11 Oct 2010 18:09:44 GMT
Source: Reuters
By Thomas Ferraro
WASHINGTON, Oct 11 (Reuters) - The Nov. 2 election may turn the U.S. Congress upside down, putting Republicans back on top and President Barack Obama's Democrats in the minority.
Polls show Republicans headed toward control of the House of Representatives and perhaps the Senate, primarily because of voter anger with the weak U.S. economy.
The loss of even one chamber would slam the brakes on the president's agenda and rev up action on conservative Republican causes, particularly tax cuts.
Here are some questions and answers about how a Republican-led House and/or Senate would handle key issues:
HOW WOULD REPUBLICAN CONTROL AFFECT THE AGENDA?
The party that controls the House or the Senate holds crucial power, taking the lead in writing bills and deciding which to bring up for a vote and when.
A Republican House could pass legislation, such as promised tax relief, on simple majority votes and without any Democratic support. But Senate Democrats could block House-passed bills, including any repeal of Obama's healthcare overhaul.
Even if Republicans win control of the Senate, they would need 60 seats to avoid a Democratic "filibuster," a procedural hurdle used to block measures in the 100-member chamber.
( 1.
1. The use of obstructionist tactics, especially prolonged speechmaking, for the purpose of delaying legislative action.
2. An instance of the use of this delaying tactic.
2. An adventurer who engages in a private military action in a foreign country.)
Republicans are not expected to get 60 seats in the Senate -- or the 67 needed to override presidential vetoes. That could cause gridlock, with Congress passing only mandatory spending bills and uncontroversial measures.
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WHAT ARE SOME REPUBLICAN PRIORITIES?
House Republican leaders will push their "Pledge to America," a governing agenda they say would create jobs, cut taxes and shrink government.
While short on specifics, the plan calls for saving $100 billion next year by scaling back spending to 2008 levels (with exceptions for the elderly and U.S. troops), ending government control of mortgage giants Fannie Mae
Obama is unlikely to sign many or any of the Republican proposals into law. But they set markers in what could be a rough fight in the final two years of the president's term.
HOW WOULD CONGRESS TACKLE THE DEFICIT?
A presidential panel is set to make recommendations on Dec. 1 on tackling the budget deficit, estimated at $1.3 trillion for the fiscal year that ended on Sept. 30. With voters alarmed about the U.S. debt load and the pace of federal spending, the deficit debate is certain to get renewed attention next year.
Republicans favor spending cuts over tax hikes but some deficit hawks say everything should be on the table.
Among possible solutions: cutting retirement benefits, reforming federally funded healthcare programs and raising taxes. But these remedies would face an uphill climb in the House and the Senate no matter who is in charge.
WHAT HAPPENS TO TAXES?
Tax cuts brought in by former President George W. Bush run out at the end of 2010, on the watch of the current Congress that ends its term in December.
If lawmakers fail to extend the cuts due to partisan differences, Republicans are certain to try to renew them in early 2011 once the new Congress starts.
Obama and most Democrats want to renew tax cuts only for individual annual incomes below $200,000 and for family incomes below $250,000. Republicans want to extend all of the tax cuts, including for the portion of any income above those levels.
WOULD REPUBLICANS REPEAL OBAMA'S HEALTHCARE LAW?
Republicans very likely will not have the votes to override an Obama veto of any legislation to repeal his healthcare law.
But they could try to cut off funding to prevent full implementation of the landmark program that passed Congress without Republican support. [ID:nN28217327]
Republican John Boehner, in line to become House speaker if his party wins control of that chamber, recently said: "I am committed to do everything I can do, and our team can do, to prevent Obamacare from being implemented."
But Ethan Siegal of the Washington Exchange, a private firm that tracks Congress for investors, said:
"It's going to be very difficult for Republicans to defund, defang, kill or impede healthcare reform legislatively."
Siegal said while Obama would veto any bill to repeal, he could also reject any measure that fails to provide funds to various federal agencies to implement the overhaul.
Failure to agree on spending bills could result in the shutting down of some agencies but that is unlikely. The bigger threats to full implementation of Obama's healthcare overhaul are public opposition and court challenges, Siegal said.
WHAT HAPPENS TO OBAMA'S WALL STREET CRACKDOWN?
Republicans want to roll back the landmark Wall Street reforms enacted in July but tinkering around the edges may be all they can muster. [ID:nN06113356]
Analysts see little to no chance of a full dismantling of the law meant to prevent a repeat of the 2007-2008 financial crisis that set off the worst U.S. recession in generations.
But Republicans are targeting specific provisions of the reforms, such as funding for the new consumer watchdog. On such narrow issues, they might get some traction.
CLIMATE-CHANGE LEGISLATION
Republicans would be positioned to reverse Democrats' already stalled drive for comprehensive climate control legislation. [ID:nN07281063]
A Republican takeover of either chamber, or even large gains by Republicans, will make it harder -- if not impossible -- for Obama to win legislation imposing mandatory reductions of greenhouse gas emissions from smokestacks and tailpipes.
That is especially true if next year's Senate is filled by more skeptics of human-induced global warming.
Obama would still have the regulatory power to steer the country away from polluting fuels such as coal and oil but Republicans could counter by trying to deny funds.
WHAT ABOUT INVESTIGATIVE HEARINGS?
If they win the House or Senate, Republicans would take over the chairmanships of powerful committees that can hold investigative hearings into administration actions, from the war in Afghanistan to the cleanup of the BP oil spill.
Republicans promise plenty of hearings, including into Obama's $814 billion economic stimulus plan.
WHAT ABOUT ENERGY LEGISLATION?
Congress might manage to pass a bill this year to reform offshore oil drilling practices in the wake of the BP spill in the Gulf of Mexico. If it does not, the effort likely would be revived next year but again face hurdles.
A Congress with more Republicans could see a renewed push to open drilling in protected areas like Alaska's wilderness.
Republicans will push for more government support for the nuclear power industry. The Obama administration has taken some steps in that direction but has made more progress conditional on achieving a broader climate change bill. Democratic cooperation would be needed for either effort to succeed.
One bill with bipartisan support that could advance: legislation requiring electric utilities to generate 15 percent of their power from renewable sources such as solar, wind, geothermal and hydroelectric by 2021. (Additional reporting by Richard Cowan and Kevin Drawbaugh; Editing by John O'Callaghan)
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Backing the backstop
U.S. housing has added problem: mortgage insurance
28 October 2011 | By Agnes T. Crane
There’s a growing chorus among U.S. legislators to get the government out of the housing business. That’s understandable given the possible $311 billion bill that Fannie Mae and Freddie Mac may rack up for taxpayers, according to a Federal Housing Finance Agency estimate on Thursday. But the recent failure of PMI Group’s mortgage insurance business is a reminder that chunks of housing’s private sector need fixing, too.
PMI, like its rivals Radian and MGIC, was once a highflier in the mortgage boom. It even sported a $4 billion market capitalization. Last week, PMI was effectively seized by the Arizona Department of Insurance. The state regulator took over its mortgage-writing unit after prohibiting it from issuing new policies. That’s a death knell in an industry that needs new premiums to counterbalance claims delivered by the housing bust.
And PMI is hardly alone. Only one of the six major home loan insurers has an investment-grade credit rating. A few are dangerously close to breaching their risk-to-capital limit of 25 to 1 - the minimum required to ensure they have enough firepower to pay claims. It took just one quarter for PMI to race through this threshold, moving from 24.4 to 1 to 58.1 to 1 by the end of June, according to CRT Capital.
The duration of the housing crisis has made life hard for mortgage insurers. They make their money by insuring lenders against future losses on mortgages that don’t come with a 20 percent down payment from the borrower. As home sales have slumped and banks become loath((Unwilling or reluctant; disinclined:)) to lend to borrowers who don’t deliver chunky down payments, the business has suffered.
But bad practices prevalent in the good years bear a good part of the blame. For instance, as lenders loosened their credit standards during the boom, many mortgage insurers felt compelled to give banks a share of their premium income. That left the insurers with a smaller cushion to weather losses from claims during the housing collapse.
If the government ever hopes to extricate itself from the business of housing finance, it needs to ensure private sector backstops are well fortified and well regulated.
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Congress reaches payroll tax-cut deal
Thu, Feb 16 02:20 AM EST
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By Richard Cowan and Thomas Ferraro
WASHINGTON (Reuters) - A payroll tax cut for 160 million Americans, set to expire at the end of this month, would be extended through December under a bipartisan deal announced early on Thursday by U.S. congressional leaders.
The accord would also renew expiring jobless benefits for millions of others and prevent a pay cut for doctors of elderly Medicare patients.
The comprehensive agreement represents a victory for President Barack Obama and his fellow Democrats in Congress, and allows Republicans to put behind them a tax debate that threatened to hurt them in the November elections.
Economists say the tax cut extension and renewal of jobless benefits should provide a lift to the U.S. economy, certain to be a key issue in the battle for control of Congress and the White House in the run-up to Election Day.
"We have reached an agreement and we're moving forward," Republican Representative Dave Camp, who headed the negotiating committee, told reporters shortly after midnight EST on Thursday.
It was not immediately clear when the House of Representatives and Senate would vote on the deal, but lawmakers hoped to do so before they leave Friday for a week-long recess.
While congressional leaders announced a deal, they said a few undisclosed details had to be resolved before the agreement could be turned into a final bill. They expressed confidence this would be done quickly.
Senator Max Baucus, a lead Democratic negotiator, said, "This is very important to a lot of people: 160 million Americans are now going to maintain their payroll tax cuts (and) a lot of folks who lost their jobs through no fault of their own are going to be receiving unemployment benefits."
Their announcement capped a long day of fits and starts, political drama and high-level negotiating.
At one point, the deal seemed in jeopardy just hours after aides said it had been struck by lead negotiators.
Democrats complained that Senate Republicans were suddenly demanding that a new restriction on physician-owned hospitals had to be eased to gain their support.
Aides said some Democratic negotiators were also reluctant to sign off on the deal because of cuts in the pensions of federal workers.
The overarching issue, however, was the proposed extension for 10 months of the payroll tax cut set to expire on February 29.
Many Republicans had initially balked at the extension while others insisted that its cost had to be offset by spending cuts to prevent an increase in the U.S. deficit.
Their positions drew fire from many fellow Republicans, who argued that the party had long been for lower taxes and that blocking a tax-cut extension could rile voters in advance of the November elections.
House Speaker John Boehner and fellow Republican leaders cleared the way for a deal on Monday when they dropped their demand that there be spending reductions to pay for the tax-cut extension.
The payroll tax was first reduced from 6.2 percent to 4.2 percent in the beginning of 2011 at the request of Obama as part of his bid to stimulate the economy.
The new deal would continue the 4.2 percent rate until the end of this year, during which it is projected to put an additional $1,000 in the pockets of the average American working family.
Analysts said opinion polls showing public disgust with a gridlocked Congress may have helped drive lawmakers, many of whom are up for re-election this year, toward a deal.
(Reporting By Thomas Ferraro; Editing by Philip Barbara)
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Jobs, factory data strengthen growth outlook
Thu, Feb 16 16:36 PM EST
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By Lucia Mutikani
WASHINGTON (Reuters) - The number of Americans filing for new unemployment benefits unexpectedly fell to a near four-year low last week, suggesting the labor market recovery was quickening.
Other data on Thursday showing solid expansion in factory activity in the Mid-Atlantic area this month and builders breaking more ground on new residential projects in January offered more evidence of a sustained momentum in the economy.
"The numbers add to the belief that the economy is shifting gears. There is just no number that is giving us a whole lot of trouble, except for consumer spending," said Joel Naroff, chief economist at Naroff Economic Advisors in Holland, Pennsylvania.
The reports are the latest in a series of fairly upbeat data and could prompt economists to further temper expectations of a sharp moderation in growth in the first quarter. Economists have also dialed down their expectations for another round of bond-buying or quantitative easing by the Federal Reserve.
Initial claims for state unemployment benefits dropped 13,000 to a seasonally adjusted 348,000, the lowest level since March 2008, the Labor Department said.
Economists polled by Reuters had forecast claims rising to 365,000. The four-week average of new claims, seen as a better measure of labor market trends, was the lowest since April 2008.
In a separate report, the Philadelphia Federal Reserve Bank said its business activity index rose to 10.2 this month from 7.3 in January as orders and shipments jumped.
Though factories in the region covering eastern Pennsylvania, southern New Jersey and Delaware hired fewer workers this month, they increased hours for existing employees, which bodes well for wage growth.
In addition, order backlogs are rising and factories are taking a bit longer to make deliveries.
"We are not seeing much indication that growth has slowed from the fourth quarter of 2011 to the first quarter of 2012," said Gus Faucher, senior economist at PNC Financial Services in Pittsburgh, Pennsylvania.
The economy grew at a 2.8 percent annual pace in the last three months of 2011, with inventories accounting for two-thirds of the rise. That left economists worrying businesses will have little appetite to add more stocks with demand not that strong.
For now, the run of solid data continues. The Commerce Department reported that housing starts rose 1.5 percent to an annual rate of 699,000 units last month, beating economists' expectations for a 675,000-unit pace.
Starts were boosted by multi-unit buildings, reflecting growing demand for rental apartments as Americans move away from homeownership. Permits for future home construction rose 0.7 percent to a 676,000-unit pace in January.
Home building is expected to add to economic growth this year for the first time since 2005.
The data and rising hopes for a deal on a second bailout package for Greece buoyed U.S. stocks, with the broader Standard & Poor's 500 index touching a nine-month high.
U.S. Treasury debt prices fell and the dollar rallied against the yen.
BRIGHTENING OUTLOOK
The data on employment, manufacturing and retail sales have also raised doubts on whether the U.S. central bank will keep its pledge to hold interest rates at ultra-low levels until at least through 2014. The Fed made its low rate commitment before January's employment report was released.
Minutes of the Fed's January 24-25 meeting released on Wednesday showed a few policymakers believed a third round of quantitative easing would be needed this year to support the U.S. economy.
"Fed policy looks more and more at odds with a brightening economic outlook," said Chris Rupkey, chief financial economist at Bank of Tokyo-Mitsubishi UFJ in New York.
"Our guess is they start normalizing their low interest rate policy sometime early next year if the data keep running like this. The economy really doesn't seem to require it at this stage."
But rising oil prices as tensions mount over Iran's nuclear program pose a major risk to the economy's increasingly upbeat outlook. Brent crude rose on Thursday for a fourth day in a row, topping a six-month high of $120 a barrel.
Last week's drop in new unemployment claims pushed them below the 350,000 level that economists normally associate with sustained strength in the labor market. Claims have declined for three straight weeks.
Job gains have exceeded 200,000 for two straight months and the unemployment rate dropped to a three-year low of 8.3 percent in January. Economists are cautiously optimistic that February will be another month of solid job gains.
Despite the improvement, considerable slack still remains. About 23.8 million Americans are either out of work or underemployed and there are no job openings for nearly three out of every four unemployed.
In a second report, the Labor Department said prices received by farms, factories and refineries edged up just 0.1 percent in January as food and energy costs fell. Wholesale prices dipped 0.1 percent in December.
But producer prices excluding food and energy rose 0.4 percent last month, the largest gain since July, after increasing 0.3 percent in December.
Wholesale prices outside of food and energy were pushed up by higher drugs costs, which accounted for about 40 percent of the increase. Higher prices for light motor trucks and household appliances also contributed.
(Additional reporting by Jason Lange; Editing by James Dalgleish)
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