Archive for November, 2010

Obama, Republicans in tax face-off at White House

Tuesday, November 30th, 2010 | Finance News

WASHINGTON (Reuters) – President Barack Obama faces off with Republican congressional leaders over taxes on Tuesday in a test-of-wills that could foreshadow how the White House works with the opposition party in the coming two years.

Obama will host Republicans John Boehner, the next Speaker of the House of Representatives, and Mitch McConnell, the party's leader in the Senate, as well as Democrats Nancy Pelosi, the current Speaker, and Harry Reid, the Senate Majority Leader, at 10:30 EST at the White House.

Taxes will be at the top of their agenda.

With a broad victory in November 2 elections behind them, Republicans are eager to force Democrats to agree to extend Bush-era tax cuts for wealthy Americans as well as the middle-class constituency that concerns Obama the most.

Democrats have been in disarray about how to proceed, despite an impending deadline: the tax cuts expire at the end of this year, and Obama is keen to avoid a situation in which American families making less than $250,000 a year face a tax hike on Jan 1.

To prevent that, he may have to agree to extend cuts for Americans of all income levels for one to three years -- an onerous option to many Democrats, but one that may be the most likely outcome if the two sides agree on anything at all.

Obama has said the United States cannot afford to pay the $700 billion it would cost to extend tax cuts for the rich, but he has also signaled a willingness to compromise after the "shellacking" his party received in this month's election.

The White House said a deal was unlikely to be reached at Tuesday's meeting, which Obama said he hoped would jump-start a better relationship between him and the newly empowered Republicans.

"My hope is that tomorrow's meeting will mark a first step toward a new and productive working relationship," Obama said. "Because we now have a shared responsibility to deliver for the American people on the issues that define not only these times but our future -- and I hope we can do that in a cooperative and serious way."

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Boehner and McConnell, who could become Obama's main adversaries next year, wrote in an opinion piece that their party would insist on extending tax cuts for everyone during the "lame duck" congressional session that ends this year.

Republicans will control the House and have greater strength in the Senate next year.

"If President Obama and Democratic leaders put forward a plan during the lame-duck session to cut spending and stop the tax hikes on all Americans, they can count on a positive response from Republicans," the two men wrote in a Washington Post piece published on Tuesday.

"If the president and Democratic leaders don't act before the end of the year, however, House and Senate Republicans will work to get the job done in the new Congress. But we hope it doesn't come to that."

The Republicans will put that position on the table during the meeting with Obama, which will also be attended by Vice President Joe Biden, Treasury Secretary Tim Geithner, budget director Jack Lew and other congressional leaders.

Obama invited the congressional leaders for a White House dinner earlier this month, but it was put off for scheduling reasons, which some Democrats interpreted as a Republican snub of the president's outstretched hand.

(Additional reporting by Kim Dixon and Thomas Ferraro; editing by Chris Wilson)

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India economy grows by forecast-beating 8.9 percent

Tuesday, November 30th, 2010 | Finance News

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NEW DELHI (AFP) – India's economy grew a forecast-beating 8.9 percent year-on-year in July-September, data showed Tuesday, underscoring the country's brisk recovery from the global financial crisis.

The healthy numbers brought temporary cheer to the Congress-led government, buffeted by a string of scandals including a damaging telecom corruption scam which could have cost the public treasury up to 40 billion dollars.

The robust growth, propelled by manufacturing, services and a revived farm sector, was significantly above market forecasts of 8.2 percent growth.

The expansion came despite the rapid unwinding of massive fiscal and monetary stimulus steps taken in the last few years that helped shield the country of 1.2 billion people from the global slump.

"These numbers are reassuring, especially with monetary and fiscal stimulus being withdrawn -- it shows the resilience of this recovery," D.K. Joshi, chief economist at ratings agency Crisil, told AFP.

Adding to the good news for the government, first-quarter growth was revised upwards to 8.9 percent year-on-year from 8.8 percent, data from the Central Statistical Organisation showed.

The South Asian country is the world's second fastest-growing major economy, behind regional rival China, which logged growth of 9.6 percent year-on-year in the same three-month period.

Surging vehicle and other consumer product sales helped to power the strong Indian performance, which is underpinned by rising incomes and widening access to credit.

"Private consumption growth of close to 10 percent is pretty close to a historic high," Sujan Hajra, chief economist at Mumbai brokerage Anand Rathi Financial Services, told AFP.

Manufacturing grew by 9.8 percent, construction grew by 8.8 percent while trade, hotels, transport and communication surged 12.1 percent. Farm output expanded by 4.4 percent thanks to a bountiful monsoon.

The government aims to achieve double-digit expansion within the next couple of years to reduce deeply entrenched poverty. It seeks "inclusive growth" to embrace those left behind by India's boom.

Over 40 percent of Indians still live below the poverty line of 1.25 dollars a day, compared with 16 percent in China, according to the World Bank.

The government expects the economy to expand 8.5 percent in the financial year to March 31, 2011, after growing by 7.4 percent last year.

Economists said the economy appeared on track to beat that target.

"The economy is poised to record its first annual expansion in excess of 8.5 percent since the global downturn as domestic demand continues to strengthen," said Matt Robinson, senior economist at Moody's Analytics.

India's finance secretary, Ashok Chawla, said the 1.3-trillion-dollar economy's upturn was broad-based with all sectors recovering.

The country posted average annual growth of 9.5 percent between 2006 and 2008 before the international financial slump.

Global investors have been pouring billions of dollars into India's stock market, seeking exposure to the country's strong growth, as industrialised economies are still struggling to emerge from the downturn.

Economists say India's strong performance could prompt the central bank, which has hiked interest rates six times since the start of the year, to press ahead with monetary tightening -- the most aggressive in the Asia Pacific region -- to curb inflation

Inflation, which is running at more than 8.5 percent, is sharply above the central bank's "comfort level" of four to five percent.

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AP-CNBC Poll: Cut services to balance the budget

Tuesday, November 30th, 2010 | Finance News

WASHINGTON – To ease surging budget deficits, Americans prefer cutting federal services to raising taxes by nearly 2-1 in a new poll. Yet there is little consensus on specific, meaningful steps — and a wariness about touching two gargantuan programs, Social Security and Medicare.

An Associated Press-CNBC Poll showed widespread anxiety about budget shortfalls exceeding $1 trillion a year. Eighty-five percent worry that growing red ink will harm future generations — the strongest expression of concern since AP polls began asking the question in 2008. Fifty-six percent think the shortfalls will spark a major economic crisis in the coming decade.

As for detailed cures, the poll shows little agreement — a problem that has long bedeviled lawmakers who often speak about taming federal deficits but seldom vote to do so. Given more than a dozen options for helping balance the budget, majorities backed just four: Reduce the number of federal workers, trim their salaries, cut overseas military bases and eliminate the tax deduction on home mortgage interest in exchange for lower income tax rates.

"I'm sure there's waste somewhere," said Terri Davis, 44, a travel company employee from Ashburn, Va. "But I like a lot of government programs that keep order in the streets, that do research about what's dangerous. A lot of things are worthwhile."

Budget deficits have been winning increased attention from President Barack Obama and congressional Republicans, who will control the House next year and wield increased clout in the Senate. Despite their midterm election victory, the GOP holds only a slight 44 percent to 38 percent edge in trust on the issue, with 13 percent saying they trust neither party, the poll shows.

Obama announced a pay freeze Monday for the government's 2 million nonmilitary civil servants, saying, "Getting this deficit under control is going to require some broad sacrifice."

A bipartisan deficit commission that Obama appointed is to issue a report this week, while another bipartisan panel dominated by former officials has released its own budget-balancing plan. Both groups are taking fire for considering savings from popular programs like Social Security and Medicare.

Asked to choose between two paths lawmakers could follow to balance the budget, 59 percent in the AP-CNBC Poll preferred cutting unspecified government services while 30 percent picked unspecified tax increases. Republicans leaned heavily toward service reductions while Democrats, usually staunch advocates of federal spending, were about evenly split between the two alternatives.

The results underscored the political peril legislators face in considering tax boosts, especially with the struggling economy, rampant joblessness and ascendant tea party supporters insisting Washington is too powerful.

"We've got an awfully big government and a lot of waste," said Jackie Hallock, 53, a writer from Pawleys Island, S.C. "I think we should cut taxes, not raise taxes. They're already too high."

If there's a ray of hope for policymakers, it's the expectation many have for a broadly aimed deficit-reduction effort.

Asked to consider each budget-balancing strategy separately, nearly two-thirds said tax increases will be needed to eliminate deficits and almost 8 in 10 said government services will have to be cut. A large majority of Democrats said spending cuts were inevitable, while about half of Republicans said tax increases were necessary — positions that are usually anathema for party leaders in Congress.

Combining those responses, just over half overall — 54 percent — said spending cuts and higher taxes will be needed.

"The deficit is so immense, it's going to take a combination of things," said Mark Price, 52, a retiree from Roseville, Mich.

Whatever path is chosen, 54 percent want the burden shared evenly; 38 percent want the wealthiest to bear the biggest burden.

Even so, the public is not bristling to tackle the deficit.

Of seven issues tested, the deficit was even with taxes as fifth most mentioned, well behind the economy. Forty-seven percent said the deficit should be reduced with spending cuts even if new education, health and energy programs were eliminated, while 46 percent said those programs should grow even if the red ink expands.

When it comes to culling savings from Social Security and Medicare, the public mood runs from ambivalence to distaste. The giant pension and health care programs for the elderly together comprise a third of the $3.5 trillion annual budget.

People are about evenly divided on whether to reduce Medicare and Social Security benefits for the best-off seniors and whether to raise Social Security payroll taxes on the wealthiest Americans. Nearly two-thirds oppose raising the retirement age to 69 for people to receive full Social Security benefits. Most oppose raising the retirement age even if done gradually over the next 65 years.

Clear majorities oppose eliminating the tax credit for children, cutting the number of troops or their pay and trimming education and homeland security spending. People were split about evenly over cutting farm subsidies, while more opposed reducing Pentagon weapons research. Most opposed raising the federal gasoline tax and using the money for roads.

In a reversal from last month, most people oppose extending expiring tax cuts for the richest Americans. Just 34 percent want to renew tax cuts for everyone; 50 percent prefer extending the reductions only for those earning under $250,000 a year; and 14 percent want to end them for all.

The AP-CNBC Poll was conducted by GfK Roper Public Affairs & Corporate Communications from Nov. 18-22 and involved landline and cell phone interviews with 1,000 adults chosen randomly nationwide. The margin of sampling error is plus or minus 4.3 percentage points.

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AP Polling Director Trevor Tompson and AP News Survey Specialist Dennis Junius contributed to this report.

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Online:

CNBC: http://www.cnbc.com/

AP-GfK Poll: http://www.ap-gfkpoll.com

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