Boehner Mulls Cliff Backup Plan House Speaker John Boehner has decided to develop a backup plan to avoid the so-called fiscal cliff, a strategy for averting a year-end tax increase if negotiations break down.
(…) “They seem to be so close that I’d be surprised if it fell apart,” Sen. Charles Schumer (D., N.Y.), a member of the Senate Democratic leadership team, said on a conference call with reporters. “I think the likelihood is we will get an agreement.” (…)
The administration Tuesday worked to keep Democrats from breaking ranks as Mr. Obama negotiates a deal that already includes policy proposals that members of his party oppose. White House congressional liaison Rob Nabors met with House and Senate Democrats in the Capitol to explain the president’s offer and calm rising anxieties. (…)
Discussion of the latest Obama offer was eclipsed somewhat Tuesday by the introduction of the GOP backup plan. The bill, which is expected to come to a House vote Thursday, would do nothing to block the $110 billion in spending cuts that are due to take effect Jan. 2 in defense and domestic programs—a major part of the fiscal cliff that members of both parties have been hoping to avert.
However, GOP aides said the bill would include provisions to address two other looming year-end problems.
The bill would include an extension of a provision to protect millions of middle-class Americans from paying the Alternative Minimum tax, a levy initially designed to affect only the wealthiest Americans but that was not indexed for inflation. Congress has passed a series of stopgap measures to keep that from hitting couples with moderate incomes, and the “Plan B” bill would extend that protection permanently.
The bill also would block an impending increase in the estate tax and extend the current rate of 35% on estates valued at more than $5.12 million. Without action, the estate tax would jump to 55% on all estates valued at more $1 million on Jan. 1.
White House Press Secretary Jay Carney dismissed the backup plan as something that “can’t pass the Senate and therefore will not protect middle-class families, and does little to address our fiscal challenges with zero spending cuts.”
The WSJ is not happy: A Bad Budget Deal
(…) Mr. Boehner is certainly in a tough spot, with tax rates set to rise on January 1 if Congress fails to act. His fellow Republicans haven’t helped by whining about their lack of “leverage” and publicly negotiating with themselves over the terms of their tax surrender.
We think they have more leverage than they believe if they are willing to fight on taxes into next year. But if they’re not, at least they shouldn’t associate themselves with a deal that increases spending and taxes with little or nothing tangible in return.
Let Mr. Obama own the tax increase and its measly 7.5% annual reduction in a $1.1 trillion deficit. Let the sequester take effect as planned, which at least means some spending restraint. Then engage Mr. Obama next year in trench warfare over spending and the debt limit as voters figure out that soaking the rich doesn’t begin to solve the problem. A bad budget deal is worse than no deal at all.
Housing Starts in U.S. Post Best Three Months in Four Years Builders in November capped the strongest three months for residential construction in four years and permits climbed as record-low borrowing costs buoyed the U.S. housing market.
Starts fell 3 percent to a 861,000 annual rate from a revised 888,000 annual pace in October. The number of building permits issued climbed 3.6 percent in November to an 899,000 annual rate, the most since July 2008.
Billings by architecture firms increased in November at the fastest pace in five years, a report from the American Institute of Architects showed today. The group’s billings Index climbed to 53.2 last month, the highest level since November 2007, from 52.8 in October.
The total US for-sale inventory of single family homes, condos, townhomes and co-ops remained at historic lows, with 1.76 million units for sale in October 2012, down -17.00% compared to a year ago.
The median list price in October was $189,900, the same as a year ago. The median age of inventory was down -11.81% compared to one year ago.
(…) The recovery that began in Florida more than a year ago has since spread to California, Arizona, Nevada and other parts of the West, with many of these markets registering dramatic declines in the number of properties for sale coupled with year-over-year list price increases of 10 percent of more. However, a growing number of Midwestern and “rust belt” markets are registering signs of weakness, with list prices below the levels observed last year.
FedEx Maintains Full-Year Forecast Amid Economic Concerns FedEx Corp., operator of the world’s largest cargo airline, maintained its full-year profit forecast amid growing concern that the U.S. economic growth may slow.
The Memphis, Tennessee-based company re-affirmed its full- year profit forecast of $6.20 to $6.60 a share, excluding costs associated with a voluntary buyout program. Profit will fall to $1.25 to $1.45 a share in the third quarter ending in February, FedEx said in a statement today. Analysts anticipated $1.45, the average of 22 estimates compiled by Bloomberg.
Profit in the second quarter ended Nov. 30 fell 12 percent to $438 million, or $1.39 a share, from $497 million, or $1.57, a year earlier, FedEx said. The profit, which included 11 cents in costs related to Superstorm Sandy, trailed the $1.41 average estimate.
Oracle Rises After Best Earnings Gain In 6 Quarters
Oracle Rises After Best Earnings Gain In 6 QuartersOracle found stability in a tumultuous time, reporting late Tuesday its strongest earnings growth in six quarters as revenue unexpectedly rose. The business software giant’s fiscal second-quarter earnings rose 18.5% to 64 cents a share. Analysts had expected 61 cents. Revenue rose 3% to $9.1 billion, defying forecasts for a second straight slim decline, to $9.01 billion. Software demand offset continued weakness in hardware.
Euro Boosted by S&P Greece Upgrade The euro reached a seven-month high against the dollar following a five-notch upgrade of Greece by ratings firm Standard & Poor’s, and investors welcomed progress in the U.S. budget negotiations, prompting a rise in stocks.
The euro hit its highest level since May 1 after Standard & Poor’s raised its rating on Greece to B-minus from selective default late on Tuesday. It is the highest rating S&P has given Greece since June 2011.
German Business Confidence Brightens Amid Euro-Zone Gloom
The closely watched Ifo business confidence index rose for the second straight month to 102.4 in December from 101.4 in November. (…)
The Netherlands Bureau for Economic Policy Analysis said Wednesday that the Dutch economy will contract by 1% in 2012 and shrink 0.5% in 2013, citing sluggish exports, government austerity measures and a persistent slump in the housing market. In September, it expected a 0.5% contraction in 2012 and 0.75% growth in 2013.
Elsewhere, industrial orders in Italy, which has been stuck in recession for over a year, were flat in October, data from the national statistics institute showed Wednesday. A further drop in domestic demand for industrial goods suggested the euro-zone’s third-largest economy isn’t about to turnaround. (…)
The slide resumes with October down 1.6% after September’s -1.3%.
If you ask, October construction activity cratered 5.3% in Germany (+2.4% in September), declined 1.1% in France (-0.5%), rose 1.9% in Italy (-7.75) and rose 0.5% in Spain (+0.3%).
BOE: Pound Hurting Economy The strong pound is holding back the U.K. economy, the Bank of England said, in its starkest warning yet on Britain’s diminishing export prospects.
FDI continues losing streak China expects stable growth of foreign direct investment into the country next year although FDI continued to fall in November.
The country’s FDI decreased 5.4 percent in November from a year earlier to $8.29 billion, and the pace of the drop accelerated from 0.24 percent in October, according the Ministry of Commerce on Tuesday.
Except for a 0.05 percent increase in May, the country’s FDI has been declining since November 2011, as labor costs rose and economic growth slowed.
(…) Domestic output grew by a record 766,000 barrels a day to the highest level in 15 years, government data show, putting the nation on pace to surpass Saudi Arabia as the world’s largest producer by 2020. Net petroleum imports have fallen by more than 38 percent since the 2005 peak and now account for 41 percent of demand, down from 60 percent seven years ago, moving the U.S. closer to energy independence than it has been in decades. (…)
The U.S. will produce an average of 6.41 million barrels a day this year, a 14 percent increase from 2011, according to a Dec. 11 report from the Department of Energy. It’s the biggest annual gain in the number of barrels since the industry began when Pennsylvania’s Drake well ignited the first American oil rush in 1859, department data show. Saudi Arabia pumped 9.7 million barrels a day in November, according to data compiled by Bloomberg. The Paris-based International Energy Agency said last month the U.S. is on track to become the top producer in about eight years.