Open thread: Senate to vote on debt bill at 1 p.m., or maybe not

posted at 12:09 pm on July 31, 2011 by Allahpundit
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They’re supposed to vote at 1 p.m., but according to Plouffe and another “Democrat familiar with the situation,” there’s still no bill. What’s the hold up? In all likelihood, they’re haggling over the “triggers” that’ll happen if the new Super Commission can’t agree on, or Congress won’t accept, new deficit reduction proposals later this year. Jen Rubin’s hearing the following from a Republican source on the Hill:

The second tranche works like this: If a new congressional commission introduces a plan totaling at least $1.5 trillion in cuts by Thanksgiving and it’s passed by Christmas there are no across-the-board cuts. Or, if a balanced budget amendment is passed and sent to the states, then across-the-board cuts are avoided. However, if there is no commission package passed AND the BBA is not passed and sent to the states, then across-the-board cuts of $1.2 trillion including Medicare and defense (the details of which aren’t final) go into effect. If the across-the board-cuts go into effect, the debt ceiling is only raised $1.2 trillion (likely insufficient to keep the government operating for long), meaning “we could do this all over again, depending on economic growth.” In other words, if we went to sequestration the total debt ceiling increase would be $2.1 trillion in two doses.

So there’s the BBA concession: Democrats can avoid new cuts in the second stage entirely if they pass the amendment. As for the automatic Medicare/Pentagon reductions, that’s obviously designed to make both sides in Congress think twice before rejecting the Super Commission’s recommendations. The precise formula for that is still being negotiated too. According to Jake Tapper, the White House wants fully 50 percent of the automatic cuts to affect the Pentagon and 50 percent to be spread across various other discretionary programs. GOP hawks won’t go for that, especially since the only alternative might be approving a Commission package that includes new revenues.

As I write this, the Senate has just begun its session and Reid is insisting that they’re “cautiously optimistic” about a deal but not there yet. Here’s your thread for tracking today’s drama. Exit question: How many Republican and Democratic votes will this bargain get in the House? Progressives are reportedly already murmuring about balking because of the lack of revenue in the deal, which means Boehner will need a majority of his previous Republican majority on yesterday’s vote to get this through. (Here’s one vote forecast.) I wonder if they’ll do it on the first try or, a la TARP, if it’ll take a market panic and subsequent re-vote to get it done. Stand by for updates.

Update: The post-deal spin starts before the deal is even struck:

“I don’t think we’ve been hurt at all,” McConnell said on CBS’ ‘Face the Nation’.

“The American people wanted us to do something about out-of-control spending and … the debt ceiling is going to produce what many people would believe is a complete change in the trajectory of the federal government beginning to get spending under control,” said McConnell, who is likely to be largely responsible for any package that wins muster with Congress.

Update: John Bolton sounds the alarm for hawks:

Every indication is that the debt-ceiling negotiations are leaving the defense budget in grave jeopardy. By exposing critical defense programs to disproportionate cuts as part of the “trigger mechanism,” there is a clear risk that key defense programs will be hollowed out.

While the trigger mechanism comes into play only if the Congressional negotiators fail to reach agreement on the second phase of spending cuts, it verges on catastrophe to take such a national security risk.

Defense has already taken hugely disproportionate cuts under President Obama, and there is simply no basis for expanding those cuts further. Republican negotiators must hold the line, since the Obama Administration plainly will no

Deal update: $2.4T in cuts and ceiling hikes — both in two parts

posted at 8:42 am on July 31, 2011 by Ed Morrissey
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ABC reports this morning that Congressional leaders have already begun briefing their caucuses on the eleventh-hour deal that emerged from the White House last night. Jonathan Karl notes that the deal is contingent on getting enough support from each House caucus to form a majority, and in the Senate to avoid a filibuster. We’ll come back to that in a moment, but Karl also updates the story on the deal. The topline numbers are apparently $2.4 trillion in matching spending cuts and debt-ceiling raises instead of $2.8 trillion, but now both are split into two parts:

The current framework would give the president the authority to raise the debt ceiling in two parts: roughly half of it now and the balance at the end of the year.

Each increase would be subject to a Congressional resolution of disapproval.

If Congress voted to disapprove that increase, however, the President could veto their disapproval.

The AP reported earlier on the $2.4 trillion number, too, although they say the cuts will be “slightly more” than the debt-ceiling boost. That’s still enough to get Barack Obama past the 2012 election, but not by much. It guarantees that the debt ceiling will be a 2012 election issue, although by now that was a given anyway.

However, the added McConnell wrinkle is interesting — and potentially a big win for Republicans. Essentially, Republicans get to claim credit for the cuts while laying blame for the debt increases on Obama. If they “disapprove,” Obama will veto the disapproval and end up owning all of the political baggage for the debt-ceiling increases. That’s a steep price to pay for Obama just to protect himself through the next election, although he could turn it on its ear and refuse to veto the second increase disapproval and force this fight all over again. That would, however, put the country back in “crisis” mode, and that would still be all on Obama.

This brings the deal closer to what I predicted yesterday; in fact, it almost matches it exactly. But can the leaders get the votes for it? If Obama endorses this deal, most Democrats will have no choice but to back it; after all, they have been doing the most Chicken Little screeching about the consequences of legislative failure. Boehner and McConnell will lose a significant number of Republicans, but both will probably hold a majority of their caucuses. I’d expect an agreement along these lines to pass quickly through Congress, maybe fast enough to avoid having to pass a $50 billion, two-week extension to gain time for the debate.

Update: Added “ceiling” to headline for more clarity.

Update II: McConnell tells CNN that they are “very close” to a deal. I’d interpret that to mean that they’re shopping the deal to the caucuses to make sure they can get the votes.

Reid postpones vote to “give everyone as much room as possible” for deal; Update: $2.8T in cuts and debt-ceiling boost, no tax hike?

posted at 11:45 pm on July 30, 2011 by Ed Morrissey
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The late breaking news from the nation’s capital tonight is that the late-breaking news from the capital early tomorrow morning has been postponed:

Senate Majority Leader Harry Reid (D-Nev.) announced shortly after 10 p.m. Sunday that he would postpone a vote on his bill to raise the debt limit to give negotiators at the White House more time to work.

He said the Senate would vote on his plan at 1:00 p.m. Sunday, instead of 1:00 a.m., as was originally scheduled. …

“I believe we should give everyone as much room as possible to do their work,” he said. “I spoke to the White House, quite a few times this evening, and they’ve asked me to give everyone as much time as possible to reach an agreement if one can be reached.”

The Senate adjourned at 10:13 p.m. Saturday and will reconvene at noon Sunday.

Translastion: The remarks by John Boehner and Mitch McConnell earlier today appear to have been accurate. CBS’ Mark Knoller had been tweeting earlier that Dan Pfeiffer was poo-pooing the notion that a deal was brewing, but that he has “covered WH long enough to know when pool kept late on Sat night something’s going on.” And as I predicted earlier tonight, the first stage may be a very short-term debt-limit increase to get time to finalize a deal:

If they get a tentative deal, Pres Obama will agree to short term extension of debt limit to allow time to enact deal.

If Obama told Reid to extend the vote for another 12 hours, then the White House must figure that they’re close to a deal.

Update: Jimmie Bise links to ABC, which reports the tentative parameters of the deal:
Debt ceiling increase of up to $2.8 trillion
Spending cuts of roughly $1 trillion
Vote on the Balanced Budget Amendment
Special committee to recommend cuts of $1.8 trillion (or whatever it takes to add up to the total of the debt ceiling increase)
Committee must make recommendations before Thanksgiving recess
If Congress does not approve those cuts by late December, automatic across-the-board cuts go into effect, including cuts to Defense and Medicare.

So Obama gets all of the increase in one fell swoop, but no tax hikes, apparently, plus a total of $2.8 trillion in reductions for projected spending (none of the plans actually made cuts in spending) in areas guaranteed to hurt both parties. The vote on the BBA is a win for Boehner, but only in the sense that Republicans get Democrats on the record for opposing it. It’s a deal we could have reached two weeks ago, but were never going to reach until time ran out.

Update II: Via Jeff Dunetz, National Journal’s Major Garrett also gets a similar story from his sources, but the news is a little better:
2.8 trillion in deficit reduction with $1 trillion locked in through discretionary spending caps over 10 years and the remainder determined by a so-called super committee.
The Super Committee must report precise deficit-reduction proposals by Thanksgiving.
The Super Committee would have to propose $1.8 trillion spending cuts to achieve that amount of deficit reduction over 10 years.
If the Super Committee fails, Congress must send a balanced-budget amendment to the states for ratification. If that doesn’t happen, across-the-board spending cuts would go into effect and could touch Medicare and defense spending.
No net new tax revenue would be part of the special committee’s deliberations.

I expect plenty of hyperventilating at the term “Super Committee,” but it’s basically the kind of ad hoc committee that Congress can authorize at any time. It sounds a lot like the BRAC process used by Congress to identify military bases for closure. The prohibition on net tax revenue gains is a big, big win for Republicans if it holds. I should note that Jimmie Bise in his post believes that the second round of cuts might be actual cuts; if so, then this is an even bigger win.

Note too that the second round of cuts appears to be guaranteed; if the Super Commission can’t agree on specific and precise reductions, then an across-the-board cut goes into place.

Update III: Jen Rubin hears the same deal from the offices of two “senior” Republicans on the Hill.

Sixth Quarter of Gains for Yuan

The Chinese yuan posted the sixth straight quarterly gain on the speculation that China will allow the currency to appreciate faster in order to slow growth of consumer prices.

The People’s Bank of China increased the reference rate for the yuan to 6.4716 per dollar today, allowing the currency to fluctuate 0.5 percent in either side of the target. Li Daokui, the adviser to the central bank, explained the rise of prices in June by higher costs of agricultural products and pork. China Securities Journal said today, citing the State Information Center, the inflation is estimated to be 5.3 percent in the first half of 2011 and about 4.9 percent for the whole year.

USD/CNY traded at 6.4648 today as of 11:22 GMT, fluctuating near its opening rate of 6.4644, after rising as high as 6.4680 and falling as low as 6.4625.

If you have any questions, comments or opinions regarding the Chinese Yuan, feel free to post them using the commentary form below.

Earlier News About the Chinese Yuan:
» Yuan Appreciates Above 6.5 vs. USD for a Short Time (2011-04-29)
» Chinese Yuan Appreciates with Other Asian Currencies (2011-04-02)
» China Allows Yuan Appreciate, Can It Do So? (2011-01-12)
» Yuan Rises Beyond 6.6 per Dollar as China Battles Inflation (2010-12-31)
» Can Yuan's Gains Be Limited by Demands for Slower Appreciation? (2010-12-29)

Export & Import Prices Push Aussie Higher

The Australian dollar gained today versus the euro and the Japanese yen as the advance of import and export prices prompted the speculation that the central bank will raise interest rates.

Australian import prices rose 0.8 percent in the second quarter, while export prices increased by 6.0 percent. The MSCI Asia Pacific Index of regional shares climbed 1.1 percent. The positive economic data caused most market participants to bet that the next move of the Reserve Bank of Australia will be hike, not cut.

AUD/JPY climbed from 84.87 to 85.20, while EUR/AUD fell from 1.3302 to 1.3284 as of 8:35 GMT today.

If you have any questions, comments or opinions regarding the Australian Dollar, feel free to post them using the commentary form below.

Earlier News About the Australian Dollar:
» Aussie Goes Lower as China's Manufacturing Slows (2011-07-21)
» AUD/USD Trades Higher After RBA Minutes (2011-07-19)
» Aussies Goes Down as Europe Hurts Risk Appetite (2011-07-18)
» AUD Fall with Stocks & Commodities on Concerns for Global Growth (2011-07-15)
» Aussie Heads Down on Europe Woes & China's Growth (2011-07-11)

Open thread: Senate ready to table … everything? Update: McConnell not negotiating with Reid — yet; Update: Boehner’s bill defeated, 59-41; Update: Senate to vote on Reid’s bill?

posted at 8:00 pm on July 29, 2011 by Allahpundit
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Scotty B might be off the hook. Over at the Examiner, Philip Klein hears that the Senate’s not only about to table Boehner’s bill, they’re about to table Reid’s bill. How come? Apparently it has to do with the CBO score: Reid’s plan ended up coming in lower than expected, just as Boehner’s bill did, so presumably he thinks it’s D.O.A. as is. (In fact, if you toss out Reid’s gimmicks, Boehner’s bill would save more money than his would.) Whether that’s true or just an excuse because he realizes the GOP has enough votes to filibuster, I assume this means Reid won’t bother offering his own bill at all. What he’ll do instead is meet with McConnell and Boehner tonight and come up with something that can get seven Republican votes, then file for cloture late — very late — this evening so that they’re on track for a final vote on Monday. But who knows? Things are chaotic right now. Turn on CSPAN 2 and watch the fun.

There’s already been one surprise since the House vote, in fact. From Cantor’s spokesman:

    House to vote on @SenatorReid ‘s Debt Ceiling bill tomorrow – will show not capable of passing.

They’re pushing that out now, of course, to warn Reid not to waste time by pushing his own bill. Maybe that’s why he’s supposedly ready to table his own plan. Stand by for updates. Possible RINO sightings to come!

Update: A cryptic tweet from Claire McCaskill:

    McConnell told Senator Reid at around 6pm that he will not negotiate with him. Sigh. Very Disappointing.

I think that means he won’t negotiate until Boehner’s bill is voted on. As for Reid’s own bill being tabled, Mark Knoller illuminates: “McConnell offered to let Reid vote on his deficit bill tonight. Reid agreed IF McConnell agrees to simple majority passage. Offer withdrawn.” So the GOP held out. Reid didn’t have the votes.

Update: Boehner’s bill is dead — but not on a party-line vote. It was 59/41, presumably because Senate tea partiers like DeMint and Rand Paul voted no. I’ll post the roll as soon as I have it.

Update: Another surprise: It looks like Reid wants a vote on his bill after all and is “filling the amendment tree” to make sure the GOP doesn’t try to add anything to it. But he doesn’t have the votes. Supposedly, he’s called a presser at 8:45 p.m. to whine about a GOP filibuster.

Update: McConnell’s offering to vote on Reid’s bill now but Reid won’t agree unless it’s a simple majority. He can’t get to 60. Republicans are holding the line (or at least 41 are).

Update: The six Republicans who voted against Boehner’s bill: DeMint, Lee, Paul, Vitter, and Orrin Hatch and Lindsey Graham, both of whom are in robust reelection-pander mode.

Open thread: Boehnerpalooza; Update: U.S. will probably stay AAA, says Moody’s; Update: “Put something on the table!”; Update: Bill passes, 218-210; Update: First compromise proposals emerge

posted at 5:25 pm on July 29, 2011 by Allahpundit
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The vote’s set for 5:45 p.m. ET or shortly thereafter but the outcome’s a fait accompli. I agree with Ed that tacking on a balanced-budget amendment is mainly a face-saving gesture, but so what? The Senate was going to kill Boehner’s bill last night anyway. Adding a BBA and pushing it through preserves the “we passed two bills and you passed zip” talking point in case we hit the ceiling next week and a messaging war erupts. It’s basically Cut Cap and Balance lite (very lite!), and like Tina says, it may put Democrats on the defensive by forcing them to explain their entrenched resistance to the amendment. Although, if we really wanted to do that, the best way would be to borrow Jeff Flake’s fiendishly clever ploy to attach a BBA to Reid’s bill and have the House pass that. Let Obama explain why Reid’s plan in isolation is wonderful but Reid’s plan plus a balanced budget must be defeated at all costs.

For what it’s worth, I think Guy Benson’s spot on as to how this all shakes out:

    This is my best analysis, informed by a series of discussions with Capitol Hill staffers: Mitch McConnell will use any leverage he and Speaker Boehner have amassed (I’d argue that leverage has been slightly diminished, since Boehner had to resort to a gimmick to pass his own plan through the House) to strengthen and improve Reid’s bill as much as possible. In this final negotiation, Democrats’ top concern will be protecting the president by ensuring the final deal clears the debt ceiling decks until after 2012. For their part, Republicans will fight for the deepest cuts possible, and perhaps a guaranteed vote on a BBA in the Senate. The resulting deal will likely be unacceptable to some House Republicans — especially those who are, or were, “no’s” on the Boehner deal. It will still pass the House, however, because Pelosi will be instructed to release her caucus to give Boehner the votes he needs to cobble together a majority.

They’re almost certainly going to resolve the short-term/long-term sticking point with some version of McConnell’s old proposal to let Obama raise the ceiling unilaterally unless two-thirds of both chambers vote him down. (“Do House Republicans really want to do this again in six months?” wondered NBC this morning.) They also need to hash out some sort of trigger mechanism for the new debt commission so that the two sides stay at the table and produce an actual proposal. In exchange for that, presumably, Republicans will demand and receive more front-loaded cuts and some sort of protection for defense spending. Obama said just within the past hour that he’d accept a two-day raising of the debt ceiling to keep negotiations going, so if they can’t get all this hammered out this weekend, look for that bill to pass on Monday. The two sides are only $8 billion apart once you ignore Reid’s phony war “savings,” so there’s your starting point.

Here’s the CSPAN live feed in case you’re not near a TV. We may or may not have a separate open thread for tonight’s Senate votes depending upon how soon they happen. If not, stick with this post for updates. To whet your appetite, TPM reports that Senate Democrats are eyeing no fewer than 11 Republicans as possible yes votes on Reid’s bill:

    Right now, Democrats are looking to about 11 gettable GOP votes: Sens. Olympia Snowe (R-ME), Susan Collins (R-ME), Bob Corker (R-TN), Mark Kirk (R-IL), Scott Brown (R-MA), Lamar Alexander (R-TN), Lisa Murkowski (R-AK), Kay Bailey Hutchison (R-TX), Saxby Chambliss (R-GA), Mike Crapo (R-ID), and Tom Coburn (R-OK). The last three were the Republican members of the Gang of Six deficit reduction group.

I simply can’t believe they’d help him pass it after House Democrats made Boehner choke, but there’s your drama for the evening: Will the Senate GOP cave before a compromise is even reached? If it happens, it’ll be RINOgeddon.


Update: Now they tell us.

    Moody’s Investors Service said today it expects the U.S. will get to keep its Aaa credit rating, “albeit with a shift to a negative outlook,” provided Congress and the White House can work out a deal to avoid missing payments to U.S. bondholders.

    Moody’s launched a review of the U.S. credit rating on July 13, as the fight over how to raise the current $14.3 trillion federal borrowing limit was starting to heat up. Moody’s review will finish when the debt limit is extended “for more than a short period of time,” the company said. That line gives some ammunition to Democrats and President Barack Obama, who have said any debt deal should lift the borrowing cap through the end of 2012.

Advantage: Obama and Reid. The silver lining for Republicans is that Moody’s also said it only cares about payments related to the debt service when assessing “default.” Since Treasury will have plenty of revenue to cover that, default isn’t happening.

Update: Boehner’s unloading on President Present in his floor speech. “Put something on the table! Tell us where you are!”

Update: They’ve got until Monday to hammer out a deal, right? Wrong. According to The Hill, for procedural reasons the real deadline is … tomorrow.

Update: The deed is done, 218-210. Time to switch over to CSPAN 2 and watch Reid and the Democrats go to work. I’ll post the House roll as soon as it’s available.

Incidentally, this Hill article makes it sound like the Senate might not vote on Reid’s bill. The plan, apparently, is to hold a vote right away to table Boehner’s bill and then have Reid and McConnell huddle to produce a compromise bill. That bill will be presented for a cloture vote late tonight — if they can work out the details — so that things can move forward per proper procedure before we hit the ceiling.

Update: Via Fox reporter Chad Pergram, the 22 Republicans who voted no: Amash, Bachmann, Broun, Chaffetz, Cravaack, DesJarlais, Duncan (SC), Gowdy, Graves (GA), Huelskamp, Johnson (Ill), Jordan, King (IA), Latham, Mack (FL), McClintock, Mulvaney, Paul, Scott (SC), Southerland, Walsh, Wilson (SC).

Update: From Chuck Todd, nothing surprising here: “Reid is floating more cuts up front, a promise on a VOTE for a BBA and some stronger trigger to get Senate GOP xovers.”

Medical-device manufacturer to lay off 1400 …

posted at 2:05 pm on July 29, 2011 by Ed Morrissey
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In March 2010, Nancy Pelosi warned us that we had to pass ObamaCare to “find out what’s in it.”  What is in it is jobs for China.  What’s not in it is jobs for Americans, as the Boston Globe reports today (via NewsAlert):

    Boston Scientific Corp. said yesterday that it plans to eliminate 1,200 to 1,400 jobs worldwide during the next 2 1/2 years to free money for new investments, the Natick medical device maker’s second major round of cuts since last year.

    The company would not say how many jobs will be lost in Massachusetts, where fewer than 2,000 of its 25,000 employees are based. In February 2010, Boston Scientific said it would pare 1,300 jobs worldwide, but similarly did not say where.

    Yesterday’s move, a day after Boston Scientific disclosed it was investing $150 million and hiring 1,000 people in China, raised fears that the company will gradually shift more work to foreign sites with less government oversight and lower costs than the United States.

Massachusetts state Senator James Elridge (D-Acton) reacted … predictably:

    “My sense is, sadly, that like many other American companies, they are shedding jobs in Massachusetts and adding jobs overseas,’’ Eldridge said. “And this is a company making greater profits, so it’s even more outrageous.’’

Yes, that’s what happens when the American government makes it more expensive to do business in the US.  And that’s exactly what ObamaCare did, especially with medical-device manufacturers like Boston Scientific.  Fourteen months ago, those manufacturers warned that they would have to cut costs in the US as a consequence of the new taxes imposed on their sales:

    Massachusetts medical-device companies say they’ll cut back on operational costs – and jobs – after a planned 2.3 percent tax on their products is implemented in 2013, according to a new survey.

    The Massachusetts Medical Device Industry Council, which held its annual meeting yesterday in Boston, said about 90 percent of the 100 medical-device firms said they would reduce costs due to the new tax tucked into the recently passed health-care reform bill.

It’s not as if Boston Scientific didn’t try to warn people about the problem, either.  Less than two weeks ago, they joined hundreds of other medical-device manufacturers to plead for a repeal of the tax:

    More than 420 companies including Boston Scientific, St. Jude Medical and Stryker signed on to a letter asking the U.S. Congress to repeal a planned 2.3 percent excise tax on medical devices. The tax could cost $20 billion a year and is set to take effect in 2013 as part of broad health care reform package passed last year.

    “The tax is already having an adverse impact on R&D investment and job creation, jeopardizing the U.S. global leadership position in medical device innovation,” said the letter.

    “If this tax is not repealed, it will continue to force affected companies to consider cutting manufacturing operations, research and development, and employment levels to recoup the lost earnings due to the tax,” it said. “It will also adversely impact patient access to new and innovative medical technologies,” it added.

    “The medical device excise tax is a serious burden for companies struggling to maintain America’s global leadership in the development of medical technology,” said Stephen J. Ubl, president and CEO of the Advanced Medical Technology Association (AdvaMed), a medtech lobbying group that drafted the letter.

The tax wasn’t the only problem in the bill, either, as I wrote at the time:

    Taxes on companies aren’t ultimately paid by business entities.  They get paid by the consumer in the long run.  In order to save costs, these device manufacturers will either have to lay off employees or cut back on innovative research — and likely both.  The end result will be higher prices, lower support, and less innovation to meet medical needs of consumers.

    That’s not the only problem facing the industry, either.  They now have to provide an accounting for their marketing efforts among physicians, thanks to a new “sunshine bill” that requires full disclosure of any marketing directed at physicians.  That will escalate internal costs, putting even more pressure on device makers to cut elsewhere or raise prices, or both.

The jobs will move overseas mainly to meet demand overseas.  But we could have kept the jobs and sales here, had it not been for the increasing regulatory and tax policies of the Obama administration, starting with — but hardly ending with — ObamaCare.

Update: I changed the headline, because as TNeloms points out in the comments, not all of the closed jobs are in the US.  However, given the reaction of Democrats in Massachusetts, it’s looking like a good chunk of them will be.

Allen West: Not going to get involved in Tea Party “schizophrenia”

posted at 1:25 pm on July 29, 2011 by Ed Morrissey
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Matt Lewis says, “When Laura Ingraham and Rep. Allen West are calling out the Tea Party, you know something’s up[.]” As it turns out, some of the Tea Party attack on Allen West turned out to be a misunderstanding, but West takes the opportunity to support John Boehner and remind people that Harry Reid’s plan cuts defense spending. Laura Ingraham pledges her support to West as she scolds some conservatives for attacking West for attempting the possible:



As I said on the air yesterday in an interview, any definition of “fiscal conservative” that doesn’t include Paul Ryan and Allen West is one that I can’t recognize. West defends himself and the Republican caucus well enough, so I don’t need to recap it, but West has a point when he asks what he’s voting for if people demand that he vote against Boehner 1.1.

Besides, the entire notion that the Tea Party Nation would push for a primary against West is based on a faulty media report. Judson Phillips, its founder and CEO, repudiated that notion entirely in a statement later in the morning:

    Setting the Record Straight

    There is a story in The Hill that a group of Tea Party organizations is threatening a primary challenge against a number of Freshmen Congressmen including Allen West. This story says a press release has been issued with Tea Party Nation supporting an effort to push a primary challenge against Allen West.

    Tea Party Nation has NEVER said we want to see a primary challenge against Allen West. West has been a staunch Tea Party supporter and though we strongly disagree with his support of the really terrible John Boehner plan, West has been an overwhelmingly good Congressman and we would be hard pressed to find someone better.

    The group that put this press release out used Tea Party Nation’s name without our permission. No one at TPN was shown this press release in advance. Had we been shown that press release, we would have vetoed the use of our name.

    We still call for a primary challenge to John Boehner and there maybe some Republicans who deserve a primary challenge, but Allen West is not one of those.

    To be absolutely clear, neither Tea Party Nation, nor Tea Party Nation founder Judson Phillips support this effort.

    We specifically repudiate it.

Not that there is anything wrong with primary challenges anyway, of course. That’s a perfectly legitimate way to push for policy goals, and the Tea Party in general made good use of them in 2010. However, targeting Allen West of all people for being insufficiently conservative would have been a fast track to irrelevancy, and Phillips certainly understands that.

Dollar Falls on US Growth Slowdown

The US dollar fell sharply against some of the major currencies today, following a report that showed that the economic growth in the second quarter of 2011 was worse than expected.
The greenback was trading at a rather high level against the other currencies earlier today, advancing significantly both against the euro and the Great Britain pound before 12:30 GMT today. Following the US GDP report, it slid to bearish against the euro and trades almost in the negative zone against the pound. The dollar is also down against the Japanese yen and the Swiss franc.

The gross domestic product increased at an annual rate of 1.3 percent in the Q2 2011 from the Q1 2011. The first quarter growth was revised down from 1.9 percent to 0.4 percent. The traders expected 1.8 percent gain in GDP on average. This news is very pessimistic in regards of the possible rate increases in the United States and thus is extremely negative for the US dollar.

EUR/USD went up from 1.4327 to 1.4333 as of 13:09 GMT, trading as low as 1.4229 earlier. GBP/USD is now trading near its opening level — 1.6369. USD/JPY fell from 77.69 to 77.14 today.

If you have any questions, comments or opinions regarding the US Dollar, feel free to post them using the commentary form below.

Earlier News About the US Dollar:

» Continued Debates over US Debt Push USD to New Lows vs. CHF (2011-07-25)
» Optimism for Europe Returns, Greenback Suffers (2011-07-20)
» Dollar Rises on Signs of Agreement Among US Lawmakers (2011-07-19)
» S&P Warn About Possible Downgrade of US Rating, USD Down (2011-07-15)
» Dollar Regains Strength as Bernanke Speaks (2011-07-14)

Crude Oil Tumbles, Heads for Weekly Decline, on U.S. GDP, Debt Stalemate

By Margot Habiby -

Oil fell, heading for its first weekly drop since June, as the U.S. economy grew less than estimated in the second quarter and a deadlock of U.S. lawmakers over raising the debt limit further threatened expansion.

Futures tumbled as much as 2.6 percent after the Commerce Department reported that gross domestic product climbed at a 1.3 percent annual rate, less than the 1.8 percent median estimate of economists surveyed by Bloomberg News. The Treasury Department has set an Aug. 2 deadline for increasing the U.S.’s $14.3 trillion debt limit to avert a default.

“The markets have been negative all week as we continue to watch the stalled debt ceiling talks,” said Tom Bentz, a broker with BNP Paribas Commodity Futures Inc. in New York. “The GDP number missed expectations and that’s created more pressure on oil and equities.”

Crude for September delivery fell $1.83, or 1.9 percent, to $95.61 a barrel at 12:51 p.m. on the New York Mercantile Exchange. Earlier, it touched $94.95, the lowest price since July 18 on an intraday basis. Prices are down 4.3 percent this week and have risen 19 cents in July.

Brent for September settlement on the London-based ICE Futures Europe exchange dropped 97 cents, or 0.8 percent, to $116.39 a barrel. The European benchmark contract was at a premium of $20.78 a barrel to New York futures, compared with a record close of $22.63 on July 14.

The Standard & Poor’s 500 Index fell 0.4 percent to 1,295.58, and the Dow Jones Industrial Average dropped 68.04 points, or 0.6 percent, to 12,172.07.
Technical Support

Crude in New York is extending losses as prices slide below the 50-day moving average, according to data compiled by Bloomberg. Front-month futures have settled for more than a week above this indicator, at $97.33 today. A breach of technical support usually means prices will continue to fall.

U.S. GDP increased following a 0.4 percent gain in the prior quarter that was less than the 1.9 percent previously estimated, Commerce Department figures showed today in Washington. Household purchases, about 70 percent of the economy, rose 0.1 percent in the second quarter. The U.S. is the world’s largest oil-consuming country.

House Speaker John Boehner, a Republican, delayed a planned vote on debt-limit legislation late yesterday as Senate leaders stood ready to kill the measure should it get to their chamber. Boehner’s plan failed to gain enough backing from his own party members.
Debt Vote

Senate Majority Leader Harry Reid and other Democrats are working to break the impasse over raising the debt limit by devising a strict enforcement mechanism to guarantee future deficit savings, according to party officials. President Barack Obama said today that the two parties are in “rough agreement” on a debt measure and urged senators from both parties to work together to resolve the deadlock.

“The U.S. debt talk resembles a train wreck,” Thorbjoern Bak Jensen, an analyst at Global Risk Management, said by phone from Middelfart, Denmark. “Oil is still awaiting the debt ceiling outcome.”

Oil inventories in Cushing, Oklahoma, the physical delivery point for Nymex futures, rose by 583,000, or 1.6 percent, to 36.9 million barrels on July 26 from July 16, according to data compiled by DigitalGlobe Inc. (DGI) from satellite images.

The Energy Department said July 27 that Cushing stockpiles, including floating and fixed tanks, were 37.1 million. The hub has working storage capacity of 48 million barrels, the department said on May 31.
OPEC Production

Crude production from the 12 members of the Organization of Petroleum Exporting Countries jumped 245,000 barrels a day in July from June to 29.6 million barrels a day, according to a Bloomberg News survey of producers, oil companies and industry analysts. The 11 members with output quotas, all but Iraq, pumped 26.8 million barrels a day in July, up 230,000 barrels a day from June.

Tropical Storm Don, currently in the northwestern Gulf of Mexico and heading for the Texas coastline, has shut in about 6.8 percent of oil and 2.8 percent of gas production from the gulf, according to the Bureau of Ocean Energy Management, Regulation and Enforcement.

Outer rain bands from the storm were approaching the Texas coast, the National Hurricane Center in Miami said in a bulletin at 10 a.m. local time. It’s forecast to make landfall late today or early tomorrow. Don is about 190 miles (305 kilometers) southeast of Corpus Christi, Texas, with maximum winds of 50 miles per hour, the bulletin said.

Crude may drop next week, a Bloomberg News survey showed. Thirteen of 32 respondents, or 41 percent, forecast oil will decrease through Aug. 5. Analysts were split last week, with 41 percent looking for a gain and 41 percent projecting a fall.

Oil volume in electronic trading on the Nymex was 310,035 contracts as of 12:53 p.m. in New York. Volume totaled 426,749 contracts yesterday, 31 percent below the average of the past three months. Open interest was 1.51 million contracts.

To contact the reporter on this story: Margot Habiby in Dallas at mhabiby@bloomberg.net

To contact the editor responsible for this story: Dan Stets at dstets@bloomberg.net

Rick Perry: Abortion is a states’ rights issue

posted at 5:07 pm on July 28, 2011 by Allahpundit
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A smart middle-ground play for independents, but I thought he was supposed to be the great evangelical hope. Last week he said he was “fine” with New York legalizing gay marriage before clarifying today that he’s not fine with gay marriage itself. (In fact, he supports a Federal Marriage Amendment.) Now this. Why would a social-conservative voter looking for a champion who has traction in the polls prefer him to, say, Bachmann?

Maybe Perry’s willing to shed some votes in Iowa in exchange for picking some up in New Hampshire.

Despite holding personal pro-life beliefs, Texas Gov. Rick Perry categorized abortion as a states’ rights issue today, saying that if Roe v. Wade was overturned, it should be up to the states to decide the legality of the procedure.

“You either have to believe in the 10th Amendment or you don’t,” Perry told reporters after a bill signing in Houston. “You can’t believe in the 10th Amendment for a few issues and then [for] something that doesn’t suit you say, ‘We’d rather not have states decide that.’”…

The National Right to Life Committee responded to Perry’s categorization of abortion as a states’ rights issue in a statement, saying, “Our society has an obligation to enact laws that recognize and protect the smallest members of our human family. Prior to Roe, states had the ability to enact laws that extended full legal protection to unborn children. We look forward to the day when Roe v. Wade is changed, and the states will once again have the ability to pass legislation that fully protects mothers and their unborn children.”

I’m surprised the NRLC gave him cover on that. Granted, the immediate first step after Roe is overturned would be state laws restricting abortion, but I’ve never understood that to be the end point for pro-lifers, as Perry seems to suggest by invoking the Tenth Amendment. The goal is a Human Life Amendment or, at a minimum, a federal statute banning abortion coast-to-coast. If you believe abortion is murder, why on earth would you want to let any state choose to legalize it? Huckabee made that point succinctly during the 2008 campaign; watch the end of the clip below.

Maybe Perry’s position on this mirrors his position on gay marriage. His argument for the Federal Marriage Amendment is that it would require ratification by three-fourths of the states, so the process honors the federalist principle of the Tenth Amendment even though the FMA would trump it. He could make the same argument for the HLA, although (a) a hardcore believer in the Tenth Amendment presumably wouldn’t want to see the sovereignty of any state trumped, even if three-quarters of the other states agree, and (b) if he didn’t make the same argument for the HLA, he’d have to explain why he thinks gay marriage requires a national solution but abortion doesn’t.

But maybe none of this matters. Neither the HLA nor the FMA will ever pass, so all we’re doing is polishing credentials here — and his already have plenty of polish. The latest whispers from his advisors, incidentally, claim that he’ll be in by late August. In fact, he’s already nudging Fox about a spot in the August 11 debate.

Guess who’s gotten pretty quiet this week

posted at 4:28 pm on July 28, 2011 by Ed Morrissey
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Jim Geraghty notices that the man who has spent July all over our TV screens now seems strangely … shy:

This is not a complaint, but an observation: President Obama has made no public speeches, appearances, or remarks since Monday night.

According to CBS News’ Mark Knoller, he has no public or press appearances scheduled for today.

This seems more than just a coincidence. After all, this is crunch time on the debt ceiling. If the President wanted to pick a time for conspicuous leadership, this would be it. By tomorrow, there may not be enough time to get any solution through Congress, let alone one the White House likes.

Jim speculates that Obama’s advisers may have decided that Obama’s media blitz the last three weeks has just not moved the needle, but I think it goes farther than that. I’d guess that the White House is getting worried about Obama’s relentless scolding while pursuing the no-plan strategy. The White House press corps has begun insisting on seeing Obama’s plan in writing, and since it’s not forthcoming, Obama’s team may be afraid of putting him out in public.

This could also reflect some frustration from Senate Democrats. The Reid and Boehner plans share a similar structure, and Reid might want to get the Senate into position to pass his proposal so that a conference committee can quickly produce something that will pass both chambers. Having Obama out front demagoguing the issue doesn’t help move that process along, as Republicans could filibuster Reid’s efforts if they really dig in their heels.

But Jim has the bottom line right — Obama very obviously didn’t help matters over the last three weeks with his all-mouth, no-plan strategy. If one doesn’t want to offer a solution, then perhaps the One shouldn’t be spouting off about those who do — and have.

New numbers, no surprise: Affordable Care Act anything but affordable

posted at 9:50 am on July 28, 2011 by Tina Korbe
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We already knew this, but, today, the Centers for Medicare and Medicaid released a 10-year forecast that confirms it: National health spending will grow at a rate faster than it would have if Obamacare had not passed. The Washington Times reports:

    Total spending is projected to grow annually by 5.8 percent under Mr. Obama’s Affordable Care Act, according to a 10-year forecast by the Centers for Medicare and Medicaid Services released Thursday. Without the ACA, spending would grow at a slightly slower rate of 5.7 percent annually. …

    The federal government is projected to spend 20 percent more onMedicaid, while spending on private health insurance is expected to rise by 9.4 percent. …

    “Simply put, this report states the obvious, that Americans have known for more than a year – the $2.6 trillion law only makes the fundamental problem of skyrocketing health care costs worse,” said Sen. Orrin G. Hatch, Utah Republican and ranking member of the Senate Finance Committee.

The White House responded to the report in a blog post, spinning the report to emphasize, “National Health Expenditures Reach Historic Low.” White House Deputy Chief of Staff Nancy deParle writes:

    But the report doesn’t tell the whole story.

    The Affordable Care Act creates changes to the health care system that typically don’t show up on an accounting table. We know these new provisions will save money for the health care system, even if today’s report doesn’t credit these strategies with reducing costs.

The report comes just as the legal challenges to the ACA reach the Supreme Court. At the same time, ads from RepealItNow.com report the drive for congressional signatures on a petition for repeal continues to be successful. In the ads, a congenial Mike Huckabee says the coalition needs the signatures of just four senators to make repeal possible. (Maybe those same four senators could revive Republican hopes of Cut, Cap and Balance!) That’s a stretch, of course — the best strategy for repeal remains to capture the Senate and White House in 2012 (and as much as I don’t want to admit it, that’s the best strategy for Cut, Cap and Balance, too). But the point is, grassroots organizations continue to bring the heat, even as health care reform seems to have fallen off the radar in debt and deficit discussions and in national news media, in general. This new report only provides more fodder for their efforts.

Obviously, that doesn’t mean the report is good news. Rising health costs affect us all and, frankly, seem especially daunting in light of our present economic outlook. So, as someone who has accepted that entitlement programs won’t carry me through retirement or future health problems, I find it helpful to remember that the best approach to health care to keep personal costs down, at least, is to attend to the basics — you know, right diet, regular exercise and ample sleep. Easier said than done, of course, but still worth attempting.

IBD: Boehner 1.1 beats nothing at all

posted at 9:10 am on July 28, 2011 by Ed Morrissey

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As John Boehner attempts to whip his caucus for a vote this morning on version 1.1 of his debt-ceiling bill, the Speaker gets some support from Investors Business Daily. It’s not enthusiastic support, mind you, but IBD’s editors seem to feel that the only thing worse than passion Boehner 1.1 is not passing Boehner 1.1:

President Obama may not have a plan for resolving the debt crisis, but he definitely has a goal — to shift blame for the lousy economy onto Republicans’ shoulders. Above all else, the GOP must not let that happen.

When House Speaker John Boehner released his latest plan to cut spending in exchange for raising the debt ceiling, attacks from Obama and his fellow Democrats were to be expected.

The attacks from the GOP side, however, are short-sighted at best. They risk giving Obama what he wants more than anything — a way to weasel out of responsibility for the economic mess his policies have produced.

As Charles Krauthammer did on Wednesday, the conservative IBD editorial board urges Republicans to take a long view:

As Obama’s poll numbers continue to sag, his hopes for re-election increasingly depend on his ability to convince voters that he had nothing to do with the lousy economy. And if the GOP blows the current debt standoff, Obama will be free to blame any bad economic news going forward on Republican intransigence.

Republicans can’t let themselves fall into this trap. Obama, and Obama alone, is responsible for the fact that two years after the recession ended, the unemployment rate is above 9%, growth is stagnant, inflation is rising, and federal spending and debt are exploding.

They conclude with the thought that it’s better to lose a skirmish than the entire war, but this isn’t even really losing the skirmish. It’s not a great victory either, but Republicans have changed the paradigm of deficit reduction in Washington in this debate. Tax hikes are off the table, and we’re now talking about spending reductions to address the long-term debt situation.

Passing Boehner 1.1 puts the onus back on the Democrats in the Senate to produce an alternative, which would be their very first vote on any plan in this crisis. If they pass a Reid plan, then the entire issue goes to a conference committee and we end up with a compromise on the principles of the GOP. If the Senate refuses to act at all, then it’s not the fault of Republicans when the deadline arrives.

IBD’s two-time Pulitzer Prize-winning editorial cartoonist Michael Ramirez puts the crises in spending, long-term debt, and leadership into single-frame perspective this morning:

Also, be sure to check out Ramirez’ terrific collection of his works: Everyone Has the Right to My Opinion, which covers the entire breadth of Ramirez’ career, and it gives fascinating look at political history. Read my review here, and watch my interviews with Ramirez here and here. And don’t forget to check out the entire Investors.com site, which has now incorporated all of the former IBD Editorials, while individual investors still exist.

All 53 Senate Dems sign letter to Boehner: Your bill will never pass

posted at 10:23 pm on July 27, 2011 by Allahpundit
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Awfully nice of them to give Boehner one more little boost on the eve of tomorrow’s vote by calling the House GOP’s bluff like this.

Default it is, then.

    Dear Speaker Boehner,

    With five days until our nation faces an unprecedented financial crisis, we need to work together to ensure that our nation does not default on our obligations for the first time in our history. We heard that in your caucus you said the Senate will support your bill. We are writing to tell you that we will not support it, and give you the reasons why.

    A short-term extension like the one in your bill would put America at risk, along with every family and business in it. Your approach would force us once again to face the threat of default in five or six short months. Every day, another expert warns us that your short-term approach could be nearly as disastrous as a default and would lead to a downgrade in our credit rating. If our credit is downgraded, it would cost us billions of dollars more in interest payments on our existing debt and drive up our deficit. Even more worrisome, a downgrade would spike interest rates, making everything from mortgages, car loans and credit cards more expensive for families and businesses nationwide.

    In addition to risking a downgrade and catastrophic default, we are concerned that in five or six months, the House will once again hold the economy captive and refuse to avoid another default unless we accept unbalanced, deep cuts to programs like Medicare and Social Security, without asking anything of the wealthiest Americans.

    We now have only five days left to act. The entire world is watching Congress. We need to do the right thing to solve this problem. We must work together to avoid a default the responsible way – not in a way that will do America more harm than good.

So that’s how this story ends. With the party of endless spending and entitlements unto death lecturing fiscal conservatives on how they’re leading the country into a credit downgrade. Perfecto.

Politico reports that Mitch McConnell is huddling with Biden to forge some sort of face-saving deus-ex-machina compromise. The story’s thin on details, but since McConnell’s involved and the only big remaining stumbling block is whether the final deal is short-term or long-term, I assume they’re trying to work out a way to combine McConnell’s original proposal about giving Obama more unilateral control over raising the ceiling with Boehner’s bill. E.g., instead of making next year’s debt-ceiling increase contingent upon Congress enacting the new commission’s debt-reduction recommendations, it might grant Obama the power to increase it himself in return for deeper, front-loaded cuts. But that’s just me speculating. We’ll know more tomorrow.

As a late evening dessert, here’s Chris Christie dumping on Obama for not producing his own plan. According to Rich Lowry, Boehner’s getting closer to 218 — but he’s not there yet.

ATF official: I told the White House about Fast & Furious

posted at 10:45 am on July 27, 2011 by Ed Morrissey
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What did Barack Obama know about Operation Fast and Furious, and when did he know it?  Rep. Darrell Issa’s committee uncovered an explosive nugget of information from the subpoena of ATF e-mail, which went public in yesterday’s hearings.  The ATF manager of the Phoenix office notified a White House official of Operation Fast and Furious as an update on the overall Project Gunrunner effort, connecting the controversial operation directly to the White House for the first time:

    At a lengthy hearing on ATF’s controversial gunwalking operation today, a key ATF manager told Congress he discussed the case with a White House National Security staffer as early as September 2010. The communications were between ATF Special Agent in Charge of the Phoenix office, Bill Newell, and White House National Security Director for North America Kevin O’Reilly. Newell said the two are longtime friends. The content of what Newell shared with O’Reilly is unclear and wasn’t fully explored at the hearing. …

    Congressional investigators obtained an email from Newell to O’Reilly in September of last year in which Newell began with the words: “you didn’t get this from me.”

    “What does that mean,” one member of Congress asked Newell, ” ‘you didn’t get this from me?’ ”

    “Obviously he was a friend of mine,” Newell replied, “and I shouldn’t have been sending that to him.”

Issa asked him why O’Reilly would have been asking about Project Gunrunner, the overall interdictment effort, but that’s fairly clear.  As a national-security advisor with responsibility for North America, the cartels in Mexico would be one of the primary threats O’Reilly would watch.  O’Reilly told Newell that he planned to travel to Mexico to work on the issue, which would explain the need for an update.

What’s less clear is why Newell informed him with the caveat “you didn’t get this from me”.  Why wouldn’t the ATF report on Fast and Furious results to the White House when asked?  Was Newell told to avoid linking the operation directly to the White House, or was the ATF worried about the implications of the operation even before it blew up in their faces?  Given the hostility towards Congressional oversight already demonstrated at the ATF and Department of Justice during this investigation, this looks like even more evidence that the Obama administration let the ATF run wild, perhaps on purpose.

The more important question will be who O’Reilly told at the White House about the operation.  Clearly, O’Reilly wanted the information to prepare for key meetings on a very sensitive subject.  It’s hard to believe that O’Reilly would have kept that information to himself.  Issa’s committee needs to get O’Reilly into the hearing and on the record, and it may be time to subpoena some White House records, too.

CBO: Reid bill a bigger reduction in spending … barely

posted at 11:25 am on July 27, 2011 by Ed Morrissey
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The Washington Times reports today that the duel of spending reduction bills may be won by Harry Reid.  The CBO scored Reid’s proposal better than John Boehner’s on actual reductions in spending, although neither takes a machete to the budget.  In fact, the difference is almost indistinguishable:

    The Congressional Budget Office said the plan by Senate Majority Leader Harry Reid would raise the government’s borrowing limit by $2.7 trillion, and cut $2.2 trillion from future spending, chiefly by limiting the amount of money spent on the wars in Iraq and Afghanistan. …

    The CBO analysis could give momentum to Mr. Reid’s plan, though the GOP says spending on the wars in Iraq and Afghanistan was going to drop anyway, and so shouldn’t be considered as future savings. …

    The CBO said the Senate bill’s discretionary spending cuts would result in $840 billion in lower authorized spending, and $750 billion in actual lower outlays over the next decade. The Senate bill also capped spending on the two wars at $450 billion over the next decade, which would mean spending authority is $1.2 trillion lower, and actual outlays would be $1 trillion lower.

Reid’s advertising his proposal as authorizing $2.2 trillion in cuts for a $2.7 trillion debt-ceiling increase, but most of those cuts would happen anyway.  Reid counts dollars spent on the war at current rates as part of the savings when the drawdowns occur, savings that are already in place.  Instead, his bill cuts in 10 years roughly half of the annual budget deficit, averaging $75 billion a year, which is roughly nineteen days of borrowing at current deficit rates.

That’s an improvement over Boehner’s bill, but not by much.  Boehner would save $710 billion over the next decade, averaging $71 billion a year, which accounts for 17.3 days of borrowing at the current rate of deficit spending.  That’s more of a distinction without a difference.  Boehner’s bill would only authorize a $900 billion hike in the debt limit, however, which would force a new round of cuts before next year’s election.  Unlike Reid’s proposal, Boehner assumes that the savings in war funding have already taken place.

Boehner promised to go back and rewrite the House bill to get more savings out of it.  Given these figures, that shouldn’t be a terribly difficult task.  However, at this point, it looks like the two chambers are close enough in figures and approaches to pass their bills and get a conference committee to deal with the differences, which is probably what will happen by the end of the week.

CBO: Reid bill a bigger reduction in spending … barely

posted at 11:25 am on July 27, 2011 by Ed Morrissey
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The Washington Times reports today that the duel of spending reduction bills may be won by Harry Reid.  The CBO scored Reid’s proposal better than John Boehner’s on actual reductions in spending, although neither takes a machete to the budget.  In fact, the difference is almost indistinguishable:

    The Congressional Budget Office said the plan by Senate Majority Leader Harry Reid would raise the government’s borrowing limit by $2.7 trillion, and cut $2.2 trillion from future spending, chiefly by limiting the amount of money spent on the wars in Iraq and Afghanistan. …

    The CBO analysis could give momentum to Mr. Reid’s plan, though the GOP says spending on the wars in Iraq and Afghanistan was going to drop anyway, and so shouldn’t be considered as future savings. …

    The CBO said the Senate bill’s discretionary spending cuts would result in $840 billion in lower authorized spending, and $750 billion in actual lower outlays over the next decade. The Senate bill also capped spending on the two wars at $450 billion over the next decade, which would mean spending authority is $1.2 trillion lower, and actual outlays would be $1 trillion lower.

Reid’s advertising his proposal as authorizing $2.2 trillion in cuts for a $2.7 trillion debt-ceiling increase, but most of those cuts would happen anyway.  Reid counts dollars spent on the war at current rates as part of the savings when the drawdowns occur, savings that are already in place.  Instead, his bill cuts in 10 years roughly half of the annual budget deficit, averaging $75 billion a year, which is roughly nineteen days of borrowing at current deficit rates.

That’s an improvement over Boehner’s bill, but not by much.  Boehner would save $710 billion over the next decade, averaging $71 billion a year, which accounts for 17.3 days of borrowing at the current rate of deficit spending.  That’s more of a distinction without a difference.  Boehner’s bill would only authorize a $900 billion hike in the debt limit, however, which would force a new round of cuts before next year’s election.  Unlike Reid’s proposal, Boehner assumes that the savings in war funding have already taken place.

Boehner promised to go back and rewrite the House bill to get more savings out of it.  Given these figures, that shouldn’t be a terribly difficult task.  However, at this point, it looks like the two chambers are close enough in figures and approaches to pass their bills and get a conference committee to deal with the differences, which is probably what will happen by the end of the week.

Euro Posts Weekly Gain After Two Weeks of Losses

EuroThis week was “a mixed blessing” for the euro. For the most part, the currency showed a good performance as worries about the debt crisis subsided, but by the end of the week concerns returned.

The summit of the European Union leaders caused optimism among Forex traders, who anticipated some cohesive plan for dealing with the sovereign-debt crisis. The summit ended, a plan was presented, but traders didn’t look very happy about the outcome. Surely, some market participants were pleased by the plan of the EU leaders, but most investors aren’t sure that suggested measures would help to deal with the problems in the longer run, not to mentions concerns about expected Greek default.

The shared 17-nation European currency also get boost from the US, where politicians aren’t able to reach agreement about measures to battle the US debt crisis, making the dollar less appealing than the euro. But the decline of the euro against some currencies on Friday made traders feel uncertain about the euro. Was that drop just a minor correction or a first step in a long way down? It’s hard to tell as currently the euro, along with the dollar, is one of the worst currencies to trade because of its unpredictability.

EUR/USD jumped from 1.4109 to 1.4356 and EUR/JPY advanced from 111.58 to 112.75 over this week. EUR/CHF, unlike the previous two currency pairs, hasn’t declined on Friday, rose from 1.415 to 1.768 during this week and posted a weekly high of 1.1891.

If you have any questions, comments or opinions regarding the Euro, feel free to post them using the commentary form below.

Earlier News About the Euro:

    Euro Drops as Optimism Caused by EU Summit Wanes (2011-07-22)
    Euro Jumps as EU Leaders Make Plan to Help Greece (2011-07-21)
    Is Agreement Among European Leaders Attainable? Perhaps (2011-07-19)
    Bad Monday for Euro (2011-07-18)
    Euro Recovers on US Trade Balance, Threatened By Ireland (2011-07-13)

econd Week of Gains for Yen, Will BOJ Intervene?

Japanese yenThe Japanese yen posted a second week of gains as concerns the debt problems in the US and Europe made the currency more appealing as a safe haven.

Worries about the sovereign-debt crisis intensified after the major rating agencies warned that the rollover of the Greek debt would be considered a default and spoke about possibility of the US credit rating downgrade. The yen climbed against the greenback on the speculation that the Federal Reserve will embark on a next round of the quantitative easing.

The fundamentals in Japan are positive for the yen too. The Bank of Japan said that the economy is recovering from the earthquake:

    After declining sharply following the earthquake, production has recently shown clear signs of picking up with the easing of supply-side constraints. This has resulted in an upturn in exports. Domestic private demand has also begun to pick up, with some improvement in household and business sentiment.

On the negative side, the strength of the Japanese currency is a danger by itself as a strong currency may cause an intervention of the central bank to support the nation’s exporters.

USD/JPY fell from 80.53 to 79.12 this week and posted a weekly low of 78.46. EUR/JPY slumped from 114.41 to 112.00, while GBP/JPY dropped from 128.98 to 127.63.

If you have any questions, comments or opinions regarding the Japanese Yen, feel free to post them using the commentary form below.

Earlier News About the Japanese Yen:

    Yen Declines as Chinese Economy Grows (2011-07-13)
    Growing China's Economy Saps Demand for Safety of Yen (2011-06-14)
    Yen Falls on Anticipation of Stimulus (2011-06-13)
    Yen Profits from Fears of European Crisis (2011-06-08)
    Yen Loses Strength on Poor GDP, Rebound of Stocks & Commodities (2011-05-19)

Dollar, Stocks Slide, Default Risk Rises Amid Debt-Limit Fight

 July 26, 2011, 12:46 PM EDT
By Stephen Kirkland and Nikolaj Gammeltoft

July 26 (Bloomberg) -- The dollar slid to a record low versus the Swiss franc, stocks fell and the cost of insuring U.S. debt rose to a 17-month high as President Barack Obama dueled with House Speaker John Boehner over the U.S. debt limit. Commodities recovered from earlier losses.

The dollar depreciated against all 16 major peers at 12:13 p.m. in New York and dipped below 80 centimes versus the franc. The Standard & Poor’s 500 Index lost 0.2 percent to 1,335.35 and the Stoxx Europe 600 Index fell 0.4 percent. Credit- defaults swaps on U.S. debt increased two basis point to 58 basis points. The S&P GSCI Index of 24 commodities climbed 0.6 percent, rebounding from a 0.7 percent drop, as zinc, cotton and copper added at least 1.5 percent.

Obama said yesterday the U.S. may experience a “deep economic crisis” if leaders fail to reach a deal and the nation defaults, while Boehner said the president “wants a blank check” to keep spending. Stocks were also pressured after home prices fell the most in 18 months, 3M Co. forecast earnings that trailed analyst estimates and United Parcel Service Inc. said the third quarter will be “fairly slow.”

“We have multiple sources of uncertainty, including what’s happening in Washington with the debt ceiling,” Mark Freeman, co-chief investment officer at Westwood Management Corp. in Dallas, said in a telephone interview. His firm oversees $14 billion. “The longer the uncertainty goes on, the greater the risk is that it will negatively affect businesses.”

‘Theme of the Day’

The Dollar Index, which tracks the U.S. currency against those of six trading partners, declined 0.6 percent for the fifth decline in the past six days. South Africa’s rand, Sweden’s krona and the Norwegian krone rose more than 1 percent to lead gains against the U.S. currency.

“The theme of the day is once again sell the dollar,” said Kathleen Brooks, research director at Forex.com, a unit of Gain Capital Holdings Inc., an online currency-trading company. “Playing this argument out in public, rather than trying to iron out differences behind closed doors, is causing shock waves in the markets. Every public spat is a step back from reaching an agreement by the Aug. 2 deadline.”

Obama delivered his message yesterday in a prime-time television address from the White House, while Boehner spoke afterward from the Capitol. Earlier in the day, Boehner, an Ohio Republican, and the Democratic leader in the Senate, Harry Reid of Nevada, unveiled competing plans to raise the $14.3 trillion debt limit.

Two-Step Plan

Boehner said today that his two-step plan to raise the nation’s debt limit and cut spending can pass both chambers of Congress, and he hopes Obama would sign it.

“To think about the fact that we’re a week away from a default, or a pseudo default, is a reflection of the fact that Washington is less than a place of great intellectual wisdom,” Michael Steinhardt, whose hedge funds returned more than 20 percent a year for almost three decades, said on Bloomberg Television’s “InBusiness with Margaret Brennan.”

The S&P 500 extended losses after yesterday slumping 0.6 percent. All 12 stocks in a gauge of homebuilders declined after home prices in 20 U.S. cities dropped in the year ended in May by the most in 18 months, adding to evidence the housing market is struggling. The S&P/Case-Shiller index of property values in 20 cities fell 4.5 percent from May 2010. Other data showed sales of new homes unexpectedly declined for a second month in June.

Consumer Confidence

Stocks pared losses in the U.S. after confidence among American consumers unexpectedly rose in July from an eight-month low, led by a rebound in the outlook for jobs over the next six months. The Conference Board’s index climbed to 59.5 from a revised 57.6 reading in June that was lower than previously estimated.

3M slid 4.6 percent after projecting full-year earnings that trailed analysts’ estimates after lower demand for LCD televisions curbed sales in its display and graphics business, the company’s third-biggest unit. United Parcel Service Inc. retreated 4.4 percent as the shipping company said it expects a continued “extremely sluggish” U.S. business environment.

Gains in technology companies helped limit losses in stocks. Broadcom Corp., the supplier of communications chips for Apple Inc.’s mobile devices, surged 9.5 percent after also forecasting sales that topped estimates. Netflix Inc., the mail- order and online film-rental service, tumbled 9.2 percent after its forecasts missed projections.

Baidu, India

The MSCI Emerging Markets Index climbed 0.7 percent, led by a rally in technology companies after Baidu Inc. reported earnings. India’s Bombay Stock Exchange Sensitive Index dropped 1.9 percent, the most in two weeks, as the central bank raised its benchmark interest rate more than economists estimated.

The New Zealand dollar climbed as much as 1.2 percent to a record versus the greenback as investors sought alternatives to the U.S. currency. China’s yuan advanced as much as 0.1 percent against the dollar to its strongest level in 17 years after the central bank placed the currency’s reference rate at a record high.

Copper advanced 1.6 percent as a strike at BHP Billiton Ltd.’s Escondida copper mine in Chile, the world’s biggest, entered a fifth day. Corn for December delivery rose 0.2 percent on the Chicago Board of Trade and soybean futures climbed 0.9 percent as dry weather in the Midwest worsened crop conditions in the U.S. Gold for immediate delivery was little changed at $1,613.50 an ounce following yesterday’s rally to a record $1,624.07.

--With assistance from Shiyin Chen in Singapore, John Deane, Michael Patterson, Andrew Rummer, Michael Shanahan, Garth Theunissen and Daniel Tilles in London and Jimi Corpuz and Margaret Brennan in New York. Editors: Michael P. Regan, Nick Baker

To contact the reporters on this story: Stephen Kirkland in London at skirkland@bloomberg.net; Nikolaj Gammeltoft in New York at ngammeltoft@bloomberg.net

To contact the editor responsible for this story: Nick Baker at nbaker7@bloomberg.net

Rand Near Monthly High vs. USD on Rate Difference, US Uncertainty

South African randThe South African rand rose to its highest level in more than two weeks against the US dollar today, as the rate difference attracted speculators, while they shunned uncertainty of the States.

While President Obama continues to press the Congress for the debt ceiling compromise, there’s no end seen to these prolonged debates. Next Tuesday can become one of the worst days in dollar’s history if nothing changes until that. As the global investors have the fact in mind, many of them a reluctant to keep their assets in USD. The recent behavior of the South African rand is showing an elevated interest in this currency.

On the other hand, there’s another attractive advantage in the ZAR for the foreign currency traders — its interest rate (5.5 percent compared to almost zero in the US). Being the Africa’s biggest economy, South Africa is also considered a fiscally and financially stable region, closely tied to the commodity prices (especially gold), which makes it a near-perfect target for short-term currency investments. Five days ago, the South African Reserve Bank has left the rates unchanged, signaling that the period of high rates may continue further.

USD/ZAR fell from 6.7619 to 6.6744 as of 14:53 GMT today, reaching as low as 6.6658 intraday — the maximum level since July 8th.

If you have any questions, comments or opinions regarding the South African Rand, feel free to post them using the commentary form below.

Earlier News About the South African Rand:

    Rand Weakened by Credit Rating Outlook for Greece (2011-07-05)
    Rand Weakens with Commodities on US Growth Forecast (2011-06-23)
    South African Rand Falls on Greek Crisis, Trims Losses (2011-06-20)
    South African Rand Climbs vs. Dollar on Greece's Bailout (2011-06-02)
    Rand Advances vs. Dollar on Economic Growth (2011-05-27)


This entry was posted on TopForexNews on Tuesday, July 26th, 2011 at 2:56 pm and is filed under South African Rand. You can follow any responses to this entry through the RSS 2.0 feed. You can skip to the end and leave a response. Pinging is currently not allowed.

CAD Sets New Multi-Year Record on US Crisis Expectations

Canadian DollarThe Canadian dollar expanded today, reaching a new 3-year maximum level versus the US currency, as the President of the United States warned of a serious “economic crisis”.

The loonie (as the CAD is nicknamed) reached its new record level against the US dollar today — the highest since November 2007. While there aren’t many supporting news for the Canadian dollar (except for persistently high levels of oil price), the loonie wins as an alternative to the greenback, which suffers from the debt ceiling crisis in the United States.

Sentiment for the US currency weakened after US President Barack Obama warned that a heavy economic crisis is threatening the world’s largest economy (and, consecutively, the global economy too) if no compromise is reached before August 2.

USD/CAD fell from 0.9474 to 0.9424 as of 12:47 GMT today, setting its new yearly record low at 0.9406. CAD/JPY rose from 82.56 to 82.77, while EUR/CAD went up from 1.3620 to 1.3646 today.

If you have any questions, comments or opinions regarding the Canadian Dollar, feel free to post them using the commentary form below.

Earlier News About the Canadian Dollar:

    Canadian Inflation Slows, Loonie Retreats (2011-07-22)
    CAD Reaches Three-Year High vs. USD (2011-07-22)
    BOC Rate Statement Invigorates Loonie (2011-07-19)
    Canadian Dollar Looks More Attractive After EU Stress Tests (2011-07-15)
    Loonie Declines vs. Greenback, Remains Strong vs. Majors (2011-07-12)


This entry was posted on TopForexNews on Tuesday, July 26th, 2011 at 12:53 pm and is filed under Canadian Dollar. You can follow any responses to this entry through the RSS 2.0 feed. You can skip to the end and leave a response. Pinging is currently not allowed.

Reid: I have an exciting new compromise debt deal for you radical right-win

posted at 6:00 pm on July 25, 2011 by Allahpundit
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The Corner has a rundown of Boehner’s two-step short-term proposal — lots o’ buck-passing to a commission plus some procedural chicanery a la Mitch McConnell’s proposal plus a vote on a balanced-budget amendment down the line — but I think it’s a nonstarter. The Cut, Cup, and Balance coalition has already rejected it, which, if all members abide by that, means Boehner’s bill would start without 39 GOP votes in the House and 12 Republican votes in the Senate. Maybe the CCB crowd is playing good cop/bad cop with Boehner, trying to frighten the White House and Reid into agreeing to more concessions as the deadline looms, but eyeball their membership roster. Usually they mean what they say.

As for Reid’s plan: $2.7 trillion in cuts and no tax hikes — but no entitlement reform either, and fully $1 trillion of those “cuts” are merely the savings the feds have already been counting on from winding down the wars in Iraq and Afghanistan. Obama endorsed it about an hour ago, notwithstanding his weeks-long demand for new revenue, because it ensures that the next debt-ceiling debate won’t happen until 2013 and thus achieves his main/only goal of helping him get reelected. In fact, per Ed’s post this morning, remember that as of this weekend Boehner’s short-term plan was Reid’s plan. They were going to present it as a bipartisan compromise until The One intervened and reminded Dingy Harry what’s truly important to America, namely, another four years of Barack Obama. So Reid caved, even though Obama surely would have signed Boehner’s plan, and threw this thing together as quickly and haphazardly as he could. How haphazardly? Feast your eyes.

And that’s where we are at right now. Check back in an hour or two and we’ll probably have another 15-20 new proposals to fill you in on. Via Greg Hengler, here’s Dingy’s salute to the CCB coalition, which inexplicably makes it even harder for moderate Republicans in the House and Senate to vote for his plan. Which GOPer would want to take sides against the tea party with a guy who’s dumping on them as “extremists”? Exit question: Doesn’t Reid have the upper hand on Boehner right now? We already know that the GOP caucus is split over Boehner’s proposal whereas the Democrats might support Reid’s plan fairly uniformly, especially in the Senate. It’ll be a tough sell to progressives in the House, but the fact that it doesn’t touch entitlements and that Obama’s backing it (and sure to talk it up during his speech tonight) makes things somewhat easier. If Pelosi/Hoyer can deliver 100 Democrats in the name of averting default, Boehner might be able to deliver 120 Republicans, especially now that some righties are half-praising Reid’s bill as not so bad

GOP lawmakers officially announce “imperfect” plan, in which “no side gets

posted at 5:20 pm on July 25, 2011 by Tina Korbe
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House GOP leaders were perfectly candid in their assessment of the deficit-reduction-and-debt-limit-increase plan they put before the House today.

“It’s not ‘Cut, Cap and Balance,’” House Speaker John Boehner (R-Ohio) said. “But it is built on the principles of ‘Cut, Cap and Balance’ that can pass the United States Senate, as well as the United States House.”

House Majority Leader Eric Cantor (R-Va.) echoed Boehner.

“The plan we just introduced is a well-thought-out and reasoned plan in which no side gets what it wants,” Cantor said.

As rumored, the short-term plan provides for a last-minute debt limit increase offset by even greater spending cuts with no tax increases. It also requires a vote on a balanced budget amendment — but doesn’t require that the amendment pass. The debt limit increase doesn’t carry the country through 2012, either. That means another politically-motivated round of debt limit negotiations — precisely what the president has said he doesn’t want.

“This plan is not perfect,” House GOP Whip Rep. Kevin McCarthy (R-Calif.) said. “But it shows a great contrast to what the president has put forward. The president continues to pick politics over people. His only concern when you listen to him is, he brings up the election. We’re more concerned about policies, with the direction this country is going.”

The president is scheduled to respond to Boehner’s plan at 9 p.m. tonight and the Speaker will likely respond to the president’s response.

The plan is not dreadful for a short-term deal. As many have pointed out, the no-tax part, in particular, represents a significant victory for Republicans. But the nature of the cuts aren’t clear and the debt limit increase will be upfront. The deal has already engendered fierce opposition from the “Cut, Cap and Balance” coalition. Realists might suggest time is running out for a reworked “Cut, Cap and Balance” to make its way through the House and Senate — but conservatives counter that “more of the same” in terms of a short-term deal that does nothing to ensure a balanced budget in the future betrays the American people, who sent Tea Partier after Tea Partier to Congress to combat “business as usual.”

In case anyone else has as severe a case of whiplash as I do from the this-is-the-plan, no-that-is-the-plan back-and-forth, it’s helpful to remember no plan is “the” plan until it’s written down, passed and signed. This short-term deal very well could be that, but, until it is, I’m still in the “Cut, Cap and Balance” camp. Of course, Republicans are just looking for a deal that will pass (and that’s understandable) — but, like Erick Erickson, I refuse to offer absolution to tired GOP-ers who’ve abandoned the plan. Too many Democrats have opposed a debt limit increase in the past and too many have expressed openness to a balanced budget amendment to dismiss “Cut, Cap and Balance” as extreme or to pronounce it “over, done and dead,” as Senate Majority Leader Harry Reid has tried to do. Perhaps a short-term deal will relieve the pressure of the negotiations momentarily, but it won’t solve the fundamental problems like “Cut, Cap and Balance” would. CCB is still the best plan on the table — one worth reviving and one worth fighting for.

Obama: I wish I could bypass Congress and change things on my own

posted at 4:02 pm on July 25, 2011 by Allahpundit
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Via National Journal. He’s quick to add, “But that’s not how our system works.” Doesn’t it? Bypassing Congress to whatever extent possible has been his strategy for more than a year, culminating in an unauthorized war in Libya that even his own lawyers believe is illegal. (FYI: According to Mike Mullen, that war is now indeed a “stalemate.”) Scarcely a day passes without a new op-ed by some lefty law professor arguing that the Fourteenth Amendment lets Obama raise the debt ceiling unilaterally, despite decades of congressional precedent to the contrary. And ICE has already decided to go ahead and consider factors championed by the DREAM Act in immigration cases despite the fact that the Act hasn’t passed. O may say “no we can’t” here to the suggestion of executively-imposed amnesty, but in light of the above, can you blame the La Raza crowd for thinking (and chanting) “yes we can”?

George Will, describing The One as “Huey Long with a better tailor,” has had enough:

    Inordinate self-regard is an occupational hazard of politics and part of the job description of the rhetorical presidency, this incessant tutor. Still, upon what meat doth this our current Caesar feed that he has grown so great that he presumes to command leaders of a coequal branch of government? He once boasted (June 3, 2008) that he could influence the oceans’ rise; he must be disabused of comparable delusions about controlling Congress.

    When he was a lecturer on constitutional law, he evidently skipped the separation-of-powers doctrine. But, then, because this doctrine impedes the progressives’ goal of unleashing untrammeled government, they have long loathed it: Woodrow Wilson, the first president to criticize the American founding, considered the separation of powers the Constitution’s “radical defect.”

    It has, however, rescued the nation from Obama’s preference for a “clean” debt-ceiling increase that would ignore the onrushing debt tsunami. There are 87 reasons for Obama’s temporary conversion of convenience to the cause of spending restraint — the 87 House Republican freshmen. Their inflexibility astonishes and scandalizes Washington because it reflects the rarity of serene fidelity to campaign promises.

The true stupidity of this clip, of course, is that — as with everything else — his constitutional faux-modesty is motivated by getting reelected. It’s not that he has some profound separation-of-powers objection to an executive amnesty; it’s that he knows independents would seethe at the power grab, especially on an issue as sensitive as immigration, and it’d end up hurting him badly at the polls. He’s already got the Latino vote locked up. Better, then, to play it safe with indies by paying lip service to La Raza about how his hands are tied or that he “needs a dance partner,” etc. Whatever excuse works.