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Warren Buffett brings tax fight to supercommittee

In Economics, News on October 13, 2011 at 9:50 am

Investor Warren Buffett


Warren Buffett is bringing his fight to raise taxes on the super-wealthy to Congress’ deficit-reduction supercommittee.

In an exchange of letters between the billionaire investor and a Republican congressman that Buffett sent the committee this week, Buffett is offering to release his federal tax returns — with a condition.

“If you could get other ultra rich Americans to publish their returns along with mine, that would be very useful to the tax dialogue and intelligent reform,” Buffett wrote.

The letters, obtained Wednesday by The Associated Press, were among several sent in recent days to the special bipartisan panel created this summer to find ways to reduce the mushrooming national debt by at least $1.2 trillion over the coming decade.

The same law that produced the supercommittee gave Congress’ regular committees until Friday to submit their own suggestions for erasing red ink. Some of those that have trickled in so far indicate that rather than offering dramatic new ideas for savings, many lawmakers are championing longtime favorite proposals and urging the panel to avoid cutting certain programs.

In his letter to the panel, Sen. Tom Harkin, D-Iowa, who heads the Senate Health and Education Committee, asked the panel to take “bold and immediate action to create jobs” while embracing deficit reduction that would take effect after the unemployment rate drops. The leaders of the Senate Environment and Public Works Committee, Chairman Barbara Boxer, D-Calif., and Sen. James Inhofe, R-Okla., combined on a letter asking the supercommittee to “not neglect America’s transportation needs.”

In Buffett’s letter sent Tuesday to Rep. Tim Huelskamp, R-Kan., Buffett did reveal new information about his own earnings last year. He wrote that his adjusted gross income, which can exclude some income and expenses, was $62,855,038. His taxable income was $39,814,784.

In a New York Times opinion piece this summer in which he said tax rates on the wealthiest Americans were too low, Buffett disclosed that he paid $6,938,744 in federal taxes last year, or 17.4 percent of his taxable income. Taxable income is lower than adjusted gross income because it subtracts exemptions and itemized deductions such as charitable contributions and state and local taxes.

Buffett’s views have become central to the struggle between President Barack Obama and Congress over how to control the federal debt. Obama has used the “Buffett Rule” to describe his fight to clamp taxes on the wealthy that are at least as high as those paid by lower earners, a drive that Republicans oppose.

Last week, Huelskamp, a conservative freshman, wrote Buffett offering to release his own tax returns if Buffett would do the same.

“If your name is lent to a national policy and your story the justification for a major overhaul to the tax code, then the American people have a right to see the evidence guiding that policy,” Huelskamp wrote.

Buffett responded that even an anonymous release of the returns of the 400 richest Americans would show how little taxes some are paying and “would be a big step in informing legislators and the public of what needs to be done.”

Buffett forwarded both letters to members of the supercommittee this week with a brief note stating in part, “You may find some of the figures helpful in your deliberations.”

As for the letters congressional committees are sending the supercommittee, Harkin’s suggests saving money by giving brand-name drugmakers fewer years of patent protection against generic competitors and encouraging students to take education loans directly from their colleges — both policies that have been favored by the Obama administration. Harkin wrote that the supercommittee should avoid cuts to programs including job training, Obama’s health care overhaul and aid to the disabled.

Sen. Kay Bailey Hutchison, R-Texas, encouraged the committee to pare savings from Social Security by gradually raising the future retirement age from 67 to 69 and, in some years, trimming annual inflation adjustments in benefits by 1 percentage point. Hutchison has been offering that proposal for weeks but it has been opposed by the seniors group AARP.

Senate Armed Services Committee Chairman Carl Levin, D-Mich., said he and the panel’s top Republican, Sen. John McCain of Arizona, hope to write a bipartisan letter that other Armed Services members could support.

But the top Republican on the Senate Finance Committee, Sen. Orrin Hatch, R-Utah, said he is trying to unite minority Republicans on that panel behind their own letter.

Senate Finance Committee Chairman Max Baucus, D-Mont., who is also on the supercommittee, is considered unlikely to send a recommendation letter, as is another supercommittee member, House Ways and Means Committee Chairman Dave Camp, R-Mich.

The supercommittee has until Nov. 23 to send a package of savings to Congress. Lawmakers will have until Dec. 23 to vote on the measure, with failure meaning $1.2 trillion in cuts in defense and many domestic programs will begin taking effect in 2013.

Source: Associated Press.





FACT CHECK: Obama’s jobs plan paid for? Seems not

In Barak Obama, Economics, News, Politics on September 9, 2011 at 1:30 pm

President Barack Obama delivers a speech to a joint session of Congress at the Capitol in Washington, Thursday, Sept. 8, 2011. Watching are Vice President Joe Biden and House Speaker John Boehner. (AP Photo/Cliff Owen)


President Barack Obama’s promise Thursday that everything in his jobs plan will be paid for rests on highly iffy propositions.

It will only be paid for if a committee he can’t control does his bidding, if Congress puts that into law and if leaders in the future — the ones who will feel the fiscal pinch of his proposals — don’t roll it back.

Underscoring the gravity of the nation’s high employment rate, Obama chose a joint session of Congress, normally reserved for a State of the Union speech, to lay out his proposals. But if the moment was extraordinary, the plan he presented was conventional Washington rhetoric in one respect: It employs sleight-of-hand accounting.

A look at some of Obama’s claims and how they compare with the facts:

OBAMA: “Everything in this bill will be paid for. Everything.”

THE FACTS: Obama did not spell out exactly how he would pay for the measures contained in his nearly $450 billion American Jobs Act but said he would send his proposed specifics in a week to the new congressional supercommittee charged with finding budget savings. White House aides suggested that new deficit spending in the near term to try to promote job creation would be paid for in the future — the “out years,” in legislative jargon — but they did not specify what would be cut or what revenues they would use.

Essentially, the jobs plan is an IOU from a president and lawmakers who may not even be in office down the road when the bills come due. Today’s Congress cannot bind a later one for future spending. A future Congress could simply reverse it.

Currently, roughly all federal taxes and other revenues are consumed in spending on various federal benefit programs, including Social Security, Medicare, Medicaid, veterans’ benefits, food stamps, farm subsidies and other social-assistance programs and payments on the national debt. Pretty much everything else is done on credit with borrowed money.

So there is no guarantee that programs that clearly will increase annual deficits in the near term will be paid for in the long term.


OBAMA: “Everything in here is the kind of proposal that’s been supported by both Democrats and Republicans, including many who sit here tonight.”

THE FACTS: Obama’s proposed cut in the Social Security payroll tax does seem likely to garner significant GOP support. But Obama proposes paying for the plan in part with tax increases that have already generated stiff Republican opposition.

For instance, Obama makes a pitch anew to end Bush-era tax cuts for the wealthiest Americans, which he has defined as couples earning over $250,000 a year or individuals over $200,000 a year. Republicans have adamantly blocked what they view as new taxes. As recently as last month, House Republicans refused to go along with any deal to raise the government’s borrowing authority that included new revenues, or taxes.


OBAMA: “It will not add to the deficit.”

THE FACTS: It’s hard to see how the program would not raise the deficit over the next year or two because most of the envisioned spending cuts and tax increases are designed to come later rather than now, when they could jeopardize the fragile recovery. Deficits are calculated for individual years. The accumulation of years of deficit spending has produced a national debt headed toward $15 trillion. Perhaps Obama meant to say that, in the long run, his hoped-for programs would not further increase the national debt, not annual deficits.


OBAMA: “The American Jobs Act answers the urgent need to create jobs right away.”

THE FACTS: Not all of the president’s major proposals are likely to yield quick job growth if adopted. One is to set up a national infrastructure bank to raise private capital for roads, rail, bridges, airports and waterways. Even supporters of such a bank doubt it could have much impact on jobs in the next two years because it takes time to set up. The idea is likely to run into opposition from some Republicans who say such a bank would give the federal government too much power. They’d rather divide money among existing state infrastructure banks.

Source: Associated Press



Romney aims at Republican center with economy plan

In Economics, News, Republican on September 7, 2011 at 2:08 pm

U.S. Republican presidential candidate and former Massachusetts Governor Romney speaks during the American Principles Project Palmetto Freedom Forum in Columbia

By Patricia Zengerle, Reuters

Presidential hopeful Mitt Romney aimed squarely at the Republican center as he launched his economic program on Tuesday, proposing spending cuts and lower taxes and picking well-known party figures as advisers.

The former Massachusetts governor unveiled a 59-point economic plan in a speech in Nevada, promising to cut corporate taxes, reduce federal regulations and get tough with China two days before Democratic President Barack Obama makes a major speech on the U.S. economy and jobs.

Romney also named two top aides of former President George W. Bush to his four-member economic team: Glenn Hubbard, chairman of Bush’s Council of Economic Advisers from 2001 to 2003, and his successor, Gregory Mankiw.

Romney’s plan reflects Republican Party orthodoxy, with an emphasis on cutting taxes and eliminating regulations. He would push for free trade agreements and promote domestic energy production, weaken labor unions, boost worker training, and seek a constitutional amendment to balance the budget.

“High taxes and regulations — that’s basically a mantra for the Republican Party,” said David Madland, director of the American Worker Project at the Center for American Progress Action Fund. “This is the heart of the Republican Party.”

Romney made bold promises for his 160-page economic program. He said it would grow the U.S. economy at 4 percent per year, each of his first four years in office, and add 11.5 million new jobs.

Despite addressing a weekend rally held by the Tea Party, Romney is distancing himself from candidates who lean farther toward the right, including his main rivals, Texas Governor Rick Perry and Minnesota congresswoman Michele Bachmann.

“He’s trying to go for the conservative center,” said Julian Zelizer, a politics expert at Princeton University.

Republican primary voters will focus on two things — one is whether they like a candidate’s views, but the second is whether he or she can be elected, Zelizer noted.

Romney stands a better chance than Perry or Bachmann of beating Obama, polls show.

“They are not candidates who are going to be the most solid in terms of ‘winnability,'” Zelizer said. “That second question (can he beat Obama?) is going to loom large because the anger toward Obama is so intense.”


Romney said he would submit five bills on the economy on his first day in office, including an act implementing long-delayed free trade agreements with Colombia, Panama and South Korea.

He also promised to issue five executive orders on his first day, including ordering countervailing duties on Chinese imports if China does not move quickly to float its currency.

“I’ll clamp down on the cheaters, and China is the worst example of that. They have manipulated their currency to make their products artificially inexpensive,” he said. “… And I will label China as it is, a currency manipulator and I will go after them for stealing our intellectual property.”

Romney was the early leader in the race for the Republican nomination to challenge Obama’s bid for re-election next year, but has fallen behind Perry in recent polls. Seeking to regain that lost ground, Romney has stressed his record in private business as co-founder of private equity firm Bain Capital.

Obama’s job approval ratings have plunged as the country has grappled with a sputtering economy and a 9.1-percent unemployment rate.

Obama’s campaign said Romney’s plan would enrich corporations at the expense of the middle class.

“Governor Romney repackaged the same old policies that helped create the economic crisis: boosting oil company profits and allowing Wall Street to write its own rules, more tax breaks for large corporations and more tax cuts for the wealthiest while working Americans are forced to carry a greater burden,” said Obama campaign spokesman Ben LaBolt.

Economists said it was difficult to assess whether Romney’s plan would do what he says, when U.S. consumer confidence is weak, depressing demand.

“Having 59 ideas is way too many,” said Stephen Fuller of George Mason University. “What we need is two or three really good ideas that resonate, not politically, but look realistic to consumers, so they are going to feel confident.”

Polls released on Tuesday showed Americans are unhappy with Obama’s handling of the economy and jobs. An NBC News/Wall Street Journal poll showed Obama’s job approval rating at a low of 44 percent. An ABC News/Washington Post poll showed six in 10 Americans rated Obama’s performance on the economy and jobs negatively.

Source:  Reuters



Infrastructure bank could be part of jobs package

In Barak Obama, Economics, News on September 1, 2011 at 1:18 pm

President Barak Obama


A national infrastructure bank that would entice private investors into road and rail projects could be a major part of the jobs package that President Barack Obama hopes will finally bring relief to the unemployed.

The White House hasn’t divulged the contents of the package that Obama is to unveil in an address to a joint session of Congress next week. But the president has pushed the idea of an infrastructure bank in recent speeches and has praised Senate and House bills that create such a government-sponsored lending institution.

Whether the bank, which would need time to organize, could have any real impact on the jobs situation in the coming year — and particularly before the November 2012 elections — is in dispute.

Obama seems to think it would.

“We’ve got the potential to create an infrastructure bank that could put construction workers to work right now, rebuilding our roads and our bridges and our vital infrastructure all across the country,” he said at a news conference in July.

But Janet Kavinoky, director of infrastructure issues at the U.S. Chamber of Commerce, cautioned that “even in the next two years I don’t believe the bank is going to be that kind of job creator.”

The best way to spur job growth in the short term is for Congress to pass long-stalled bills to fund aviation and highway programs, she said.

The Chamber of Commerce strongly supports the infrastructure bank. Kavinoky said the United States is one of the few large countries that lack a central source of low-cost financing for construction projects. But she said it’s going to take time to get it running and come up with a pipeline of projects where funds can be invested.

Sen. John Kerry, D-Mass., who’s sponsoring an infrastructure bank bill, argued that “we have projects all across America that are ready to go tomorrow.” He said the bank “could have money flowing in the next year easily.”

Michael Likosky, senior fellow at the NYU Institute for Public Knowledge and author of “Obama’s Bank: Financing a Durable New Deal,” says he is working with transportation agencies in California and New York that “are waiting for the federal government to say they are going to support these projects.”

A commitment to a national infrastructure bank could also provide a positive spark to financial markets and encourage investment, he said.

The bank would supplement federal spending on infrastructure by promoting private-sector investment in projects of national or regional significance. The private sector currently provides only about 6 percent of infrastructure spending.

Supporters, which range from the Chamber of Commerce to the AFL-CIO, say pension funds, private equity funds and sovereign wealth funds have hundreds of billions of dollars ready to be invested in low-risk infrastructure projects.

It’s better than having pension fund money go to Treasury bonds, Likosky said. “It’s really about changing our approach; we’re in tough economic times and we will be for a while. We have to make sure the money we have goes further.”

The Kerry bill would require $10 billion in start-up money from the government to get the first loans going and cover administrative costs. The bank would be government owned, run by a board of directors, independent of any federal agency and self-sustaining after the initial expense. Public-private partnerships, corporations and state and local governments would be eligible for the loans.

The bank’s directors would pick which projects to finance based on an analysis of costs, benefits and revenue streams, such as from tolls or fees, for repaying the loan. Once the terms of the loan, including interest rates and fees to cover risk, are set, the Treasury Department would disburse the loan.

Urban projects would have to be at least $100 million in size, rural ones $25 million. The infrastructure bank’s loan could cover no more than 50 percent of a project’s costs.

“There is going to be a revenue stream for payback and therefore the project is going to stand on its own because it will be a good enough project to attract private-sector funding,” said Sen. Kay Bailey Hutchison of Texas, one of several Republican co-sponsors of the Kerry plan.

Supporters estimate the bank could set up as much as $160 billion in government loans over a decade and anchor as much as $650 billion in projects.

In the House, Rep. Rosa DeLauro, D-Conn., has a similar bill that relies on $25 billion in start-up money and makes use of bonds as well as loans to stimulate construction projects. Both Kerry and DeLauro would cover transportation, water and energy projects.

DeLauro would also include communications projects. She says her bill is modeled after the European Investment Bank, which has been financing infrastructure projects for 50 years and last year invested more than $100 billion.

Obama, in his 2012 budget proposal, envisioned spending $30 billion to start an infrastructure bank within the Transportation Department that would provide grants as well as loans to transportation projects.

That idea drew opposition from the House Transportation Committee chairman, Rep. John Mica, R-Fla. He said in a recent article in the congressional newspaper Roll Call that it would be better to increase help for existing state infrastructure banks “rather than increasing the size of the bloated federal bureaucracy, as some advocate, by creating a national infrastructure bank.”

Kerry pointed to a 2009 American Society of Civil Engineers report that said $2.2 trillion needs to be spent over five years to bring the nation’s roads, bridges and water systems up to an adequate level. He said Congress needs to both pass a new highway bill and agree on alternatives like the bank.

“If we can leverage $650 billion and get money going in the transportation bill, we can begin to nibble away at the problem,” Kerry said.

Source:  Associated Press.



AP-GfK poll: Views on economy, Obama role sour

In Barak Obama, Economics, News on August 25, 2011 at 2:28 pm

President Barak Obama


WASHINGTON — Americans‘ views on the economy have dimmed this summer. But so far, the growing pessimism doesn’t seem to be taking a toll on President Barack Obama’s re-election prospects.

More people now believe the country is headed in the wrong direction, a new Associated PressGfK poll shows, and confidence in Obama’s handling of the economy has slipped from just a few months ago, notably among fellow Democrats.

The survey found that 86 percent of adults see the economy as “poor,” up from 80 percent in June. About half — 49 percent — said it worsened just in the past month. Only 27 percent responded that way in the June survey.

That can’t be good news for a president revving up his re-election campaign. Yet there are several hopeful signs for Obama.

Despite the perception of a weakening recovery, there has been no significant change in the number of people who say he deserves re-election: 47 percent as opposed to 48 percent two months ago. That’s a statistical dead heat with those who favor a change in the White House.

And more Americans still blame former President George W. Bush rather than Obama for the economic distress. Some 31 percent put the bulk of the blame on Obama, while 51 percent point to his Republican predecessor.

“I think Bush had a hand in it, too. Obama’s not totally responsible,” said Mary Parish, 68, of Troy, Tenn. An independent who voted for Republican John McCain in 2008, she said she doesn’t believe Obama has what it takes to heal the economy. “He’s a smooth-talking man. But he does not know what he’s doing.”

Obama also fares better than Congress in the blame department. Some 44 percent put “a lot” or “most” of the blame on Republicans while 36 percent point to congressional Democrats.

The gloomy economic outlook reflected in the poll, which was taken Aug. 18-22, follows a round of bleak government economic reports — on unemployment, the housing market and economic growth that fell below 1 percent for the first six months of the year. It was taken amid heightened worries of a new U.S. recession, fallout from a downgrade of the country’s credit rating and a spreading European debt crisis.

As the public’s outlook on the economy dips, so has approval for the president’s economic stewardship.

More than 6 in 10 — 63 percent — disapprove of Obama’s handling of the economy. Nearly half, or 48 percent, “strongly” disapproved. Approval of his economic performance now stands at just 36 percent, his worst approval rating on the issue in AP-GfK polling.

Among Democrats, 58 percent approve of the president’s handling of the economy, down from 65 percent in June. Among Republicans, approval dipped to 9 percent from 15 percent.

Just 51 percent consider Obama a strong leader, down from 60 percent in June and 65 percent following the capture and death of Osama bin Laden in May. In June, 85 percent of Democrats in the poll called him a strong leader. Now, the number is down to 76 percent.

Of course, there are limits to what a president can do.

“I think he can nudge it along, but really, it boils down to the private sector,” said Dan Elliott, 42, of Hillsboro, Ill., an independent who voted for Obama in 2008 and says he’ll probably vote for him again.

Judith Lee, 63, a retired teacher from Great Diamond Island, Maine, said she’s a Republican who voted for Obama in 2008 but has been disappointed by his leadership style.

“I don’t think he is a very forceful leader,” Lee said. “His style of leadership seems to be to look for consensus and ideas from other people, and it seems to have been ineffective. And Congress seems to be deadlocked on problems.”

Some 75 percent in the poll said the country is heading in the wrong direction, up from 63 percent in June. Among Democrats, 61 percent chose “wrong direction” — up from 46 percent in June.

And for the first time for Obama in the poll, a majority of all adults said they disapprove of his overall performance — 52 percent, up from 47 percent in June. Among Democrats, approval fell 8 points, to 74 percent from 82 percent in June. Among Republicans, it fell to 11 percent from 22 percent.

Politically, the poll underscores the difficult time ahead for Obama as he seeks re-election in a shaky economy.

Unemployment increased to 9.2 percent in July, up from 9.1 percent in June. And most economists don’t expect it to decline much below 8.5 percent by the November 2012 presidential election. No president has won re-election with a jobless rate that high since Franklin D. Roosevelt in 1936.

So why hasn’t the rise in pessimism taken more of a toll?

Despite the general rise in gloom, it seems unlikely that liberal Democrats will flock away from Obama even if they have rising doubts about his agenda or economic leadership, analysts suggest. And independents, who helped elect Obama in 2008 and are now being actively wooed by both parties, did not exhibit significant changes in their approval levels.

It was at 44 percent, statistically no different from the 43 percent approval rating among independents in June.

“A lot is out of his hands,” said Penny Johansen, 65, a retired legal secretary from Tempe, Ariz. “There is only so much one person can do, and one person cannot be blamed for the acts of others.” Politically unaligned, she voted for Obama in 2008 and says she’ll probably do so again.

On related economic issues, 59 percent said they disapproved of Obama’s handling of tax issues, up from 53 percent in June. And 64 percent said they disapproved of his handling of the annual budget deficit, compared with 63 percent in June.

Sixty percent described the financial situation in their own households as “good,” about even with the level in June. Asked if they expected their financial situation to change over the next 12 months, 31 percent said they expected it to get better, 12 percent expected it to get worse and a majority — 56 percent — said they expected it to “stay about the same.”

As to creating jobs, some 44 percent said they would trust Democrats to do a better job, while 42 percent said Republicans would.

The AP-GfK poll was conducted Aug. 18-22 by GfK Roper Public Affairs and Corporate Communications. It involved landline and cellphone interviews with 1,000 adults nationwide and has a margin of sampling error of plus or minus 4.1 percentage points.

Source: Associated Press

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