Presidential Address on Economy, 11:30 AM ET
Gallup and Politico show President Obama earns more trust from the public than any politician on the economy.
AP on presidential stimulus update: “President Obama said Monday the $787 billion economic stimulus plan is beginning to take hold and that work is coming in ‘ahead of schedule and under budget.’ … Transportation department officials say that because so many contractors want a share of stimulus money, competition is driving down costs by about 15% to 20%. For instance, officials said Colorado’s first five projects were 12% lower than anticipated and Oregon’s are 30% lower.”
LA Times credits the desperate economic times: “…the program’s early success may owe more to the depth of the economic crisis than to any newfound efficiency in Washington … construction companies had seen business plunge so far so fast that they rushed to submit unusually low bids for the federally funded projects — hoping to have at least some work in the summer construction season, and hoping to stay afloat.”
ABC’s Lisa Chinn pooh-poohs: “…the contractors are bidding cheap … but anybody who ever had work done knows the bid isn’t always what the cost turns out to be.”
Fed chief Bernanke also delivering speech today defending finance strategy. USA Today prints excerpts: “Preventing the failure of AIG was the best of the bad options available, but it nevertheless involved substantial costs, including financial risks to the taxpayer. The American people also quite correctly see as unfair that AIG was saved from bankruptcy because of the dangers to the system that its failure would have posed, even as many other companies, including non-financial and smaller financial firms, have not received the same treatment. Allowing AIG to at least partly avoid the discipline of the marketplace also sets a bad precedent. For these reasons, it is essential that we make changes to the financial rules.”
G-7 finance ministers to meet on global stim. CNN/Money.com: “Treasury Secretary Tim Geithner will host a meeting of international finance ministers next week, the Treasury Department said Monday … certain details of the [G-20] plan remain unclear and analysts said next week’s meetings will likely involve discussion of, among other things, how much money individual members will commit to the IMF.”
Unfair Tax Code Worsens Inequality
OurFuture.org’s Eric Lotke on the new Institute for America’s Future report on taxes and inequality: “Adjusted for inflation, weekly wages were lower in 2007 than they were in 1979 … Top-end taxes have declined over the past 30 years. Inequality has risen … Income inequality rose 144 percent — measured by the ratio of after-tax income of the top one percent to after-tax income of the middle sixty percent. Top end taxes dropped 15 percent — measured as the average effective tax rate at the top one percent.”
Citizens for Tax Justice also releases report: “Is ‘Tax Day’ Too Burdensome for the Rich? The U.S. Tax System Is Not as Progressive as You Think”
The Atlantic’s Conor Clarke challenges Ari Fliescher oped complaining the rich pay too much in taxes: “When I look at the CBO’s dataset on long-term tax trends, I see plenty of things that are important besides the share of federal tax liabilities. Most important is the top decile’s share of the national income. In 2001 the top decile earned 37.5% of the national pretax income. In 2006 the same decile earned 41.6% of the income. In 2001, households in the top decile earned an average pretax income of $294,700. In 2006 it was $366,400. Why should we be surprised that this group pays more in taxes? It earns more money … while the top decile is paying a larger share of federal taxes, it is being taxed at a lower rate.”
WH Backs Congressional Carbon Cap
Browner said the administration would like to have comprehensive legislation in hand before a planned U.N. climate conference in Copenhagen in December. “It is the strong preference of the administration that we secure legislation,” Browner said. “Copenhagen and the position we can take will be driven by what we are prepared to do domestically.”…
…[Rep. Ed] Markey said if Congress fails to act, the Environmental Protection Agency may have to set new regulations on greenhouse emissions – a process that he warned would carry “less flexibility” than congressional action. “Industries across the country will have to gauge how lucky they feel,” he said.
…there were new signs today that House Democratic leaders are listening closely to the concerns of their colleagues in manufacturing states, many of whom are warning that a cap-and-trade program to limit emissions will have a negatively impact on their state’s industries. Particularly in the Senate, the support of these moderate Democrats will be central to passing legislation.
“We have to set aside a certain amount of carbon credits to ensure that the steel and the paper and other trade-sensitive, energy-intensive industries are not exploited in the near term by the Chinese and others,” Rep. Ed Markey of Massachusetts, one of the leading House Democrats on climate change and the recent coauthor of a draft global warming bill, said at the conference today.
In the past, President Obama and some Democrats have called for auctioning all carbon credits. But in order to win votes in Congress, they now seem to be making concessions. “We can’t have all the credits auctioned off immediately,” Markey said.
MIT’s Technology Review offers overview: “Representatives from the Obama administration and one of the authors of the draft bill discussed it at a forum held at MIT on Monday. They said that two things have brought a sense of added urgency to the process. The first is that the Environmental Protection Agency (EPA) is moving toward regulating carbon dioxide emissions even if Congress does not act. The second is the United Nations Conference on Climate Change, which will be held in Copenhagen in December. At the event, countries will meet to negotiate a new global climate-change treaty. Congressional leaders hope to have the bill passed by the House of Representatives by August, and have the finished version ready for the president to sign before the conference.”
W. Post’s The Fix reports on new enviro-labor ads with the taglne “Carbon Caps = Hard Hats”: “The Environmental Defense Action Fund and the United Steelworkers are combining forces for a multi-million dollar ad campaign in eight states (Indiana, Michigan, Missouri, New Hampshire, Ohio, Pennsylvania, Virginia and West Virginia) urging members of Congress to support President Obama’s plan to cap carbon emissions — one of the most controversial elements of his broader budget plan. The ads, on which the to groups will spend $2 million over the next month, feature the mayor of Braddock, Pa. — a goateed and tattooed John Fetterman making the case that the bill will help create rather than eliminate jobs in the Rust Belt.”
EDF’s David Yarnold oped touts carbon cap benefits in Midwest and South: “A carbon cap will spur development of renewable energy sources like solar and wind power, as well as new technology to clean or conserve the energy we have now. Manufacturing states in the Midwest and South will see some of the biggest benefits of a carbon cap, because the new businesses will all need newly built parts. A single wind turbine requires 8,000 different parts, for example. Those parts – from bolts, copper wiring and ball bearings to steel towers and blades – can most efficiently be manufactured by American factories that will only need minor renovations to handle the job. LessCarbonMoreJobs.org is a new Web site that maps potential job growth from a carbon cap. It shows that more than 1,200 companies in 12 states are poised to grow.”
Politico reports that enviro groups are also joining the push for Employee Free Choice Act: “In district meetings with members over the recess, the Sierra Club, the country’s oldest environmental organization, urged its members to push for EFCA, which would make it easier for workers to join unions, and a cap-and-trade bill … the Sierra Club and National Resources Defense Council have lent their support for EFCA, arguing that the proposal will help ensure that any new green jobs created by a cap-and-trade system include fair wages and benefits.”
“Every job can be green,” says Grist’s Jon Rynn.
TIme reports on new Biosphere 2 study on the climate threat to forests: “It’s the first study to isolate the specific impact of temperature on tree mortality during drought — and it indicates that in a warmer world trees are likely to be significantly more vulnerable to the threat of drought than they are today.”
Hacker v. Newt on Health Care
[GINGRICH:] I think the country is going to get sick of the Treasury trying to run Wall Street and General Motors and Chrysler and whoever else happens to show up. The taste for big spending and the taste for government bureaucracy is going to decline pretty rapidly….
[HACKER:] …conservatives like Gingrich — who famously said [in 1995] that if there were private plans competing with Medicare, it would wither on the vine — have long been arguing that there should be private and public competition within the Medicare program. And they clearly think the private plans are going to be able to hold their own; otherwise, Medicare would have a very hard time withering … the public plan [would be] a check on private insurers, a benchmark with which they have to compete, the force of competition and accountability in a private insurance market that for too long has had neither.
Conservatives have predictably seized on the Lewin Group’s findings to argue that the proposal to have a public plan compete with private plans is a “Trojan horse” for a universal Medicare-for-all program of national health insurance. A case in point is a new editorial from the Wall Street Journal, titled “The End of Private Health Insurance.”
But the Lewin Group’s new report suggests nothing of the sort. While it does indicate that the savings from having a public plan compete with private plans could be huge (as has every previous analysis of public plan choice), it has virtually no bearing on the question of how large enrollment in the public plan would be under a reform proposal like mine, or like President Obama’s campaign proposal, or like Senator Baucus’s 2008 “White Paper”. That’s because the illustrative proposal that the Lewin Group analyzed is fundamentally and strangely different from these proposals–in ways that assure that enrollment in the public plan will be much, much larger.
Mayor Bloomberg and SEIU’s Dennis Rivera push for reform: “we heartily support President Obama’s plan to address healthcare reform immediately and to evaluate any reform proposal against eight commonsense, nonpartisan principles: protecting families’ financial health, making health care coverage affordable, aiming for universal coverage, providing portability of coverage, guaranteeing choice, investing in prevention and wellness, improving patient safety and quality of care, and maintaining long-term fiscal sustainability … this push for healthcare reform is too important to fail.”
Goldman Using Fuzzy Math To Protect Million-Dollar Salaries?
Goldman plans to leave TARP: “Goldman Sachs announced Monday that it made $1.81 billion in profit during the first quarter, far more than analysts had expected, and planned to raise $5 billion to repay taxpayer bailout funds. … While six smaller banks have already returned federal funds, Goldman’s move to exit from the Troubled Assets Relief Program would put pressure on other large banks to follow suit, threatening to diminish the government’s efforts to stabilize the financial system and support new lending to consumers and businesses.”
WSJ on Goldman’s motivation: “Goldman managers have a big incentive to escape the state’s clutches. Last year, 953 Goldman employees — nearly one in 30 — were paid in excess of $1 million apiece, according to people familiar with the matter. But tight federal restrictions connected to the financial-sector bailout have severely crimped the Wall Street firm’s ability to offer such lavish pay this year.”
NYT’s Floyd Norris questions Goldman’s accounting: “Goldman’s 2008 fiscal year ended Nov. 30. This year the company is switching to a calendar year. The leaves December as an orphan month, one that will be largely ignored. In Goldman’s earnings statement, and in most of the news reports, the quarter ended March 31 is compared to the quarter last year that ended in February. The orphan month featured — surprise — lots of write-offs. The pretax loss was $1.3 billion, and the after-tax loss was $780 million.” The Big Picture’s Barry Ritholz scoffs: “Leave it to the clever boys at Goldman Sachs to turn dross into gold: They have come up with a way to hide massive losses so clever, it requires special comment: The Orphan Month.”
Merrill Lynch bonuses under microscope: “The Securities and Exchange Commission is reviewing whether Bank of America broke the law by not telling shareholders about Merrill Lynch’s plan to pay out $3.6bn in bonuses before they voted for a government-backed merger of the two banks. Merrill paid the bonuses in December, days before it was acquired by BofA and a month before bonuses were normally dispensed. ”
Reuters on the tax haven crackdown: “The U.S. government plans to step up criminal prosecutions of tax cheats hiding money in offshore accounts and has seen a boost in individuals turning themselves in, the top U.S. tax official said on Monday. The Internal Revenue Service recently set guidelines to lure individuals to voluntarily come forward by easing penalties, part of a crackdown on overseas tax evaders. The program appears to be driving traffic into the agency, Internal Revenue Service Commissioner Doug Shulman told an audience at the National Press Club in Washington … Those who take part are subject to fines, payment of back taxes and a 20 percent penalty, but are generally immune from criminal prosecution. At the same time, the agency has a number of criminal prosecutions in the pipeline.”
Auto Rescue Update
Bloomberg on latest GM speculation: ” The U.S. government is considering swapping some of the $13.4 billion General Motors Corp. owes it for an equity stake in a stripped-down version of the carmaker, people familiar with the matter said. A government stake would accompany a smaller share of the new company for bondholders, who own $27.5 billion in GM debt. Bondholders had been offered 90 percent of the new entity’s equity by the company before the government rejected the company’s previous restructuring plan. The swap would be part of an effort to cut GM’s debt as the carmaker approaches a June 1 deadline to come up with a plan to become viable, the people said.”
W. Post looks at Fiat’s business model: “The Obama administration has decided that Chrysler needs a partner to survive, and it has put its hopes in Fiat and [CEO Sergio] Marchionne. It has given Fiat and Chrysler until the end of the month to negotiate partnership terms.”
NYT: “The senior lenders to Chrysler are planning to make a counteroffer to the Treasury Department this week, pushing back on a debt-reduction plan they say is too coercive, people briefed on the matter said Monday.”
F-22 Fight Blunted
Military relents on F-22s. NYT: “Top Air Force officials said Monday that they supported the Obama administration’s decision to buy only four more of the advanced F-22 fighter jets, making it less likely that Congress will insist on extending its production … Legislators from Georgia, Connecticut and other states with major suppliers are still likely to push for more planes. But it will be much harder for them to succeed if the Air Force is not quietly supporting their efforts, military analysts said.”
Unions Unite on Immigration Reform
NYT on new AFL-CIO/Change To Win agreement on immigration reform: “The nation’s two major labor federations have agreed for the first time to join forces to support an overhaul of the immigration system, leaders of both organizations said on Monday. The accord could give President Obama significant support among unions as he revisits the stormy issue in the midst of the recession … The accord endorses legalizing the status of illegal immigrants already in the United States and opposes any large new program for employers to bring in temporary immigrant workers … An official from the United States Chamber of Commerce said Monday that the business community remained committed to a significant guest-worker program. ‘If the unions think they’re going to push a bill through without the support of the business community, they’re crazy,’ said Randel Johnson, the chamber’s vice president of labor, immigration and employee benefits.”
Quote of the Day
“…there’s a lot of effort to try and marginalize lobbyists — good luck.” — Chamber of Commerce President Thomas Donahue.
Terrance Heath contributed to the making of this Breakfast.