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Tax cut and oil clause pass House December 14, 2011

Republicans say raising taxes will hinder efforts to create jobs in the US economy

The US House of Representatives has passed a bill to extend payroll tax cuts by tying the measure to a much-disputed oil pipeline project.

The Republican-backed bill was voted in by 234-193, but is unlikely to pass the Senate where Democrats called it “ideological candy” for conservatives.

President Barack Obama says he will veto any bill linking the tax break to the disputed Canada-to-Texas pipeline.

Republicans oppose a Democratic-backed deal urging more taxes for the wealthy.

Republican Speaker of the House John Boehner praised the bill after it passed on Tuesday, saying it could extend the payroll tax “without job-killing tax hikes”.

The White House renewed its appeal that America’s highest earners should “pay their fair share” to offset the estimated $180bn (£116bn) cost of the payroll tax cut, but made no mention of the pipeline clause.

Congress “cannot go on vacation before agreeing to prevent a tax hike on 160 million Americans and extending unemployment insurance”, White House Press Secretary Jay Carney said.

US lawmakers have been engaged in bitter partisan disputes over government spending throughout the year.

In November, the Obama administration delayed a decision to approve the Keystone XL pipeline project, which would run from the Canadian province of Alberta to refineries in Texas.

The project has met with opposition from Nebraska and environmental groups that are concerned the pipeline would pass through the Sand Hills region, which contains a major aquifer.

While Canada is behind the project, the White House has said it will reassess the pipeline route, delaying a final decision till after the 2012 presidential elections.

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How Fox News is helping Barack Obama’s re-election bid | Jonathan Freedland

Whoever wrote the political rulebook needs to start rewriting it. It used to be an iron maxim that voters’ most vital organ was neither their head nor their heart, but their wallet. If they were suffering economically, they’d throw the incumbents out. Yet in Britain a coalition presiding over barely-there growth, rising unemployment and forecasts of gloom stretching to the horizon is holding steady in the opinion polls, while in the US Barack Obama is mired in horrible numbers – except for the ones showing him beating all-comers in the election now less than 11 months away. Even though the US economy is slumped in the doldrums, some of the country’s shrewdest commentators make a serious case that Obama could be heading for a landslide victory in 2012.

How to explain such a turnaround? In the United States, at least, there is one compellingly simple, two-word answer: Fox News.

By any normal standards, Obama should be extremely vulnerable. Not only is the economy in bad shape, he has proved to be a much more hesitant, less commanding White House presence than his supporters longed for. And yet, most surveys put him comfortably ahead of his would-be rivals. That’s not a positive judgment on the president – whose approval rating stands at a meagre 44% – but an indictment of the dire quality of a Republican field almost comically packed with the scandal-plagued, gaffe-prone and downright flaky. And the finger of blame for this state of affairs points squarely at the studios of Fox News.

It’s not just usual-suspect lefties and professional Murdoch-haters who say it, mischievously exaggerating the cable TV network’s influence. Dick Morris, veteran political operative and Fox regular, noted the phenomenon himself the other day while sitting on the Fox sofa. “This is a phenomenon of this year’s election,” he said. “You don’t win Iowa in Iowa. You win it on this couch. You win it on Fox News.” In other words, it is Fox – with the largest cable news audience, representing a huge chunk of the Republican base – that is, in effect, picking the party’s nominee to face Obama next November.

This doesn’t work crudely – not that crudely, anyway. Roger Ailes, the Fox boss, does not deliver a newspaper-style endorsement of a single, anointed candidate. Rather, some are put in the sunlight, and others left to moulder in the shade. The Media Matters organisation keeps tabs on what it calls the Fox Primary, measuring by the minute who gets the most airtime. It has charted a striking correlation, with an increase in a candidate’s Fox appearances regularly followed by a surge in the opinion polls. Herman Cain and Rick Perry both benefited from that Fox effect, with Newt Gingrich, the former House Speaker, the latest: in the days before he broke from the pack, Gingrich topped the Fox airtime chart. Meanwhile, Mitt Romney cannot seem to break through a 20-to-25% ceiling in the polls – hardly surprising considering, as the league table shows, he has never been a Fox favourite.

But it works in a subtler way than the mere degree of exposure. Fox, serving up constant outrage and fury, favours bluster over policy coherence. Its ideal contributor is a motormouth not a wonk, someone who makes good TV rather than good policy. Little wonder it fell for Cain and is swooning now for Gingrich – one of whom has never held elected office while the other messed up when he did, but who can talk and talk – while it has little interest in Romney and even less in Jon Huntsman, even though both have impressive records as state governors. The self-described conservative journalist Andrew Sullivan says that the dominant public figures on the right are no longer serving politicians, but “provocative, polarising media stars” who serve up enough controversy and conflict to keep the ratings high. “In that atmosphere, you need talk-show hosts as president, not governors or legislators.”

Fox News and what Sullivan calls the wider “Media Industrial Complex” have not only determined the style of the viable Republican presidential candidate, but the content too. If one is to flourish rather than wither in the Fox spotlight, there are several articles of faith to which one must subscribe – from refusing to believe in human-made climate change, and insisting that Christians are an embattled minority in the US, persecuted by a liberal, secular, bi-coastal elite, to believing that government regulation is always wrong, and that any attempt to tax the wealthiest people is immoral. Those who deviate are rapidly branded foreign, socialist or otherwise un-American.

Some wonder if it was fear of this ultra-conservative catechism that pushed a series of Republican heavyweights to sit out 2012. “The talent pool got constricted,” says David Frum, the former George W Bush speechwriter who has been boldest in speaking out against the Foxification of his party. Fox sets a series of litmus tests that not every Republican can or wants to pass.

This affects those who run as well as those who step aside, setting the parameters within which a Republican candidate must operate. What troubles Frum is that it pushes Republicans to adopt positions that will make them far less appealing to the national electorate in November, with Romney’s forced march rightward typical. Even if Romney somehow wins the nomination, he won’t be “the pragmatic, problem-solving Mitt Romney” of yore, says Frum, but a new Foxified version. It was this process that led the former speechwriter to declare last year: “Republicans originally thought that Fox worked for us – and now we’re discovering we work for Fox.”

So far, so bad for the Republicans. Why should anyone else care? Because the Fox insistence on unbending ideological correctness turns every compromise – a necessary staple of governance – into an act of treachery. The Republican refusal, cheered on by a Fox News chorus, to raise the US debt ceiling this summer, thereby prompting the downgrading of America’s credit rating, is only the most vivid example. The larger pattern is one of stubborn, forced gridlock, paralysing the republic even now, at a moment of global economic crisis.

The problem is compounded by a wilful blindness towards the facts. Ari Rabin-Havt of Media Matters says Fox has created a “post-truth politics”, which is happy to ignore and distort basic empirical evidence. To take one example, Fox pundits constantly repeat that “53% of Americans pay all the tax”. In fact, 53% pay all the federal income tax – but many, many more pay so-called payroll taxes. It’s hard for a nation to make the right policy decisions if the public is misled on the basic facts. And misled they certainly are. A series of surveys has proven that Fox viewers are woefully ignorant of current affairs, the latest study revealing that it is actually better to consume no news than to watch Fox: you end up better informed.

The extremism, anger, paranoia and sense of victimhood that Fox incubates are all unhealthy for the United States. But it’s inflicting particular damage on the Republican party, which could well lose a winnable election because of its supine relationship to a TV network. It turns out it is not liberals who should fear the Fox – it’s conservatives.

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Obama Says Fixing US Economy Will Take Time December 11, 2011

U.S. President Barack Obama says fixing the American economy could take years, calling it “a long term process.”

In a television interview to be broadcast on Sunday, Obama said the structural problems in the economy have been building for two decades and that repairing them would take more than one term in office and “probably take more than one president.”

He described  himself as “the captain of a ship going through really bad storms.” Excerpts of the interview were released by the network before its airing.

The U.S. economy has recently showed signs of improvement with the unemployment rate dropping from nine percent to 8.6 percent but it remains far above a normal traditional rate of four or five percent.  The jobless rate is seen as a major factor in whether Mr. Obama can win re-election to another four-year term next November.

The president once again called on Congress to approve his nominee, Richard Cordray, to head a new consumer protection agency. In the interview he repeated comments made Saturday during his weekly address that Americans need an advocate against “dishonest businesses” and their “unscrupulous practices.”

 

Some information for this report was provided by AP, AFP and Reuters.

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Dread of euro meltdown stalks US economy

Just when things were starting to look up, the euro crisis is back in the headlines.

The American economy has been riding high on a wave of moderately good news.

The unemployment rate is at its lowest level in two and a half years, manufacturing appears to be picking up and early reports suggest that the holiday shopping season is off to a strong start.

But whatever recovery there is could be derailed by a looming crisis: Europe’s debt drama.

America’s finances are closely tied to what happens across the Atlantic, and the picture is not rosy.

“The situation in the euro area is rapidly deteriorating and contagion is spreading,” said Pier Carlo Padoan, the chief economist of the Organisation for Economic Co-operation and Development (OECD).

The OECD recently released its semi-annual report on the global economy, which predicted that America could follow the eurozone into recession if Europe’s debt crisis worsens.

Trade tremors

The Paris-based think tank also reduced its growth forecast for the world’s largest economy to 2% in 2012.

Many US industries depend on demand for their goods in Europe for growth

Just six months earlier it was expecting an expansion of 3.1%.

The eurozone is the single biggest customer for American goods, so if they’re not buying, US businesses suffer.

General Motors has already taken a hit. In November, the Detroit car giant reported a 12% drop in third-quarter earnings. The company blamed much of that decline on slower sales and higher costs in Europe.

“Clearly, things have deteriorated,” said GM Chief Financial Officer Dan Ammann when the numbers were released.

“We need to adjust to the new reality.”

The appliance maker Whirlpool is also struggling. With demand slacking off in Europe the company is planning to lay off more then 5,000 workers in North America and Europe.

“We are taking necessary actions to address a much more challenging global economic environment,” Whirlpool chief executive Jeff Fettig said.

‘Shattering’

Small companies are not immune to potential eurozone fallout either.

Continue reading the main story

Amy Galper founded the organic cosmetics company Buddha Nose. Roughly a quarter of her profits come from Europe.

In a beauty pop-up shop in New York City’s West Village, Ms Galper chatted with Kim D’Amato, the brains behind the skincare line Priti NYC.

Ms D’Amato spends part of her year in France so she can be closer to overseas clients.

Surrounded by creams that promise to smooth away stress and tension, neither woman can ignore the fear of what a meltdown in Europe could mean for their businesses.

“I would say that most of the people I sell to are small businesses,” says Ms D’Amato. “So it would be shattering.”

Ms Galper, whose sales to Japan dried up after its devastating earthquake and tsunami in March, took the pre-emptive decision to cut her inventory – just in case.

“I’m kind of being conservative to be honest,” Ms Galper says. “I’m not going to stock up too much because I don’t want to have an overstock of things.”

Follow the money

But even if exports to Europe did dry up overnight, there are more dire threats out there.

President Obama has dispatched Treasury Secretary Timothy Geithner to Europe for talks with leaders

“More important are the financial linkages that could really hurt the economy,” warns Carey Leahey, managing director of Decision Economics.

Put simply: a complete European meltdown could kick off a chain reaction that might lead to a global credit crisis.

Investors are already spooked and their fear has been driving down the share prices of some of the biggest names on Wall Street.

JP Morgan closed down 1.7% on Tuesday, despite being considered one of the strongest American banks.

So far, the worst has been averted.

The collapse of the medium-sized broker MF Global last month and the bailout of the Franco-Belgian bank Dexia in October has not come anywhere close to causing the kind of damage seen after Lehman Brothers collapsed.

But last week’s action by America’s Federal Reserve to band together with other nations’ central banks to lower the cost of borrowing dollars suggests that another credit crunch could be lurking, making it harder for businesses and individuals to get loans.

That is when Europe’s problems become everyone’s problems.

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China WTO Anniversary Marked by Progress, Challenges

It was 10 years ago this Sunday, Dec. 11th, when China joined the World Trade Organization.

Since then, the country has grown to become the world’s second largest economy and millions of Chinese have been lifted out of extreme poverty. But while China made dramatic reforms after joining the global trade club, analysts say the process of moving away from being a state-planned to a more open economy has not been a definitive success, and many challenges remain.

The view from Beijing

From China’s perspective, the past decade has been a period of historic change.

According to a recent opinion piece in the state-run China Daily, since becoming a WTO member, China has become the world’s number one investment destination, with outbound investment nearly doubling every two years since 2002. Chinese companies, the article adds, are increasingly making their mark, with 54 now listed among the world’s Fortune 500 companies, compared to 12 when it joined in 2001.

Such rapid growth has had a dramatic impact on the global economy and surprised Chinese officials.

“I have to say that exceeds far more what we expected at that time, especially the size of China’s economy, the size of China’s exports and imports, and the market expansion of some of the industries, like cars, from two million to 18 million within ten years,” says Long Yongtu, chief negotiator of China’s accession to the WTO.

Lingering U.S. trade deficit

But China’s economic rise comes at a cost to the United States and other traditional manufacturing nations. The country’s massive production of inexpensive exports means other nations’ goods are undercut, causing their industries to suffer.

U.S. exports to China are growing, but the trade deficit with China has boomed. There is also concern among WTO member nations that while Chinese companies are gaining more access to the global economy, foreign companies in China are having a different experience.

Michael Punke, U.S. ambassador to the World Trade Organization, says that over the past five years other members of the WTO have seen a troubling trend of intensified state intervention in the Chinese economy.

Many of the trade disputes with China can be traced, he says, to Chinese policies that promote or protect state-owned and domestic enterprises.

Patrick Mulloy, a member of the U.S.-China Economic and Security Review Commission, says the issue of forced technology transfers – the contract-based acquisition rather than domestic development of new technologies – is of particular concern.

“The government will say, you want to be a friend of China, put more manufacturing here, put more research and development here, be a friend of China, help us grow our economy,” he says. “And the companies will say, ‘Well, I might be able to afford to give them this type of technology because I am really holding this part back,’ but then you have 100 companies transferring technology and helping China move up the food chain. It’s good for China and if I were them I would be doing the same thing, but it’s not good for us and it’s contrary to China’s WTO commitments.”

Investor complaints

Foreign companies operating in China frequently raise concerns about the myriad licenses that businesses are required to apply for, and the problems faced receiving them in a fair and timely manner.

Undervaluation of Chinese currency has also long been considered an obstacle to free trade, and U.S. lawmakers are working to pass legislation that seeks to punish Beijing for keeping its currency artificially low, which makes the cost of its exports cheaper.

China’s industrial subsidies also remain a contentious issue, which, competitors say, make its products cheaper and more attractive to buyers.

And despite Beijing’s 2006 pledge to allow foreign credit card companies access to its market, they have yet to deliver on the promise.

Mulloy says such barriers to trade demand action.

“These are things this country really has to get to grips with and understand,” says Mulloy. “China is not our enemy, but they have a strategy and they are moving their people up a food chain of economic growth as quickly as they can and we have no counter strategy and that’s our problem.”

A topic of debate

With U.S. unemployment high and the economy waffling, trade with China has become an increasingly prevalent subject of debate in U.S. campaign politics — a topic that’s likely to persist as the 2012 presidential election draws near.

Mitt Romney, one candidate for the Republican Party nomination, has repeatedly criticized China’s trade practices and says the U.S. is already in a trade war with the world’s second largest economy.

But Daniel Ikenson of the CATO Institute, a libertarian think tank headquartered in Washington, D.C., says these disputes are just part of the process and a good reason to have China in the WTO.

“The relationship is maturing. The world’s second largest and largest economy has grown, [and] there are going to be frictions, they are going to be complaints,” he says. “We’ve had many more trade disputes with Europe and Canada than with China. That’s the way mature relations settle their differences.”

He cites growing social unease in China and the government’s ability to maintain control as a greater concern. While China continues to see rapid economic growth, there is also growing public discontent with corruption, environmental pollution and property policies and real estate properties.

If China implodes, Ikenson says, that will really have an adverse effect on the rest of the global economy.

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