You’ve heard what the early (and slim) analyst reaction has been, now for what the blogosphere has had to say about the fiscal deal achieved.
A good rundown comes courtesy of Pragmatic Capitalism’s Cullen Roche:
- A deal was actually finalized. That’s good news. It looked like we might actually go into January without a deal and that the odds of no deal at all were rising.
- No one really won here. Congress is totally dysfunctional.
- There’s still a lot unanswered.
We’ve written before about odd goings on in the spread betting world where US elections are concerned, namely last week’s big spike in Mitt Romney’s chances offered by InTrade.
If you can figure out a way to make it work, then perhaps more interesting is this little (ok, microscopic) arb opportunity: a Romney election win is being offered at 34.7 per cent on InTrade and 31 per cent on IG Index… Read more
US President Barack Obama has proposed cutting the corporate tax rate to 28 per cent from 35 per cent, extending an olive branch to business ahead of the autumn elections, Reuters reports. Special incentives for research and manufacturing are included in the plan, which also targets US corporate use of offshore tax havens. Mr Obama wants to eliminate “dozens” of tax breaks into the bargain, but faces resistance from Republicans promoting their own tax reform plans, the FT adds. GOP presidential nomination candidate Mitt Romney has called for a 25 per cent corporate tax rate, the WSJ reports. Read more
Barack Obama has sharpened the divisions with his Republican rivals ahead of this year’s presidential election, the FT says, with a 2013 budget proposal that more than doubles tax on the dividend incomes of high-earners. Mr Obama’s budget lifts the levy on dividends from 15 per cent to the top marginal rate, which will stand at 39.6 per cent in 2013 if all of the tax cuts introduced by George W. Bush expire as scheduled by the year’s end. The plan to tax dividends as ordinary income applies to individuals earning more than $200,000 or married couples who take in over $250,000. The budget proposes lifting the capital gains tax rate from 15 per cent to 20 per cent. The budget also includes extra spending on education and infrastructure, which the president plans to pay for with additional higher taxes on the energy industry, mutual funds and also estates. It contains no new proposals to tackle the long-term drivers of the US deficit, most notably Medicare, which covers medical treatment for the elderly, and Medicaid for the poor. With little chance of getting through Congress, Mr Obama’s budget proposal is a political document that sets forth the fiscal platform he will campaign on ahead of the November election. Read more
US president Barack Obama warned the nation Tuesday that the decades-old promise of a secure and rising middle class is under threat because of growing wealth disparity, says the Washington Post, in his election year State of the Union address which is expected to serve as a template for the campaign ahead. Mr Obama outlined a series of steps that he believes will reinforce the tentative economic recovery, including proposals to eliminate tax incentives for companies to move jobs overseas, to make college more affordable and to expand help for credit-worthy homeowners looking to refinance mortgages at historically low interest rates. Many of his proposals centered on changes to the tax code, including limiting deductions for companies that move jobs overseas, rewarding companies that return jobs to the US and increasing taxes on wealthy Americans, says the NYT. The US president said tax reform and budget reduction should be guided by the principle that anyone with annual income of more than $1m should pay a minimum effective tax rate of 30 per cent, the FT reports. The text released before the speech also pushed drilling for shale gas as a potential boost to the economy, reports Bloomberg. Hydraulic fracturing, which injects a mix of water, sand and chemicals underground to free gas trapped in rock, could create 600,000 jobs by the end of the decade, Mr Obama’s prepared remarks said. Read more
In December of last year, we read a few posts suggesting 2011 would see above average returns for the S&P 500 since it was the third year of a presidential term, which has historically proved lucrative for equity investors (chart from Credit Suisse):
President Barack Obama will begin a media campaign this week to seek support for his nomination of banking industry critic Richard Cordray to head the new Consumer Financial Protection Bureau, reports Reuters. The White House strategy will be to try to pressure Senate Republicans to confirm Cordray by making an appeal directly to voters in the home states of those politicians. The Senate vote on Cordray tentatively scheduled for Thursday, Obama and his aides will give a series of media interviews on the nomination of Mr Cordray, a former Ohio attorney general who worked with Elizabeth Warren on forming the new agency. Republicans opposed creation of the consumer agency, which was created under the 2010 Dodd-Frank legislation overhauling Wall Street regulation. Read more
There’s only one thing we know for sure about next year’s campaign for President: the winner will have no time to celebrate.
But before we get to that, here are some of the key issues that affect how much fiscal drag the US economy will confront in the next couple of years (all numbers courtesy of Nomura analysts). Below, for various major spending items, we’ve listed the expected decline relative to the prior year. Read more
Protracted US budget negotiations will cast a shadow over President Barack Obama’s trip to the Asia-Pacific next week where he will tout growing US-Asian economic and security co-operation, Reuters reported. Obama is set to visit Hawaii, Australia and Indonesia from Friday, coinciding with the Asia-Pacific Economic Cooperation summit that he will host in Honolulu on November 12-13. However, Obama’s bid to market his export strategy to Asia – hot on the heels of the recent free-trade agreement with South Korea – coincides with domestic calls to cut the nine-day trip short amid US budget talks and the 2012 presidential election, the wire reported. An editorial in the New York Times on Friday urged the President to tout his free market credentials and “make a case for expanding and liberalizing trade with other Pacific Rim countries”. Read more
Leaders of the world’s largest economies worked into the night to agree a comprehensive package of measures to defuse the eurozone crisis, after a tense day in which Greece dominated the Group of 20 summit, the FT reports. As negotiators prepared to go into what officials thought would be all-night sessions, the G20 was seeking to augment an action plan for growth and jobs that was already on the table with additional tasks and funds for the International Monetary Fund. After dinner on Thursday, officials said the “Frankfurt group” – France, Germany, European Union officials and the IMF – would be joined by Barack Obama, US president, for a further crisis meeting, since they did not have sufficient time on Thursday morning to complete discussions. After dinner on Thursday, officials said the “Frankfurt group” – France, Germany, European Union officials and the IMF – would be joined by Barack Obama, US president, for a further crisis meeting, since they did not have sufficient time on Thursday morning to complete discussions. President Nicolas Sarkozy told journalists: “It is vital the eurozone sends the world a message of credibility”. Saying part of the additional discussions would attempt to build a rapid firewall to stop contagion in the eurozone, he added, “Viewpoints are coming together between Europeans and between Europeans and their partners”. Read more
Barack Obama, US president, offered more support for protesters against the global financial system after a weekend of demonstrations in cities around the world, but called on them not to “demonise” those who worked on Wall Street. The FT reports that on Sunday, Mr Obama honoured Martin Luther King at a dedication to a new memorial on National Mall in Washington. Referring to protests that have spread from Wall Street to London, Rome and elsewhere, Mr Obama said: “Dr King would want us to challenge the excesses of Wall Street without demonising those who work there.” Mr Obama had previously said the protests “express the frustration” of ordinary Americans with the financial sector. Meanwhile Eric Cantor, the Republican majority leader in the House of Representatives, dramatically altered his stance on the protests, telling Fox News on Sunday that Republicans agreed there was “too much” income disparity in the country. Separately in the FT, “Occupy” protestors in the City of London won support from Reverend Dr Giles Fraser, the canon chancellor of St Paul’s, who came out on Sunday morning to say he supported their right to protest and indicated that he would not have them removed for trespassing. Read more
President Barack Obama’s $447bn jobs plan has failed its first test in Congress, after the Senate roundly rejected it in a first vote, says the FT. With 46 Republicans and two Democrats opposed to the bill, it fell well short of the 60 votes needed. The plan would cut payroll taxes and increase spending on infrastructure, paid for by a “millionaires’ tax”. Congressional rejection of the jobs bill might in fact be part of the White House’s plan, Politico says, with the defeat allowing the president to claim the high ground and blame Republican obstruction on jobs in the run-up to the 2012 elections. Read more
President Barack Obama will aim to cut $3,000bn from the federal deficit over a decade in a plan to be unveiled later on Monday, says Politico. The plan, which includes $1,500bn in revenues from a tax overhaul, is an opening gambit to a congressional super committee charged with fixing the US government’s finances. It is his fourth deficit plan this year, the WSJ says. President Obama has conceded to his Democratic base in declining to raise the eligibility age for Medicare as part of the plan, Reuters reports. A “Buffett Rule” to target millionaire taxpayers within the plan is unlikely to pass Republican muster, says the FT. Read more
President Obama will unveil a deficit-reduction plan on Monday that uses entitlement cuts, tax increases and war savings to reduce government spending by more than $3,000bn over the next 10 years, the NYT reports. The plan is the administration’s opening move in sweeping negotiations on deficit reduction to be taken up by a joint House-Senate committee over the next two months. If a deal is not struck by December 23, cuts could take effect automatically across government agencies. Mr Obama will call for $1,500bn in tax increases, primarily on the wealthy, through a combination of closing loopholes and limiting deducations available to high income earners. The proposal also includes $580bn in adjustments to health and entitlement programs, including $248bn to Medicare and $72bn to Medicaid. The president’s speech announcing the proposal is expected to be highly partisan, seeking to draw deep distinctions between his vision for the future and that of the Republicans, the FT says. Read more
International alarm over Europe’s debt crisis hit new heights on Tuesday, Reuters says, with President Barack Obama pressing the bloc’s big countries to show leadership as talk of a Greek default escalated and markets heaped pressure on Italy. German Chancellor Angela Merkel sought to quash talk of an imminent Greek default or exit from the eurozone, but confusion over whether she would issue a joint statement on Greece with French President Nicolas Sarkozy sent markets gyrating up and then down. The FT reports Ms Merkel andMr Sarkozy are holding a conference call on Wednesday with George Papandreou, the Greek prime minister. The purpose would be to assure Mr Papandreou of their support for his “almost superhuman efforts” in reforming the Greek economy and curbing its borrowing, the report says, citing a senior official. Read more
Republican candidates for president squabbled over social security, foreign wars and the economy but presented a largely united front on one issue – the need to rein in the power of the Federal Reserve. The FT reports Rick Perry, the Texas governor who has been criticised for saying Ben Bernanke, the Fed chairman, has behaved in an “almost treasonous” manner in his management of monetary policy, declined to back away from his statement in Monday’s televised debate. The candidates questioned about the US central bank all said it should be audited and limited to a single mandate to preserve the integrity of the currency, although Mitt Romney, the former Massachusetts governor, offered a partial defence of the institution. Meanwhile news that President Obama’s jobs plan would be funded by ending oil and tax company breaks meant a fight with Republicans over the plan was likely, says the WSJ. Read more
Fannie Mae and Freddie Mac are exploring ways to help homeowners refinance into cheaper mortgages, Bloomberg says, but the companies’ regulator stopped short of promising to deliver on a proposal from President Barack Obama. In his speech on Thursday, President Obama pledged to “work with federal housing agencies to help more people refinance their mortgages at interest rates that are now near 4 per cent”. Federal Housing Finance Agency officials met on the weekend with with mortgage industry executives to discuss possible changes to the Home Affordable Refinance Program, or HARP, the news agency says, citing two people with knowledge of the private meeting. Edward DeMarco, acting director of the FHFA, said agency must determine whether the programme can be expanded without more losses for the firms. Read more
Barack Obama sought to resuscitate his flagging presidency and the US economy with a larger-than-expected $450bn jobs plan that emphasises tax cuts in a bid to win over Republican opposition, the F reports. In a sign of the White House’s own bleak assessment of the recovery, the proposal, which was presented in an address by the US president to Congress, is more than half the size of the stimulus package enacted by Mr Obama shortly after he took office in the depths of the financial crisis of 2009. “It will provide a jolt to an economy that has stalled, and give companies confidence that if they invest and hire, there will be customers for their products and services,” Mr Obama said. If enacted, the plan would reduce tax paid by workers to fund the national retirement scheme to 3.1 per cent in 2012 from the 4.2 per cent level temporarily introduced this year. Read more
As we noted earlier, President Obama’s speech was perhaps a little too hotly anticipated, given the political constraints it faces.
And markets were not deeply impressed — Asia’s main indices were up less than 0.5 per cent, and that’s with Chinese consumer price inflation slowing as expected. Treasury yields and crude oil futures were up, but again, just a little. Read more
Barack Obama sought to resuscitate his flagging presidency and the US economy with a larger-than-expected $450bn jobs plan that emphasises tax cuts in a bid to win over Republican opposition, the FT reports. The plan includes elements that will be politically difficult for House Republicans to reject. John Boehner, the Republican Speaker of the House, said the proposals “merit consideration”, but the party’s leaders will probably seek to drive a hard bargain in negotiations and seek big concessions from the White House in exchange for any agreement, including pressing the White House for certain tax breaks for multinationals and looser regulation of business. The White House will seek to introduce legislation on the proposal next week, and will outline its plan to pay for the measures, as well as other fiscal reform ideas, to the so-called “super committee” of Congress in coming days. Asian share markets rose very slightly on the news, the FT reports separately. Earlier, US markets had closed lower and US and German bonds were again pushing towards record low yields after a pessimistic speech from ECB president Jean-Claude Trichet and disappointment over Fed chairman Ben Bernanke’s speech, which did not outline any specific easing measures. Read more
President Barack Obama used a Labor Day rally to call again for more infrastructure spending and a payroll tax cut ahead of Thursday’s nationally televised jobs speech, reports Reuters. “We’ve got more than 1 million unemployed construction workers ready to get dirty right now. There is work to be done and there are workers ready to do it. Labor’s on board, business is on board. We just need Congress to get on board,” Obama said. Few specifics were offered by Obama — these are expected to come on Thursday. Calculated Risk summarises the (lack of) jobs stories on Labor Day, while the FT’s Clive Crook has a powerful column on what the President needs to say and do to get America back to work. Read more
Barack Obama, US president, called for new infrastructure investments in the US to revitalise the stagnant economy and boost the beleaguered labour market, the FT reports. Speaking after new data showed US private sector jobs growth slowed in August, the president urged Congress to pass an extension of a federal transportation spending bill that expires at the end of September. Mr Obama said that failure to do so would put thousands of jobs at risk and delay vital infrastructure projects and funding for the nation’s highways and airports. “It’s inexcusable to put more jobs at risk in an industry that’s already been one of the hardest hit in the last decade,” the president said on Wednesday in comments at the White House. “We shouldn’t just be playing patch-up or catch-up, we should be leading the world,” he said. A report from ADP, the payroll processor, said US companies added 91,000 jobs in August, missing expectations of 100,000 new jobs and coming in below the downwardly revised 109,000 positions created in July. Read more
President Barack Obama announced on Sunday night that US Congressional leaders had reached an agreement on a tentative deal that would raise the US government’s borrowing limit and avoid a US default, prompting a positive response from Asian financial markets, the FT reports. The proposed cuts meant the US’s annual domestic spending will fall to the lowest level since Dwight Eisenhower was president in the 1950s, Obama said in a speech. The deal hammered out, which is to be voted on in both houses on Monday, would see the $14,300bn debt ceiling raised by $2,400bn in two stages but would avoid another drawn-out negotiation before the presidential election in November 2012, a key Democratic demand. In return, Republicans would get $2,800bn in spending cuts over the next 10 years. Read more
A deal on the debt ceiling looked further away than ever after Monday night speeches by President Barack Obama and Republican House speaker John Boehner. Mr Obama urged congressional leaders to reach a “fair compromise” over the next few days to avoid a US default, the FT reports, and warned Americans that the impasse could spark a “deep economic crisis”. In his response, Mr Boehner said Mr Obama was seeking a “blank cheque” to raise the debt limit, charging that the Democratic plan was laden with “phoney accounting and Washington gimmicks”. The LA Times says the deadline is sooner than August 2, as any legislation would need to be introduced in Congress in enough time to clear procedural deadlines. But USA Today picks up on analysis of tax receipts suggesting the government may have an extra seven to 15 days before the ceiling is well and truly reached. Read more
Investor fears about gridlock in Washington over raising the US debt ceiling mounted further as political leaders jousted over competing solutions to avert a possible debt default in August, writes the FT. The lack of public signs of progress in resolving the debt ceiling impasse between the Republican and Democratic parties cast a shadow over global markets with frustrated investors withdrawing further into haven assets. In Washington, the two political parties issued dueling plans, reports Reuters. Bloomberg looks at the details. President Obama was due to address the nation at 9pm New York time, 9am Hong Kong time. Read more
President Barack Obama and John Boehner, the top Republican in the House of Representatives, are engaged in a final high-stakes push to secure an ambitious budget deal, less than two weeks before the US runs out of cash to pay its bills, the FT reports. Both the White House and Mr Boehner’s office denied they were close to an agreement, amid rising anxiety in both the Republican and Democratic camps that elements of the deal could provoke a backlash from their respective bases. The agreement under discussion involves some $3,000bn in spending cuts over 10 years, with a commitment to tax reform next year that could bring in additional revenue. But officials familiar with the talks said both sides remained apart over the issue that has long divided them – the Democrats’ insistence that any deal include extra revenues. Republicans have so far opposed any efforts to generate additional revenue by raising taxes or limiting tax deductions for wealthy Americans and some businesses. Read more
US president Barack Obama and Republican House speaker John Boehner were on Thursday still struggling to overcome resistance from their respective parties to a debt ceiling deal, the NYT says. The latest talks, which focused on up to $3,000bn in savings from spending cuts and a tax overhaul, now faced most strident opposition from within the Democrats, the newspaper says. The FT reports one Democratic senator, Barbara Mikulski of Maryland, described the mood in the party as “volcanic” as the deal did not include higher tax revenues. However White House officials insisted the president would not agree to big spending cuts without also securing new revenue. Read more
The White House said it was open to a short-term increase in the US borrowing limit to give “a few more days” for negotiations over a broad fiscal package, the FT reports. “If both sides agree to something significant, we will support the measures needed to finalise details,” Jay Carney, White House press secretary, told reporters on Wednesday. President Barack Obama has refused to consider a lift to the debt ceiling that would be only temporary, but Mr Carney said a deal which included a short-term measure that gave time for a more complex and ambitious agreement to work its way through Congress could be acceptable. The Washington Post says the proposal being discussed would raise the debt ceiling by about $2,500bn in three phases, over the course of more than a year. Meanwhile Reuters says the Fed has been actively preparing for the possibility of a US default. Charles Plosser, president of the Philadelphia Federal Reserve Bank, Fed had been working closely with Treasury on a contingency plan, although he believed an agreement would be reached in time to avoid default. Read more