US Democrats Reject Latest Deficit-Cutting Plan

A high-profile congressional effort to trim stubborn U.S. budget deficits appeared near collapse Friday as Democrats rejected a scaled-back proposal from Republicans that contained few tax increases.




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With Democrats and Republicans on a deficit-cutting "super committee" deadlocked ahead of a Wednesday deadline, House of Representatives Speaker John Boehner, R-Ohio, floated an offer to try to break the logjam on tax increases and benefit cuts.

The plan would save $643 billion over 10 years, about half of the panel's goal of $1.2 trillion — but the two sides were unable to even agree what was in the plan.

Boehner aides said it included $229 billion in new revenues and fees. Democrats said it would only generate $3 billion in new revenue from closing a tax break for corporate jets.

"To have something on the table that does not ask the wealthiest people in the country to share (the burden) ... is unconscionable," said Senator John Kerry of Massachusetts, a Democratic member of the super committee.

The panel will need to have a deal in place well before its Wednesday vote.

The panel will work through the weekend if necessary, said Republican Representative Jeb Hensarling of Texas, a committee co-chair. "We are painfully aware of the deadline and it is staring us in the face," he told reporters.

A senior Democratic aide said the two sides are nowhere near an agreement.

But a House Democratic leadership aide said talks were continuing on ideas other than Boehner's plan.

Unlike budget standoffs in April and August, failure would not lead to a government shutdown or a sovereign debt default.

Instead, automatic spending cuts of $1.2 trillion over 10 years, split evenly between military and domestic programs, would kick in starting in 2013.

Congress is already facing rock-bottom approval ratings after a year of down-to-the-wire budget battles, and failure to reach a deal would likely incite further disgust among voters as the 2012 election season heats up.

Bush Tax Cuts A Factor

Many Republicans worry the automatic cuts to military programs could compromise national security. Democrats feel less urgency as programs for the poor and the elderly, such as Medicare and food stamps, would be largely shielded from the cuts.

They also see an advantage as temporary tax cuts enacted under President George Bush are due to expire at the end of 2012 and Republicans are eager to forge a deal that would overhaul the tax code before that time in order to avoid a higher tax burden on the wealthy.

Some Republicans have said they could support tax increases in return for an overhaul of benefits like Medicare , expected to expand dramatically as the population ages. But they face fierce opposition within their own party.

Democrats also hope to include measures to stimulate the struggling economy.

The panel must release any plan it comes up with at least 48 hours before a vote. That would point to Monday as a final deadline, but lawmakers must give budget analysts time to crunch the numbers as well.


CNBC

Did you know that an average of 23 manufacturing facilities were shut down every single day in the United States last year?

Did you know that an average of 23 manufacturing facilities were shut down every single day in the United States last year?  As World War II ended, the United States emerged as the greatest industrial power that the world has ever seen.  But now America's industrial might is being gutted like a fish and both political parties seem totally unconcerned.  Yes, we will always need trading relationships that are fair and balanced with other countries that have economic systems that are similar to our own.  However, the truth is that most of our trading relationships are neither "fair" nor balanced.  For example, China manipulates currency rates so that Chinese products are much cheaper than they should be, they brazenly steal our technology and we let them get away with it, they deeply subsidize their most important industries and they exploit their citizens by allowing them to be paid slave labor wages.  How in the world does that resemble the "free market" at work?  Predatory nations such as China do everything that they can to distort the free market.  So why in the world would any rational economist ever recommend that we should keep trading with other countries that are cheating us blind?  After you read the facts in this article about the gutting of America's industrial might, hopefully you will get very angry.  We need the American people to start getting very upset about these very important issues.

Both major political parties promised us that globalization would be wonderful for the U.S. economy.  Well, in the first decade of this century less net jobs were created than in any other decade since the Great Depression.

The "free trade" polices of the globalists have been an abysmal failure.  Tens of thousands of factories, millions of jobs, and hundreds of billions of dollars of our national wealth have gone to countries that engage in predatory trade practices and that exploit slave labor pools.

How in the world are American workers supposed to compete against workers that make less than a dollar an hour (with no benefits) on the other side of the globe?

If you support the version of "free trade" that most of our politicians are promoting, then you are supporting the one world economic system that the global elite are trying to establish.  In this one world economic system, American workers will increasingly be forced to compete for jobs with the cheapest labor on the planet.  This will continue to force the standard of living of American workers way, way down and it will continue to absolutely destroy the middle class.

The following are 35 facts about the gutting of America's industrial might that should make you very angry....

#1 According to U.S. Representative Betty Sutton, America has lost an average of 15 manufacturing facilities a day over the last 10 years.

#2 Sadly, it looks like this trend is picking up momentum.  During 2010, an average of 23 manufacturing facilities a day were shut down in the United States.

#3 Since 2001, the U.S. has lost a total of more than 56,000 manufacturing facilities.

#4 According to the Economic Policy Institute, the U.S. economy losesapproximately 9,000 jobs for every $1 billion of goods that are imported from overseas.

#5 The United States has had a negative trade balance every single yearsince 1976, and since that time the United States has run a total trade deficit of more than 7.5 trillion dollars with the rest of the world.

#6 Back in 1979, there were 19.5 million manufacturing jobs in the United States.  Today, there are 11.6 million.  That represents a decline of 40 percentduring a time period when our overall population experienced tremendous growth.

#7 Between December 2000 and December 2010, 38 percent of the manufacturing jobs in Ohio were lost, 42 percent of the manufacturing jobs in North Carolina were lost and 48 percent of the manufacturing jobs in Michigan were lost.

#8 Back in 1970, 25 percent of all jobs in the United States were manufacturing jobs. Today, only 9 percent of all jobs in the United States are manufacturing jobs.

#9 The United States has lost an average of 50,000 manufacturing jobs per month since China joined the World Trade Organization in 2001.

#10 The Economic Policy Institute says that since 2001 America has lost approximately 2.8 million jobs due to our trade deficit with China alone.

#11 All over the United States, road and bridge projects are being outsourced to Chinese firms.  Just check out the following excerpt from a recent ABC News article....

In New York there is a $400 million renovation project on the Alexander Hamilton Bridge.

In California, there is a $7.2 billion project to rebuild the Bay Bridge connecting San Francisco and Oakland.

In Alaska, there is a proposal for a $190 million bridge project.

These projects sound like steps in the right direction, but much of the work is going to Chinese government-owned firms.

"When we subsidize jobs in China, we're not creating any wealth in the United States," said Scott Paul, executive director for the Alliance for American Manufacturing.

#12 If you can believe it, the United States spends about 4 dollars on goods and services from China for every one dollar that China spends on goods and services from the United States.

#13 The U.S. trade deficit with China rose to an all-time record of 273.1 billion dollars in 2010.  This is the largest trade deficit that one nation has had with another nation in the history of the world.

#14 The U.S. trade deficit with China in 2010 was 27 times larger than it was back in 1990.

#15 The new World Trade Center tower is going to be made with imported glass from China and imported steel from Germany.

#16 The new MLK memorial on the National Mall was made in China.

#17 Do you remember when the United States was the dominant manufacturer of automobiles and trucks on the globe?  Well, in 2010 the U.S. ran a trade deficit in automobiles, trucks and parts of $110 billion.

#18 In 2010, South Korea exported 12 times as many automobiles, trucks and parts to us as we exported to them.

#19 Even in high technology products we are being destroyed.  In 2002, the United States had a trade deficit in "advanced technology products" of $16 billion with the rest of the world.  In 2010, that number skyrocketed to $82 billion.

#20 China has now become the world's largest exporter of high technology products.

#21 Back in 1998, the United States had 25 percent of the world’s high-tech export market and China had just 10 percent. Ten years later, the United States had less than 15 percent and China's share had soared to 20 percent.

#22 Manufacturing employment in the U.S. computer industry was actually lower in 2010 than it was in 1975.

#23 In 2008, 1.2 billion cellphones were sold worldwide.  So how many of them were manufactured inside the United States?  Zero.

#24 The United States now has 10 percent fewer "middle class jobs" than it did just ten years ago.

#25 Today, American workers are bringing home a much smaller share of economic pie.  Over the past decade, the ratio of wages to GDP has been declining very steadily.

#26 Now that millions of our jobs have been exported, there aren't nearly enough jobs left for all of us.  Right now, the average amount of time that a worker stays unemployed in the United States is approximately 39 weeks.

#27 There are fewer payroll jobs in the United States today than there were back in 2000 even though we have added 30 million extra people to the population since then.

#28 If you gathered together all of the workers that are "officially" unemployed in the United States today, they would constitute the 68th largest country in the world.

#29 According to one study, between 1969 and 2009 the median wages earned by American men between the ages of 30 and 50 dropped by 27 percent after you account for inflation.

#30 As the number of good paying jobs declines, America's middle class is rapidly shrinking.  In 1970, 65 percent of all Americans lived in "middle class neighborhoods".  By 2007, only 44 percent of all Americans lived in "middle class neighborhoods".

#31 In the United States today, corporate profits are at a record high, and yet employment numbers have still not rebounded.  Obviously something is structurally wrong.

#32 The Obama administration says that there are certain things that "we don't want to make in America" anymore.  If you don't believe this, just check out what U.S. Trade Representative Ron Kirk recently told Tim Robertson of the Huffington Post about the Obama administration's attitude toward keeping manufacturing jobs in America....

Let's increase our competitiveness... the reality is about half of our imports, our trade deficit is because of how much oil [we import], so you take that out of the equation, you look at what percentage of it are things that frankly, we don't want to make in America, you know, cheaper products, low-skill jobs that frankly college kids that are graduating from, you know, UC Cal and Hastings [don't want], but what we do want is to capture those next generation jobs and build on our investments in our young people, our education infrastructure.

#33 Jeffrey Immelt, the head of Barack Obama's highly touted "Jobs Council",has shipped tens of thousands of good jobs out of the United States.

#34 According to Professor Alan Blinder of Princeton University, 40 millionmore U.S. jobs could be sent offshore over the next two decades.

#35 One recent poll found that 41 percent of all Americans believe that "the American Dream has been lost".

Yes, it is fun to go out and fill up our shopping carts with "cheap products" from the other side of the world, but when we do that it destroys our jobs, our businesses and our communities.

Our addiction to cheap foreign products is incredibly self-destructive.  Essentially what we are doing is that we are ripping apart pieces of our own home and throwing them into the fire in an attempt to keep it going.  Eventually we will cannibalize our entire home.

And we never really think about what it is like for the slave laborers that make all these cheap products for us.  The following is from an article in the Telegraph about what conditions at one major Chinese manufacturing facility are like....

So far, at least 16 people have jumped from high buildings at the factory so far this year, with 12 deaths. A further 20 people were stopped by the company before they could attempt to kill themselves.

The hysteria at Longhua, where between 300,000 and 400,000 employees eat, work and sleep, has grown to such a pitch that workers have twisted Foxconn’s Chinese name so that it now sounds like: “Run to your Death”.

If we stay on this current path, even more of our formerly great manufacturing cities will turn into post-industrial hellholes.

Once upon a time, I also bought the "free trade" propaganda hook, line and sinker.  But then I opened up my mind and I learned the truth.

This nation is losing jobs, factories and wealth at a pace that is almost unbelievable.

Something desperately needs to be done.

Economic collapse

U.S. money funds seen at risk from Europe's debt storm

(Reuters) - When Lehman Brothers collapsed in 2008 and shattered the belief that U.S. money market funds would never "break the buck," Washington rushed to limit the damage.

But as Europe's debt crisis threatens to put the U.S. financial system under strain again, U.S. policymakers are worried they cannot turn to those same, impromptu tools to shore up the $2.6 trillion money markets industry.

"We've done a lot to prepare the banking sector," Jeffrey Lacker, president of the Richmond Federal Reserve Bank, said on Wednesday. "I'm less confident about the money market funds and their ability to weather major problems at European institutions."

Senior U.S. officials are alarmed by the deepening of the European debt crisis. Its spread to Italy, the euro zone's third-biggest economy, is seen as inevitably leading to spillovers across the Atlantic, in part through the holdings of money market funds of European securities.

Many investors believe money funds are as safe as lower-yielding bank accounts even though it is common knowledge that that they are not backed by the federal insurance that protects bank deposits.

During the chaos of 2008, dozens of money funds struggled to maintain $1 per share, but only one, Reserve Primary Fund, reported a net asset value below that level.

Less well known, and of concern to U.S. officials, is that the money funds cannot count on the protection measures that were pulled together to help them in 2008.

NO EASY OPTIONS

The Treasury Department is barred from reprising a guarantee program under the terms of the 2008 bailout of the U.S. banking system. Congress, which agreed to the bailout only reluctantly, prohibited renewing the program on grounds that it was providing a false sense of security to investors who might expect government protection again in the future.

The Federal Reserve is also unlikely to dust off either of two facilities it set up in 2008 to ensure money market funds had cash to meet redemption requests -- the Asset-Backed Commercial Paper Money Mutual Fund Liquidity Facility and the less-used Money Market Investor Funding Facility.

Today's rock-bottom interest rates and the fact that the government would need to charge fees for such guarantees mean that those types of emergency facilities would likely not be effective as a backstop.

Limitations on the Fed's emergency authority -- it can no longer intervene to protect individual firms as it did in 2008, but must provide aid to an entire asset class -- may further cramp the central bank's nimbleness in responding to a crisis.

Another Fed emergency liquidity facility dating from the U.S. financial meltdown depended on a promise that the Treasury would absorb some of the losses if the collateral financial institutions pledged lost value. U.S. lawmakers are now on a debt-cutting crusade and are unlikely to approve more bailout funds for the Treasury to use in that way any time soon.

NERVOUS INVESTORS

All this has left some investors nervous about their exposure to what they used to see as the safe havens of money funds, managers said.

Such funds "breaking the buck are far and few between, but nowadays, everyone is looking at Europe, and they are seeing things they thought wouldn't happen now happening," said King Lip, chief investment officer at Baker Avenue Asset Management in San Francisco.

The firm manages about $750 million in assets.

He said about 25 percent of the firm's investments are in money markets that had been carefully vetted.

"We've had clients asking us to move to cash," Lip said. "We're getting more and more requests to move to cash entirely rather than invest in money markets."

Top Fed officials have urged putting money funds on a tighter leash, saying they should be required to hold capital buffers to discourage clients from panic withdrawals.

"Given the systemic importance of the money market mutual fund industry, it is critical that one way or another we make the industry less susceptible to credit shocks and liquidity runs," Boston Federal Reserve Bank President Eric Rosengren said in September.

Strains in money funds re-emerged over the summer on concerns about their holdings of commercial paper issued by troubled European banks. Outflows spiked in July as investors worried about the fight in the U.S. Congress over raising the U.S. debt ceiling.

In response, some of the largest funds cut their European bank holdings and shortened the weighted average maturities of the assets they owned. Outflows ultimately stabilized after a debt deal was reached in the U.S. Congress.

Various academics and regulators have backed a shift to a share price that can fluctuate, as opposed to the current money fund practice of guaranteeing a stable $1 per share value. But many companies worry such a change would drive away customers.

Some industry counterproposals involve building up extra capital in some type of "buffer" to backstop money funds that run into trouble. Asset management executives also say that changes put in place by the Securities Exchange Commission at the start of 2010 already have made the funds much more robust than during the crisis, including tightening credit quality standards and imposing liquidity requirements.

Investors are watching the situation closely.

Evensky & Katz, a registered investment adviser in Coral Gables, Florida, with $700 million in assets under management, is considering whether to pull out of money market funds. But for now, it is leaning toward staying in, said Harold Evensky, the firm's president.

"We don't think any of the money market funds we use have significant exposure to Europe and if there was an issue, we have little doubt that they would cover it," he said.

Risks of global recession mount

(Reuters) - Financial contagion from Europe is pushing global economies towards the brink, and the risks of slipping into worldwide recession are rising significantly. China's exports have plunged to half their year-ago levels. Factory orders in Germany, Europe's economic powerhouse, are slumping as China weakens. 

Australia and Indonesia have cut interest rates to ward off damage from Europe, while Japan, Britain and Brazil have slashed their growth forecasts. From Beijing to Washington and Sao Paolo, top financial officials are worried their economies will be sucked into the maelstrom by Europe's inability to unify around a debt strategy. High yields on Italy's and Spain's sovereign debt, hovering around 7 percent, are putting severe funding strains on banks, infecting the global financial system, which in turn undermines confidences and upends growth. "It's a scary situation," said Mike Feroli, chief U.S. economist for JPMorgan Chase. 

"Unless Europe really goes pear-shaped, we should avoid recession. But each passing week without a resolution we are doing more damage, and it's hard to see how this will stop." On top of Europe's woes, add an intractable U.S. Congress fighting over how to cut the U.S. budget deficit, and the risks are mounting of political mishaps that upset a gradual healing of the global economy. "It is stunningly easy to slip into recession," said Tom Porcelli, U.S. chief economist at RBC Capital Markets. U.S. lawmakers face a Wednesday deadline to deliver a plan to slash $1.2 trillion (759.3 billion pounds) to $1.5 trillion from the U.S. budget deficit over the next 10 years. Porcelli is concerned that failure to reach an agreement, which looked increasingly likely, would cause lawmakers to backtrack and attempt to push through a new law to repeal the automatic triggers to impose budget cuts. Such a move would stoke financial volatility and worsen an already vulnerable outlook. Additionally, Congress has not yet decided whether to extend several fiscal stimulus measures next year. JPMorgan Chase estimates an end to measures such as the payroll tax cut, unemployment benefits for the long-term jobless and infrastructure spending would take 1.5-2 percentage points off U.S. growth next year - an expectation that most forecasters have already built into their outlooks. 

A budget debacle would strike a blow after recent economic data from the United States that has been moderately encouraging. New car sales rose a healthy 7 percent last month, industrial output has been climbing and jobless claims have been falling steadily. U.S. consumers, who drive about 70 percent of U.S. economic activity, have been slowly paying down debt, restoring household spending power as inflation ebbs. Personal income data for October, to be released on Wednesday, is expected to show a rise of 0.3 percent up from 0.1 percent the prior month, and jobless claims out the same day are seen holding below the critical 400,000 level -- both of which would support further spending and point to fourth-quarter GDP growth near 3 percent. 

Europe also has some underlying strength. Corporate cash flow is high and inventories low, giving plenty of room to ramp up should demand recover. Likewise, Germany has low unemployment, solid public finances and cheap financing that can support an expansion in German domestic demand. But political uncertainly and financial volatility is casting a huge shadow over the outlook, depressing economic activity both in Europe and the United States and spilling over to export-driven Asia. Flash estimates for PMI purchasing managing indexes on Wednesday will gauge China and Europe's manufacturing and service sectors in October. The euro zone factory index is seen slipping closer to recessionary territory at 46.5, down from 47 in September. 

Many analysts see the region already in recession. As for China's PMI index, it was getter close to stalling in September at a reading of 51, just above the 50-point level that demarcates expansion and contraction. Stephen Roach, non-executive chairman of Morgan Stanley Asia, said the combination of weak consumer demand from the United States and slumping Europe should be setting off alarm bells in export-led Asia. "For the second time in three years, global economic recovery is at risk," Roach said in a note to clients.

Clashes in Cairo again....

Gary Brown: Detroit could run out of cash in December

With Detroit Mayor Dave Bing preparing to explain the city's fiscal crisis tonight in a rare televised address, Council President Pro Tem Gary Brown says the situation is even worse than anyone has let on.

Bing is expected to discuss a confidential Ernst & Young report obtained by the Detroit Free Press that suggests Detroit could run out of cash by April without steep cuts to staff and public services.

That's a grim prognosis, but according to Brown, the city actually could be unable to make payroll "as early as December."

"I know the report says April, but there are certain risk assumptions that when you take those into consideration, worst case scenario you could run out (of cash) in December," Brown said this morning on WJR-AM 760.

In his speech tonight, Bing is expected to propose privatizing the city's public bus system and lighting departments, both of which have have been failing residents but reportedly cost them $100 million a year in subsidies.

Brown supports that long-term plan, but he is hoping the mayor will couple it with a short-term strategy to lay off up to 2,300 city workers if unions fail to agree to long-discussed concessions.

If Bing doesn't, City Council will.

"If the mayor tonight comes out with a plan that does not address the short-term and long-term issues, the Council is going to come out with a plan. We're going to put it in a resolution, send it to the governor and say 'We're willing to make these cuts.'"

Mlive

GE Filed 57,000-Page Tax Return, Paid No Taxes on $14 Billion in Profits!!!!

General Electric, one of the largest corporations in America, filed a whopping 57,000-page federal tax return earlier this year but didn't pay taxes on $14 billion in profits. 

The return, which was filed electronically, would have been 19 feet high if printed out and stacked. The fact that GE paid no taxes in 2010 was widely reported earlier this year, but the size of its tax return first came to light when House budget committee chairman Paul Ryan (R, Wisc.) made the case for corporate tax reform at a recent townhall meeting. "GE was able to utilize all of these various loopholes, all of these various deductions--it's legal," Ryan said. Nine billion dollars of GE's profits came overseas, outside the jurisdiction of U.S. tax law. GE wasn't taxed on $5 billion in U.S. profits because it utilized numerous deductions and tax credits, including tax breaks for investments in low-income housing, green energy, research and development, as well as depreciation of property. 

"I asked the GE tax officer, 'How long was your tax form?'" Ryan said. "He said, 'Well, we file electronically, we don't measure in pages.'" Ryan asked for an estimate, which came back at a stunning 57,000 pages. When Ryan relayed the story at the townhall meeting in Janesville, there were audible gasps from the crowd. Ken Kies, a tax lawyer who represents GE, confirmed to THE WEEKLY STANDARD the tax return would have been 57,000 pages had it been filed on paper. The size of GE's tax return has more than doubled in the last five years.

The Weekly Standard