Unemployment Hits 8.5%
Bureau of Labor Statistics Friday AM release: ” Nonfarm payroll employment continued to decline sharply in March (-663,000), and the unemployment rate rose from 8.1 to 8.5 percent … Since the recession began in December 2007, 5.1 million jobs have been lost, with almost two-thirds (3.3 million) of the decrease occurring in the last 5 months. In March, job losses were large and widespread across the major industry sectors.”
G-20 Acts To Aid Developing Nations
USA Today: “Leaders of the G-20 agreed Thursday to massively re-arm the International Monetary Fund for its fight against economic contagion, providing significant new financing and a broad mandate for action. President Obama and other world leaders meeting in London said they would triple the IMF’s war chest to $750 billion. And they will back the IMF, effectively creating an additional $250 billion by issuing ‘special drawing rights,’ the agency’s own quasi-currency that borrowing nations can draw upon if needed … The new initiative, along with an additional $100 billion for other lending, is expected to ease concerns about a looming financing shortage in developing countries, as global banks and other investors retrench. The World Bank says the shortfall this year will be $270 billion to $700 billion.”
Time: “The other key set of decisions concerns financial regulation and corporate behavior in a wider sense, an area that had been pushed by France and Germany but long resisted by some others. Under the deal, hedge funds and other financial-market players will be subject to far greater — and properly coordinated — international scrutiny, as will big banks with activities in several countries. ‘We’ll begin to crack down on cowboys in global markets,’ said Australian Prime Minister Kevin Rudd. The tax-haven issue that almost sank the summit means that those not complying with international standards on exchanging information will be publicly named and shamed.”
FT: “…there is nothing in the G20 communiqué that Mr Obama did not want and relatively little that he did not request. Most of the strong new regulatory measures were spelt out on Thursday were included in Mr Obama’s campaign rhetoric – not least the need to crack down on offshore tax havens …. Most of the remaining regulatory details were enunciated last week by Tim Geithner, US Treasury secretary … Mr Obama did not get as strong a commitment as he wanted from other countries to participate in a globally co-ordinated new round of fiscal stimulus. On that score, France and Germany successfully resisted pressure from the US, the UK and others to commit to concrete numbers. But on issues of substance, such as the principles underlying new regulations, and the retooling and expansion of the International Monetary Fund, Thursday’s text contained most of what Mr Obama had said he wanted.”
The Guardian’s Richard Murphy sees unresolved issues with tax havens: “The black list is likely to be based on a jurisdiction signing sufficient numbers of what are called Tax Information Exchange Agreements (TIEA). The problem with these accords is that it is incredibly difficult to make an information request under them, and the tax haven can quite easily refuse the request … TIEAs only tackle tax evasion and we need to address tax avoidance, too … [April 2] is not the day when the end of tax havens and banking secrecy was announced. It was the day the process really started, and that process will need a lot of work…”
Budget Resolutions Pass House and Senate
NYT: “Democrats said the two budgets, which will have to be reconciled after a two-week Congressional recess, cleared the way for health care, energy and education overhauls pushed by the new president.”
Politico’s Glenn Thrush on party unity in the House: “About twice as many Republicans (38 or 20 percent of their conference) voted against the GOP alternative budget — than Democrats (20 or 8 percent) who nixed their party’s spending plan. NYT adds: “It was the first time in a dozen years that a budget had received more than 230 votes … most moderate and conservative Democrats went along with the president’s push for more spending.”
The measures now move to a conference committee where negotiators must resolve differences between the two chambers, a prelude to the more difficult choices that will be required to implement Obama’s initiatives. While Democrats back the president’s vision for transforming huge sectors of the economy, they remain fiercely divided over the details.
There is no agreement, for example, on how to pay for an overhaul of the health-care system expected to add more than $1 trillion to the budget over the next decade, nor is there consensus on how to spend the hundreds of billions of dollars the government stands to collect by setting limits on greenhouse gas emissions and forcing industry to buy permits to pollute. Those issues will be decided in committees where lawmakers have begun the torturous work on the specifics of Obama’s broad plans.
Challenging President Obama’s proposed budget, they warn about saddling the next generation with too much debt. Senator Judd Gregg, Republican of New Hampshire, argues that the president’s plan will “devastate future economic opportunities for our children and grandchildren.” Senator John McCain denounces “generational theft.”
This language implies that the current generation borrows and future generations pay. But borrowing creates assets as well as liabilities — and future generations will inherit both. It’s the relationship between assets and liabilities that matters most…
…Think of the United States economy as a family farm in need of modernization. Energy prices are going up, but all the tractors are gas guzzlers. Some of our fields have accumulated toxic levels of pesticide, and we need to develop new and better technologies of sustainable production. Our grandchildren want to run the farm, but will need good health and a college education to do it well.
Spending money on increased energy efficiency, research and development, health, and education could increase the value of their assets, helping them repay debt.
Estate Tax Battle
AP on Senate vote to cut estate taxes for mega-wealthy: By a 51-48 vote, the Senate embraced a nonbinding but symbolically important amendment by Arkansas Democrat Blanche Lincoln and Arizona Republican Jon Kyl to exempt estates up to $10 million from the estate tax. Estates larger than that would be taxed at a 35 percent rate. Obama is proposing exempting estates up to $7 million and taxing larger ones at a 45 percent rate instead of the $2 million exemption and 55 percent rate slated to take effect in 2011.”
CQ: “10 Democrats backed the amendment, including the six senators from Montana, Arkansas and Washington … [BUT] It’s unclear how Democratic leaders can get the 60 votes that would likely be necessary to pass legislation…”
Matthew Yglesias on Lincoln’s hypocrisy: “John Kyl (R-Arkansas), who has a lot of odd policy views, and Blanche Lincoln (D-AR), who seems to really love the Walton family, have apparently introduced a bill to offer $249.5 billion worth of tax cuts to the inheritors of estates worth over $7 million. This is just abysmal public policy … she’s a charter member of Evan Bayh’s ‘practical caucus’ which fake-believes that fiscal discipline is so important that it’s necessary to curtail progressive priorities. Apparently, deficit reduction is more important than affordable health insurance but less important than giveaways to multi-millionaires.”
Wasteful Military Spending Eyed
NYT: “The Senate Armed Services Committee unanimously approved a bill to revamp the Pentagon’s contracting process, signaling strong bipartisan support on Thursday for President Obama’s plans to rein in the runaway costs of many weapons systems.”
Carbon Cap Still Possible Say Right-leaning Senate Dems
Don’t bury cap-and-trade legislation just yet. That was the message from several moderate Senate Democrats yesterday who a day earlier had joined with Republicans in a 67-31 Senate vote against fast-tracking a climate change bill so that it did not have to face a filibuster … [Those] Democrats said they too could support cap-and-trade legislation — just so long as they get a chance to influence the details …
…Environmentalists downplayed the significance of the debate over climate change and reconciliation, saying it would have little effect when the issue returns to the spotlight later this year … Attention for now will focus on the House, with a draft cap-and-trade and energy bill headed for markup during the week of April 27 in an Energy and Commerce subcommittee.
He told the BBC he was very worried the Earth might already be committed to dangerous climate change. But he said the US should not make promises for 2020 that it could not keep:
“It is not the point in time in 2020 that matters – it is a long-term trajectory against which the science measures cumulative emissions. The president has also announced his intent to pursue an 80% reduction by 2050. It is clear that the less we do in the near-term, the more we have to do in the long-term. But if we set a target that is un-meetable technically, or we can’t pass it politically, then we’re in the same position we are in now… where the world looks to us and we are out of the regime. We want to be in (the regime), we want to be pragmatic, we want to look at the science. There is a small window of where they overlap. We hope to find it.”
LA Times on big push for wind, whining from Big Oil: “Wind turbines off U.S. coastlines could potentially supply more than enough electricity to meet the nation’s current demand, the Interior Department reported Thursday … Critics have accused President Obama and Salazar of dragging their feet on new oil and gas drilling, and Thursday’s report does little to rebut those complaints … Salazar said he expected a push to expedite offshore wind development to be one of the most significant aspects at [upcoming series of offshore energy hearings.]”
SC Gov Caves on Stim
McClatchy: “Gov. Mark Sanford will comply with a midnight Friday stimulus deadline and become the last governor in the nation to seek millions of dollars in federal economic-recovery funds for his state, aides said late Thursday. Sanford will continue contesting $700 million in education and law enforcement money for South Carolina, but his 11th-hour move to meet the deadline buys time for schools fearing mass teacher layoffs and draconian cuts.”
Politico’s Glenn Thrush: “That last line implies that Sanford will continue his fight — although his submission of the letter to the feds requesting the money clears the crucial technical hurdle to get the cash flowing.”
Health Care Update
At confirmation hearing, Sebelius schools Senate conservatives on health care. W. Post: “[Sen. Chuck] Grassley and several colleagues voiced discomfort with suggestions that legislation include an optional government-sponsored health insurance program. Conservatives worry that a public plan would set unrealistically low reimbursement rates that could undermine the private insurance market. Sebelius, however, noted that at least 30 states include a government-sponsored health insurance option for state employees, offered ‘side by side’ with private plans.”
The Treatment’s Anthony Wright on “Why Sebelius Makes Sense”: “Sebelius, who served as Kansas’ insurance commissioner before becoming its governor, is extremely familiar with these issues–more so than many in D.C. That should equip her well to run HHS–and, no less important, to help steer a health reform effort that’s bound to change the roles both states and the federal government play in health care.”
Health Care For America Now’s Jason Rosenbaum on Senate organizing for a public plan option: “Jane Hamsher at Firedoglake reports that a group of progressive Senators is organizing to ensure America has that choice … This is a huge development, and exactly what we need to see if we are to get real health care reform…”
The Hill: “The chairmen of two key committees are at odds over the pace with which Congress should overhaul the nation’s financial regulatory system.
[Rep. Barney] Frank is expected to take up legislation later this spring to revise financial regulations, including the creation of a systemic risk regulator that would oversee the entire financial-services industry. Frank has talked about housing the regulator in the Federal Reserve. Later this year, Frank plans to turn to consumer protection regulations…
…New Democrats, the most business-minded of the Democratic caucuses, are on board with Frank’s call for a systemic risk regulator. But they also stress the need for regulators to work closely with business.
Some New Democrats are pushing for one large “comprehensive” package of regulatory changes, instead of piecemeal changes done one by one in several bills, according to a Democratic aide. At Thursday’s Oversight and Government Reform hearing, members asked former AIG chief Maurice “Hank” Greenberg his suggestions on how regulations should be crafted to prevent another AIG meltdown.
Bloomberg reports Fed chief is “delivering what he promised five months ago, record- low mortgage rates and a refinancing boom that’s putting cash in consumers’ pockets” with the $1.25T purchase of mortgage securities, BUT Bloomberg also reports “The Federal Reserve’s $1 trillion effort to restart the market for securities backed by loans is encountering resistance from investors, undermining Chairman Ben S. Bernanke’s attempt to further drive down borrowing costs … Investors are concerned that Congress … hasn’t described how the most sweeping regulatory overhaul since the Great Depression will change the ways financial companies turn a profit…”
Five small banks return $353M in TARP funds reports AP.
The Agonist’s Numeriam: “FASB Caves in on Mark to Market Accounting”
NYT: “General Motors stated in a regulatory filing to the Treasury Department on Thursday that it is prepared to file for bankruptcy protection if it cannot restructure out of court … The company stressed the need to reach agreements with the union and its bondholders.”
Bloomberg on prospects for electric Chevy Volt: “The Obama administration, pressing for more fuel-efficient vehicles, won’t block General Motors Corp.’s Chevrolet Volt electric car even after the president’s task force called it too expensive, a person familiar with the matter said … The administration’s concerns about the Volt were offset by its belief that GM needs cleaner, fuel-efficient vehicles to succeed in the long term … GM’s problems may mean the company won’t meet its timetables for producing and selling the Volt though…”
CQ: “Despite significant setbacks, the chief Senate sponsors of [the Employee Free Choice Act] intend to bring up the legislation for hearings and markups before the Senate Health, Education, Labor and Pensions Committee in the work period after Congress’ two-week spring recess … That makes the recess a critical time for unions and their supporters to figure out whose vote might be up for grabs … “I’m always willing to talk,” said Sen. Olympia J. Snowe, R-Maine…”
Terrance Heath contributed to the making of this Breakfast.