houses. Should even a small portion of that tax break be eliminated, perhaps for the richest people, to help reduce federal borrowing?

No, says Jerry Howard, chief executive of the National Association of Home Builders. Home owners suffered huge losses in personal wealth during the recent collapse of the housing market and the sector should be spared any further dings, he said.

“While the rest of the nation was in a recession, we were in a depression,” he said. “Congress should be embarrassed” to even think of asking homeowners to help pay for a fiscal crisis that lawmakers brought on themselves through years of inaction, he added.

It’s the same tune at universities and other institutions that rely on charitable gifts. They want to fully exempt the charitable gift deduction, which costs the government about $51 billion a year, from a role in the fiscal cliff talks.

“We urge you and House leaders not to impose any limits or caps to the charitable deduction,” the Charitable Giving Coalition said in a recent letter to Boehner and others.

Like other interest groups, this one says it has special attributes that set it apart.

“The charitable deduction is different than other itemized deductions in that it encourages individuals to give away a portion of their income to those in need,” the letter said.

And so it goes, group by group, tax break by tax break, payout by payout. Everyone is special. Everyone is deserving.

, , , , , , , , , , , , ,

Leave a comment

%d bloggers like this: