Posts Tagged ‘White House’

Obama, Republicans Plan Last-Minute Talks on Sequestration

Thursday, February 28th, 2013

Originally posted to reuters.com – February 28, 2013

Positions hardened on Wednesday between U.S. President Barack Obama and Republican congressional leaders over the budget crisis even as they arranged to hold last-ditch talks to prevent harsh automatic spending cuts beginning this week.

Looking resigned to the $85 billion in “sequestration” cuts starting on Friday, government agencies began reducing costs and spelling out to employees how furloughs will work.

Expectations were low that a White House meeting on Friday between Obama and congressional leaders, including Republican foes, would produce any deal to avoid the cuts.

Speaking to a business group, Obama said the cuts could shave 0.6 percentage points or more from already anemic growth and urged executives to pressure Congress into compromising on a broad deficit reduction package.

“Whether that can be done in the next two days – I haven’t seen things done in two days in Washington in quite some time,” Obama told the Business Council, which is composed of chief executives of major U.S. corporations. “The good news is that the public is beginning to pay attention to this.”

Public services across the country – from air traffic control to food safety inspections and education – might be disrupted if the cuts go ahead.

Put into law in 2011 as part of an earlier fiscal crisis, sequestration is unloved by both parties because of the economic pain it will cause, but the politicians cannot agree how to stop it.

A deal in Congress on less drastic spending cuts, perhaps with tax increases too, is needed by Friday to halt the sequestration reductions, which are split between social programs cherished by Democrats and defense spending championed by Republicans.

Obama stuck by his demand that Republicans accept tax increases in the form of eliminating tax loopholes enjoyed mostly by the wealthy as part of a balanced approach to avoiding sequestration.

“There is no alternative in the president’s mind to balance,” White House spokesman Jay Carney told reporters.

Obama wants to end tax breaks for oil and gas companies and the lower “carried interest” tax rate enjoyed by hedge funds.

But Republicans who reluctantly agreed to raise income tax rates on the rich to avert the “fiscal cliff” crisis in December are in no mood for that.

“One thing Americans simply will not accept is another tax increase to replace spending reductions we already agreed to,” said Senate Republican leader Mitch McConnell.

In one of the first concrete effects of the cuts, the administration took the unusual step of freeing several hundred detained illegal immigrants because of the cost of holding them.

Republicans described that move by Immigration and Customs Enforcement (ICE) as a political stunt aimed at scaring them into agreeing to end the sequestration on Obama’s terms.

The issue looked like it might become more controversial on Wednesday when the Associated Press reported that the Homeland Security Department official in charge of immigration enforcement and removal had announced his resignation on Tuesday just after news of the immigrants’ releases came out.

But ICE said the report was “misleading.” The official, Gary Mead, told ICE weeks ago of his retirement in April after 40 years of federal service, a spokeswoman said. Earlier, Carney denied the White House had ordered the immigrants’ release.

Friday’s White House meeting will include McConnell and the other key congressional leaders: Senate Democratic leader Harry Reid, House of Representatives Democratic leader Nancy Pelosi, and House Speaker John Boehner, the top U.S. Republican.

‘BELATED FARCE’?

The chances of success were not high.

One congressional Republican aide criticized the White House for calling the meeting for the day the cuts were coming into effect. “Either someone needs to buy the White House a calendar, or this is just a – belated – farce. They ought to at least pretend to try.”

Unlike during other fiscal fights in Congress, the stock market is taking the sequestration impasse calmly.

U.S. stocks rose, with major indexes posting their best daily gains since early January, as Federal Reserve Chairman Ben Bernanke remained steadfast in supporting the Fed’s stimulus policy and data pointed to economic improvement.

On Thursday, the Senate is expected to vote on competing Democratic and Republican ideas for replacing the sequestration. Both measures are expected to be defeated.

The Republican plan unveiled late on Wednesday would let the sequestration go into effect on Friday, but require Obama to submit an alternative $85 billion spending reduction plan to Congress by March 15, thus allowing more flexibility on how the cuts would be carried out.

Congress would have until March 22 to reject the proposal, in which case the original sequestration would remain in place. Democrats were still studying it. But on Tuesday, Senate Majority Leader Harry Reid said new revenues needed to be part of any substitute plan.

The Democratic proposal would replace the across-the-board cuts mainly with tax increases on the rich coupled with spending cuts. Some of those would be achieved by eliminating crop subsidies for large agricultural companies. More savings would be through minor defense cuts in later years.

Republicans have vowed to block any tax increases for deficit reduction.

Bernanke said sequestration was too drastic an approach for reducing the budget deficit.

“What I am advising is a more gradual approach. I’m not saying we should ignore the deficit. I am not saying we shouldn’t deal with long-term fiscal issues, but I think that from the perspective of our recovery, a more gradual approach would be constructive,” he told a House Financial Services Committee hearing.

Among many warnings from the Obama administration of possible damage to public services, the Air Force said its Thunderbirds exhibition flying team is expected to be grounded if sequestration happens.

The Pentagon will put most of its 800,000 civilian employees on unpaid leave for 22 days, slash ship and aircraft maintenance and curtail training.

But the full weight of sequestration will take place over seven months, allowing Obama and the Republicans time to work out a deal after the cuts begin this week.

White House spokesman Carney said sequestration would officially start just before midnight on Friday night if no deal were reached.

Government agencies began to tell employees how sequestration will force them to take furloughs. The Environmental Protection Agency acting head, Bob Perciasepe, told employees in an email that the agency did not know how much of its budget will be cut but it was working on an estimate of 5 percent.

“What might that mean for our employees? If the sequester order requires a 5.0% cut, the impact could be up to 13 furlough days,” he said. That would likely mean four furlough days by June 1, he said.

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Berkshire Tax Return Could be One for the Record Books

Monday, February 27th, 2012

From – AccountingToday.com

Berkshire Hathaway chairman Warren Buffett hinted in his annual letter to shareholders that the holding company’s nearly 18,000-page tax return may merit the attention of the Guinness Book of World Records.

Referring to the people who work with the operating managers, he noted, “Equally important, however, are the 23 men and women who work with me at our corporate office (all on one floor, which is the way we intend to keep it!). This group efficiently deals with a multitude of SEC and other regulatory requirements and files a 17,839-page Federal income tax return—hello, Guinness!—as well as state and foreign returns.”

Even at that length, though, Berkshire’s tax return would be dwarfed by General Electric’s, which reportedly runs about 57,000 pages, so it probably won’t end up in the record books, for this year at least.

Buffett’s tax policies have generated considerable attention in the past year after he wrote a New York Times editorial calling for changes in the Tax Code to tax the “super-rich” at a higher rate to ensure they don’t pay a lower tax rate than their secretaries (see Buffett Says Tax Code is ‘Coddling the Super-Rich’). The editorial led to the “so-called” Buffett Rule, which President Obama cited in his State of the Union address and included in his 2013 budget plan. However, Buffett has also been criticized for the disputes that his company has gotten into with the Internal Revenue Service over the back taxes that the IRS says it owes.

“Investing is often described as the process of laying out money now in the expectation of receiving more money in the future,” Buffett wrote in his shareholder letter Saturday. “At Berkshire we take a more demanding approach, defining investing as the transfer to others of purchasing power now with the reasoned expectation of receiving more purchasing power—after taxes have been paid on nominal gains—in the future. More succinctly, investing is forgoing consumption now in order to have the ability to consume more at a later date.” For more information please see Berkshire Tax Return Could be One for the Record Books on AccountingToday.com.

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Jobless rate at 3-year low as payrolls surge

Friday, February 3rd, 2012

From – Reuters

The United States created jobs at the fastest pace in nine months in January and the unemployment rate unexpectedly dropped to a near three-year low, giving a boost to President Barack Obama.

Nonfarm payrolls jumped 243,000, the Labor Department said on Friday, as factory jobs grew by the most in a year. The jobless rate fell to 8.3 percent – the lowest since February 2009 – from 8.5 percent in December.

The gain in employment was the largest since April and it far outstripped the 150,000 predicted in a Reuters poll of economists. It hinted at underlying economic strength and lessened chances of further stimulus from the Federal Reserve.

“More pistons in the economic engine have begun to fire, pointing to accelerating economic growth. One of the happiest persons reading this job report is President Obama,” said Sung Won Sohn, an economics professor at California State University Channel Islands.

The payroll gains were widespread – from retail to temporary help, and from construction to manufacturing – an indication the recovery was becoming more durable.

A survey of households showed the unemployment rate declined even as new job seekers flooded into the labor force. Economists had expected the jobless rate, which has now fallen 0.8 percentage point since August, to hold steady.

“I think this is a sign that maybe the economy is reaching that holy grail of a self-sustaining economic expansion,” Stuart Hoffman, chief economist at PNC Financial Services in Pittsburgh, told Reuters Insider.

The outlook was further brightened by a separate report showing service sector activity quickened last month to a near one-year high. A gauge of service sector employment touched a six-year high.

The fairly upbeat data buoyed stocks on Wall Street, with the tech-heavy Nasdaq Composite index hitting an 11-year high. The Dow Jones industrial average rose to a near four year high, while the Standard & Poor’s index extended its 2012 advance to about 7 percent.

U.S. Treasury debt prices tumbled as investors dialed back expectations on Fed easing. The dollar was little changed against a basket of currencies after rising earlier in the session.

The employment report contrasted with a fairly glum assessment of the economy offered by the Fed last week.

Officials at the central bank have been debating whether to buy more bonds – a program dubbed QE3 – to drive interest rates lower. It also raised doubts about the Fed’s expectation that it could hold interest rates near zero at least through late 2014.

“At the very least this scales back QE3 (quantitative easing) odds. The surprisingly persistent decline in the unemployment rate also calls into question how firmly wedded the Fed is to the late-2014 rate guidance,” said Michael Feroli, an economist at JPMorgan in New York.

Interest rate futures indicated that at least some traders were beginning to lay bets the Fed could move interest rates up in early 2014.

Fed fund futures were pricing in a 38 percent chance of a January 2014 rate hike, up from 29 percent before the report, and the first better than even chance of a rate hike was in April 2014, according to CME Group, where the contracts are traded.

However, economists at most leading Wall Street firms still believe the Fed will undertake another bond-buying program, according to a Reuters poll.

DON’T MUCK IT UP

Obama welcomed the strong jobs report and urged Congress to extend a payroll tax cut and benefits for long-term unemployed, which expire at the end of this month.

“Now is not is not the time for self-inflicted wounds to our economy. I want to send a clear message for Congress. Do not slow down the recovery that we are on, don’t muck it up,” he said at a firehouse in Arlington, Virginia.

Republicans acknowledged the improvement in the labor market, but said the jobless rate was still too high.

“Our economy still isn’t creating jobs the way it should be and that’s why we need a new approach,” said House Speaker John Boehner.

While employment growth has quickened there are no jobs for three out of every four unemployed people and 23.8 million Americans are either out of work or underemployed. The level of employment is still 5.57 million from its pre-recession level.

But steady progress is being made. The economy added 60,000 more jobs in November and December than previously reported.

In addition, average hourly earnings rose four cents, which should help to support spending. The report suggested that expectations of a slowdown in U.S. economic growth in the first quarter were not yet impacting on companies’ hiring decisions.

Employment in the private sector surged 257,000 – the largest gain since April. Government payrolls fell 14,000, the least since September.

U.S. economic growth accelerated to a 2.8 percent annual rate in the final three months of 2011, but it was widely expected to slow as businesses ease back on efforts to rebuild inventories and exports slip amid a likely recession in Europe.

Some economists cautioned that January’s jobs figures could overstate the pulse of the recovery, citing still lackluster consumer confidence, income and spending growth.

While some said the jobless rate could drop below 8 percent by year end, others warned it would likely move up in the near-term as people who had given up the search for a job re-enter the workforce.

“For this to mark an upturn in the labor market, then businesses will have to continue to hire on this scale throughout the winter,” said Kathy Bostjancic, director of macroeconomic analysis at the Conference Board in New York.

CAUTIOUS OPTIMISM

The unemployment rate has now declined for five straight months, although part of the drop reflects discouraged Americans giving up the hunt for work.

A broad measure of unemployment, which includes people who want to work but have stopped looking and those working only part time but who want more work, slipped to a near three-year low of 15.1 percent in January from 15.2 percent in December.

Revisions to the payrolls figures showed 180,000 more jobs were created last year than previously believed.

Mild winter weather boosted employment last month in construction, which added 21,000 jobs after a 31,000 increase in December. Manufacturing payrolls surged 50,000, the largest gain in a year, after rising 32,000 the prior month.

Overall, the goods-producing sector added 81,000 jobs last month, the most since January 2006.

Transportation and warehousing employment increased 13,100 and courier jobs only fell 1,500. Last month, the Labor Department reported a large increase in courier jobs in December, but revisions showed they actually declined.

Retail employment rose 10,500 after gaining 6,200 in December. Temporary help services jumped 20,100 after rising 8,300, a potentially good sign for future permanent hiring. For more information please see Jobless rate at 3-year as payrolls surge on Reuters.

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FHFA report: Mortgage principal reductions would cost $100 billion

Tuesday, January 24th, 2012

From – The Hill


Reducing mortgage principal on government-owned mortgages would cost $100 billion, making it an unlikely option, a federal housing regulator said Monday.

In response to a request from lawmakers, Federal Housing Finance Agency (FHFA) acting director Edward DeMarco released an analysis by his agency saying that the costs would come on top of continued losses of mortgage giants Freddie Mac and Fannie Mae, according to three separate staff analyses prepared over the past year.

“Given that any money spent on this endeavor would ultimately come from taxpayers and given that our analysis does not indicate a preservation of assets for Fannie Mae and Freddie Mac substantial enough to offset costs, an expenditure of this nature at this time would, in my judgment, require congressional action,” DeMarco said in the letter sent to House Democrats.

Reps. Elijah Cummings, ranking member of the House Oversight and Government Reform Committee, and panel member John Tierney (Mass.) spearheaded a letter sent Wednesday to Chairman Darrell Issa (R-Calif.) asking him to issue a subpoena for the FHFA analysis on the viability of principal reductions.

The FHFA analysis showed that Fannie and Freddie, as of June 30, had nearly 3 million mortgages with outstanding balances estimated to be greater than the value of the home, and that principal forgiveness for all the loans would require funding of almost $100 billion.

“FHFA remains committed to assisting homeowners to stay in their homes and will continue to update and improve our analysis,” DeMarco wrote.

“FHFA would reconsider its conclusions if other funds become available and if the availability of other funds is at a level that would change the analysis to indicate potential savings to the taxpayers.”

Another factor to consider is that nearly 80 percent of those underwater borrowers were current on their mortgages as of that time and those with upward of market loan-to-value ratios above 115 percent, 74 percent are current.

As of June 2011, only 9.9 percent have negative equity in their homes while about 35.5 percent of private-label mortgages were underwater, according to the report.

Overall, forebearance offers greater cash flows to the investor than forgiveness, while achieving marginally lower losses for the taxpayer than forgiveness, “although both forgiveness and forbearance reduce the borrower’s payment to the same affordable level,” the report showed.

Fannie and Freddie recently announced they would offer up to 12 months of forbearance to unemployed homeowners.

On the eve of President Obama’s third State of the Union address, lawmakers expect the president to discuss the housing crisis and possibly suggest additional initiatives to help struggling homeowners, although they weren’t aware of specifics.

Rep. Dennis Cardoza (D-Calif.), a harsh critic of the Obama administration’s housing policy, called on the White House on Monday to include in this year’s agenda his mortgage refinancing proposal.

“Simply put, none of the current housing programs that President Obama has instituted have succeeded in stemming the tide of foreclosures still dragging down our country,” Cardoza said.

“People continue to suffer as their communities are devastated by the housing crisis, with no relief in sight,” he said.

“We need bold leadership from the president on this crisis.”

DeMarco said the agency would continue to focus on improving loss mitigation and foreclosure alternatives. Borrowers who remain current on their loan payments can look into the Home Affordable Refinance Program (HARP), which allows all underwater borrowers to refinance into lower interest rate mortgages.

Additionally, there would be associated costs to upgrade technology, provide guidance and training to servicers and change accounting and tracking systems in order to implement a principal forgiveness program, the analysis showed.

“Unless there is an expectation that principal forgiveness will reduce losses, we cannot just the expense of investing in major systems upgrades,” DeMarco said.

For more information please see FHFA report: Mortgage principal reductions would cost $100 billion at The Hill.

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Obama Proposes Extending Small Business Tax Cuts Permanently

Monday, February 7th, 2011

The Obama administration proposed permanently eliminating capital gains taxes on some types of small business investments held for over five years.

The White House announced the tax cut extension Monday as part of a group of proposals aimed at encouraging small business entrepreneurship. The capital gains exemption extends a provision of last year’s Small Business Jobs Act that is set to expire this December.

The Tax Relief, Unemployment Insurance Reauthorization and Job Creation Act of 2010 provides a 100-percent exclusion from tax for capital gains realized on the sale of certain small business stock held for more than five years. The amount of gain eligible for the exclusion is limited to the greater of $10 million or ten times the taxpayer’s basis in the stock. This provision applies to qualified small business stock issued after Dec. 31, 2010, and before Jan. 1, 2012. The administration’s fiscal year 2012 budget proposal would make this provision permanent, increasing private sector investment in small businesses.

“Entrepreneurs embody the promise of America: the belief that if you have a good idea and are willing to work hard and see it through, you can succeed in this country,” said Obama. “And in fulfilling this promise, entrepreneurs also play a critical role in expanding our economy and creating jobs. That’s why we’re launching Startup America, a national campaign to help win the future by knocking down barriers in the path of men and women in every corner of this country hoping to take a chance, follow a dream, and start a business.”

Other proposals from the administration as part of its budget plan include an expansion of the New Markets Tax Credit, which aims to encourage more small businesses and entrepreneurs in disadvantaged communities. The Treasury Department plans to simplify the rules for small businesses to access up to $5 billion in tax credits for private investment in lower-income communities.

The Treasury Department will host a March 2011 conference to explore access to capital for small businesses. A broad range of options to help small businesses access the capital they need to expand and grow will be discussed at the conference, according to the White House, and more details on the conference will be released in the coming weeks.

The administration also highlighted a new Startup America initiative led by America Online co-founder Steve Case. Intel and IBM also announced new investments in small businesses, while Facebook will be hosting Startup Days events at cities across the U.S.

The Network for Teaching Entrepreneurship, a nonprofit that provides a first-class entrepreneurship education for at-risk high school students from low-income communities, is launching new programs supporting young entrepreneurs and their teachers. Ernst & Young LLP will honor NFTE youth entrepreneurs at regional Ernst & Young Entrepreneur of the Year Award galas across the country to bring attention to the next generation of young entrepreneurs.

The Small Business Administration will also direct $2 billion in existing guarantee authority over the next five years to match private sector investment funding for startups and small firms in underserved communities, as well as seed and early-stage investing in firms with high growth potential, through its Small Business Investment Company program.

Together, the SBA and the Department of Energy will boost their mentorship for cleantech startups, while the Veterans Administration is launching new training programs for Veterans who want to start new businesses.

The Department of Commerce will expand the i6 Challenge to help foster the commercialization of clean technologies. The Commerce Department is also finalizing a plan to allow entrepreneurs to request faster review of their patents, an initiative that should lower patent pendency times overall and speed the deployment of new ideas to the marketplace.

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