SEQUESTER UPDATE: VERY LITTLE MOVEMENT ? President Barack Obama heads into the State of the Union this week with very limited evidence that Republicans are inclined to accede to his demand that any sequester replacement include an equal amount of spending cuts and revenue increases through tax reform. The only slight movement over the weekend came from Sen. John McCain (R-Ariz.) on Fox News Sunday. ??
Asked about the issue, McCain said: ?Would I look at some revenue closers??Maybe so. But we?ve already just raised taxes.?Why do we have to raise taxes?again?? (Never mind that hanging hope on McCain is a thin reed given the issue has always been the House). ? Meanwhile, House Minority Leader Nancy Pelosi said on Fox that there have already been ?plenty of spending cuts." She left Republicans aghast when she added: "It is almost a false argument to say we have a spending problem.? That?s hard to square with a $16 trillion debt no matter where you stand on short-term austerity.
Further illustrating the vast chasm separating the two sides with just three weeks until the sequester hits, House Majority Leader Eric Cantor tore into Obama on NBC?s ?Meet the Press,? lambasting the president as a serial tax raiser who has only one play in the playbook: ?The problem is every time you turn around, the answer is to raise taxes. ? He just got his tax hike on the wealthy. And you can't in this town every three months raise taxes. Again, every time, that's his response. ?
More Cantor: ?We've got a spending problem, everybody knows it. ? The House has put forward an alternative plan, and there's been no response in any serious way from the Senate and the White House. And it's time, we've really got to do it." (h/t the great John Bresnahan on the morning show quotes).
M.M. TAKE: Lots can change in three weeks. And neither side wants the sequester to hit because it?s deeply stupid policy. But there?s no obvious solution at hand and it?s still hard to see the GOP swallowing another tax hike of any kind.?
WARNING: CHINA SUPRPASSES U.S. AS TOP TRADING NATION ? Bloomberg: ?China surpassed the U.S. to become the world?s biggest trading nation last year as measured by the sum of exports and imports of goods, official figures from both countries show. U.S. exports and imports of goods last year totaled $3.82 trillion. ? China?s customs administration reported last month that the country?s trade in goods in 2012 amounted to $3.87 trillion. China?s growing influence in global commerce threatens to disrupt regional trading blocs as it becomes the most important commercial partner for some countries. Germany may export twice as much to China by the end of the decade as it does to France, estimated Goldman Sachs Group Inc.?s?Jim O?Neill.? http://goo.gl/XQJ15
THIS MORNING ON POLITICO PRO FINANCE ? Kelsey Snell on Jack Lew?s Cayman Islands problem ? Jon Prior on HUD?s decision to double down on a disputed fair housing rule? To learn more about Pro's subscriber-only coverage -- and to get Morning Money every day before 6 a.m. -- please contact Pro Services at (703) 341-4600 or info@politicopro.com.
GOOD MONDAY MORNING ? Grammy?s last night produced few memorable performances (Jack White was an exception). And just about every major nominated artist walked away with at least one award. Much of it was truly painful to watch (JLo?s leg notwithstanding). And as Slate?s Matt Yglesias pointed out on Twitter, Japandroids? Celebration Rock was easily the best album of the year.
DRIVING THE WEEK ? Obama delivers his State of the Union Address on Tuesday and is expected to argue for new (and recycled) spending initiatives on infrastructure and other items to try and drive faster job growth. These are not likely to pass the House. Obama will again seek to raise pressure on House Republicans to relent on their refusal to consider new revenue through tax reform as part of an alternative to the nearly $1 trillion sequester spending cuts set to hit March 1. ?
After the SOTU, Obama goes on the traditional road trip to sell his policies with stops in Asheville, N.C. on Wednesday, Atlanta on Thursday and Chicago on Friday.? ? Treasury Budget at 2:00 p.m. on Tuesday expected to show a deficit of $2 billion. ? Retail sales at 8:30 a.m. on Wednesday expected to grow 0.1 percent. ? University of Michigan Consumer Sentiment at 8:30 a.m. Friday expected to rise slightly to 74.8 from 73.8, still a weak figure
ALSO THIS WEEK: POLITICO PRO TAX BRIEFING ? POLITICO Pro holds a lunch briefing, ?Tax Policy and the State of the Union Address,? on Wednesday: ?After President Barack Obama details his plans, join members of the POLITICO Pro team for a conversation about current tax policy and prospects for reform in the tax landscape this year.?
Special Guests: Dan Alban, attorney, Institute for Justice; Rep. Charles Boustany (R-La.), chairman, Subcommittee on Oversight; Pam Olson, deputy tax leader and Washington National tax services leader, PwC; Rep. Charles Rangel (D-N.Y.), member, Ways and Means Committee and Joint Committee on Taxation; Alan Viard, resident scholar, American Enterprise Institute.? Presented by American Action Forum.
ABOUT THAT Q4 GDP DECLINE? NEVER MIND ? Per Nomura note: ?Data releases [Friday] each had a significant impact on our Q4 GDP tracking model, but on net the change was a small positive. We began the day with Q4 GDP tracking a decline of -0.1 percent, matching the BEA's advanced estimate. Better-than-expected December trade data lifted Q4 tracking to 0.6 percent, but December wholesale inventory data pushed it back down to 0.2 percent. ? The trade deficit narrowed sharply in December, much more so than the BEA's original assumption in its Q4 GDP estimate. The December trade gap was the narrowest since January 2010.?
** Presented by the American Action Forum, a center-right policy institute providing data-driven insight and solutions to today's defining domestic policy challenges. The Forum's products offer forward-thinking, relevant ideas for a better economic future with limited government. Learn more at www.AmericanActionForum.org **
TREASURY TAKES TARP LOSS -- Per SNL Financial: ?The U.S. Treasury is starting to realize heavier losses as it continues to auction its CPP investments in banks, many of which are behind on their dividend payments. Last week, the Treasury sold $295.8 million in CPP securities, taking a loss of $104.5 million before fees, a hit amounting to over a third of the principal amount auctioned. The 35 percent aggregate discount is the steepest seen thus far in the multibank auction process by a long shot. Seven out of the 11 auctioned banks are well behind on their dividend payments, further crippling the Treasury's overall return.?
SPEECH OBAMA WANTS TO GIVE ? FT?s Ed Luce channeling Obama: ?Speaker Boehner, Vice-President Biden, members of Congress, my fellow Americans: Let?s get this over with. OK, maybe that?s overstating it. But I am seriously bored of giving speeches. ? Know this America: the era of big speeches is over. ? Tonight I want to tell you what would happen if Congress took governing seriously. I figured, what the hell? I might as well say it. ?
?My fellow Americans, the?State of the Union?is OK-ish. It has certainly been worse. ? We are no longer mired in dumb wars. ? Let us give thanks for the drones. ? I hope my most ardent supporters will understand if I spend the bulk of my capital fighting the problems most Americans have in common, which are?economic. Most of the social issues are heading the right way.? http://goo.gl/5wp47
SPEECH OBAMA WILL GIVE ? Reuters? Jeff Mason and Mark Felsenthal: ?Obama will describe his plan for spurring the?economy?? offering proposals for investments in infrastructure, manufacturing, clean energy and education. ? In the annual presidential address to Congress, Obama plans to show he has not lost sight of the economic woes of middle-class Americans ? issues that dominated the 2012 election campaign but have been overshadowed recently by efforts to cut the deficit, overhaul immigration laws and curb gun violence. ? But any new spending will face tough opposition from Republicans in Congress who are focused on cutting spending and reducing the deficit.? http://goo.gl/vgPp7
TOP STORY: CORPORATE EXECS LESS BULLISH -- WSJ?s Scott Thurm on pg. A1: ?Sensing better times ahead, investors have pushed the Dow ? up this year near its record high. But a different mood is pervading U.S. companies, where executives are less optimistic about the global economy and their own prospects, and many are lowering financial forecasts. ? [C]ompanies warn that the current quarter will be more challenging, and analysts project first-quarter earnings at S&P companies will rise just 1.7 percent, Thomson Reuters says, or less than half what they were predicting at the beginning of the year. Sixty-three S&P companies have lowered their forecasts for first-quarter earnings, according to FactSet Research, while 17 have raised them, the largest disparity since the firm began tracking the data in 2006.
?Many executives see shrinking economies in Europe. Closer to home, they worry about hesitant U.S. customers, chilled by continued Washington gridlock. In a sign of executive caution, a Wall Street Journal survey of 50 S&P companies found they plan to increase investment this year by 2 percent, signaling a dearth of big growth opportunities. Through the first nine months of 2012, S&P companies boosted investment 8 percent, following a 20 percent increase in 2011.? http://goo.gl/hmVAJ
REPORT: U.S. UNDER DAMAGING CYBER ATTACK ? WP?s Ellen Nakashima: ?A new intelligence assessment has concluded that the United States is the target of a massive, sustained cyber-espionage campaign that is threatening the country?s economic competitiveness. ?? The National Intelligence Estimate identifies China as the country most aggressively seeking to penetrate the computer systems of American businesses and institutions to gain access to data that could be used for economic gain. The report, which represents the consensus view of the U.S. intelligence community, describes a wide range of sectors that have been the focus of hacking over the past five years, including energy, finance, information technology, aerospace and automotives. ?
?The assessment does not quantify the financial impact of the espionage, but outside experts have estimated it in the tens of billions of dollars. Cyber-espionage, which was once viewed as a concern mainly by U.S. intelligence and the military, is increasingly seen as a direct threat to the nation?s economic interests. ? Dating to at least the early 1980s, China has made the acquisition of Western technology ? through means licit and illicit ? a centerpiece of its economic development planning. http://goo.gl/0RlvT
ALSO FOR YOUR RADAR --
WHITE HOUSE Senior Advisor Dan Pfeiffer on the sequester: ?[T]he president's last offer to Speaker Boehner in December remains on the table ? an offer that meets the Republicans halfway on spending and on revenues, and would permanently turn off the sequester and put us on a fiscally sustainable path. We should have a debate over how to best reduce the deficit. But with only three weeks until these indiscriminate cuts hit, Congress should find a short term?package to give themselves a little more time to find a solution to permanently turn off the sequester. That package should have balance and include spending cuts and revenues.? http://goo.gl/iaBO0
ICYMI: GEORGE WILL SAYS BREAK UP THE BANKS ? WP?s George F. Will:
?In a sense, TBTF began under Ronald Reagan with the 1984 rescue of?Continental Illinois, then the seventh-largest bank. In 2011, the four biggest U.S. banks ? had 40 percent of all federally insured deposits. Today, the 5,500 community banks have 12 percent of the banking industry?s assets. The 12 banks with $250?billion to $2.3?trillion in assets total 69?percent. The 20 largest banks? assets total 84.5?percent of the nation?s gross domestic product. ?
?There is no convincing consensus about a correlation between a bank?s size and supposed efficiencies of scale. ? By breaking up the biggest banks, conservatives will not be putting asunder what the free market has joined together. Government nurtured these behemoths by weaving an improvident safety net and by practicing crony capitalism. Dismantling them would be a blow against government that has become too big not to fail.?Aux barricades!? http://goo.gl/1M9EJ
AMERICAN/US AIRWAYS NEAR MERGER ? NYT?s Jan Mouawad: ?After months of negotiations,?American Airlines?and?US Airways?appeared likely to announce a merger this week, which would create the nation?s biggest airline. ? A merger would expand American?s domestic network, particularly in the Northeast and the Southwest, and create a more formidable competitor internationally. The combined airline would jump ahead of United Airlines and Delta Air Lines. ??
?The combination would probably bring to an end the wave of consolidation that has swept the industry. Since 2001 there have been five large mergers, reducing the number of airlines to three main carriers, along with a handful of low-cost carriers like Southwest Airlines and JetBlue, and regional carriers. ? The boards of both carriers are expected to meet some time this week to approve the combination, which then needs to be approved by a bankruptcy judge in New York. A deal could be struck this week or possibly next week.? http://goo.gl/d9jgz
** Presented by the American Action Forum, a center-right policy institute providing data-driven insight and solutions to today's defining domestic policy challenges. The Forum's products are injecting forward-thinking, relevant ideas that will build a better economic future with limited government.
With a daily morning economic news briefing in your inbox, weekly regulatory burden breakdowns, an immediate monthly jobs report analysis, and consistent impactful research on key ongoing policy debates, AAF products elevate the discussions of Hill staff, agency officials, and business professionals alike.?
Led by former CBO Director, Douglas Holtz-Eakin, American Action Forum experts bring significant policy and academic experience to solving America's economic, fiscal, health care, energy, financial, education, and regulatory policy challenges with data-driven insight and creative thinking. Learn more at www.AmericanActionForum.org **
CORRECTION: A headline in a previous version of Morning Money incorrectly identified the airlines considering a merger. American Airlines and US Airways are reportedly moving toward a merger.
Source: http://feeds.politico.com/click.phdo?i=11b27a201e9d6c5f297293731e90e97a
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