NEWS,20.12.2012

US Budget talks turn frosty

Momentum stalled on Wall Street as did budget talks between Democrats and Republicans aimed at preventing the US from falling over a fiscal cliff at the end of the month. Today Republicans in Congress will vote on House Speaker John Boehner's plan to raise taxes on incomes over US$1 million, a plan President Barack Obama would veto as he's nows seeking a US$ 400,000 threshold. Officials from Obama's administration told leaders of US business and financial-services groups that negotiations with Boehner have deteriorated in the last 24 hours, Bloomberg News reported, citing a person familiar with the meeting. "The market still believes that there will be an announcement of some sort. But as the clock is ticking, the most you're going to get is a stop-gap measure," Quincy Krosby, market strategist at Prudential Financial in Newark, New Jersey. Whether those expectations will prove correct is increasingly challenging to ascertain."It is very difficult to say if the optimism out there is warranted," Alec Young, global equity strategist at S&P Equity Research in New York. "We don't know what's going on behind the scenes, and that makes it very difficult to account for all the uncertainty out there."In afternoon trading in New York, the Dow Jones Industrial Average gained 0.11 percent and the Standard & Poor's 500 Index rose 0.09 percent. The Nasdaq Composite Index slipped 0.14 percent. The latest data showed that the US economy expanded 3.1 percent in the third quarter-stronger than previously estimated, and that existing home sales rose a better-than-expected 5.9 percent in November. However, the number of Americans filing new claims for jobless benefits climbed more than predicted in the latest week."It is great to see this kind of growth, but investors know it could all disappear if there's no deal on the cliff," Todd Schoenberger, managing partner at LandColt Capital in New York. "Macro data may be on the back burner for a while." In Europe, the Stoxx 600 Index closed with a gain of almost 0.1 percent for the day. Shares in Frankfurt and Paris eked out an advance of nearly 0.1 percent, while those in the UK slipped by a similar narrow margin.UK retail sales unexpectedly shrank in November, raising concerns the nation's economic outlook is darkening. "The economic outlook has got worse and consumers are probably still really uncertain," Rob Wood, an economist at Berenberg Bank in London and a former Bank of England official, told Bloomberg. "There's no good news ahead for them in the near term."

US fiscal cliff talks falter

US President Barack Obama and House Speaker John Boehner duelled over the fiscal cliff on Wednesday, and despite narrowing differences remained stubbornly at odds over how to avoid looming tax hikes and spending cuts. Obama leaned heavily on Republicans to end the stalemate and compromise on a deficit reduction deal to avert the so-called "fiscal cliff," saying he hoped a year-end deal was possible. But Boehner pressed ahead with a controversial "Plan B" that extends tax breaks for everyone earning less than $1m per year, and said the House would pass the measure Thursday despite Obama threatening a veto."The principal that rates are going to need to go up he conceded. I said I'm willing to make some cuts," Obama told reporters. "What separates us is probably a few hundred billion dollars. The idea we would put our economy at risk because you can't bridge that gap doesn't make a lot of sense."The two sides have struggled over how to prevent tax hikes on all Americans and federal spending cuts that kick in beginning January 1.Obama has offered to extend Bush-era tax breaks for households making under $400,000 a year as part of a 10-year deficit reduction plan.Boehner presented his counter-offer of extending the tax breaks for everyone making under $1m annually. Both offers have been summarily rejected, although each side says talks are ongoing.Despite the brinksmanship pushing right up to the deadline, Obama characterized Republican refusal to acquiesce to his plan as "puzzling," adding that there was "no reason why we should" tumble over the fiscal cliff."At some point," Obama said, "there's got to be... a recognition on the part of my Republican friends that, you know: take the deal."Boehner has said he would be satisfied with a balanced $1 trillion in tax revenues and $1 trillion in spending cuts, much of it from entitlement programs like Medicare, as part of a 10-year deal.He has dismissed the latest White House offer as including $1.3 trillion in new revenues, with $850bn in net spending reductions.After Obama's White House appearance, Boehner called a snap press conference to throw down the gauntlet, saying the House would pass his "permanent tax relief" for 99.81% of Americans."Then the president will have a decision to make. He can call on the Senate Democrats to pass that bill, or he can be responsible for the largest tax increase in American history."Democratic Senate Majority Leader Harry Reid said it had no chance of passing in the chamber.Plan B has puzzled many because it offers no spending cuts - the idea is that those could be finalized early in 2013 and he could be seen as encouraging anti-tax Republicans to effectively vote for a tax hike on the wealthy."What is the speaker trying to prove?" asked an exasperated House Democratic leader Nancy Pelosi.Obama, she said, "keeps opening doors for the speaker to go through," but Boehner's vote announcement "just slammed the door in the president's face."But Pelosi was careful to say she remained optimistic about a year-end resolution that could pass both chambers of Congress."Let's be positive. We're hoping to have an agreement," she said.Boehner risks a backlash by some conservative groups who see his extension of tax breaks for those earning up to $1m as a mere "bargaining tactic" that does not come close to solving the fiscal crisis."We don't buy into the Washington-speak, suggesting that these are actually tax cuts," Andy Roth, vice president of government affairs for the the conservative Club for Growth, which opposes the bill.But Americans for Tax Reform, headed by Grover Norquist whose anti-tax pledge has been signed by most Republicans in the House, has given lawmakers the green light, saying Boehner's plan technically does not raise taxes.Top business representatives met senior Obama aides at the White House later on Wednesday including Treasury Secretary Timothy Geithner.Senior officials told the business leaders, including Tom Donohue from the US Chamber of Commerce and Tim Pawlenty of the Financial Services Roundtable, that Boehner's plan could put the US economy on a path to go over the fiscal cliff, said sources familiar with the consultations.Obama acknowledged that part of the hesitation about signing on to some of the steepest deficit reduction in decades might lie with Republican refusal to cooperate with him."But you know, at some point they've got to take me out of it and think about their voters, and think about what's best for the country," he said.

Australia abandons budget surplus plans

Australian Treasurer Wayne Swan on Thursday conceded for the first time he was unlikely to deliver a budget surplus this financial year, a backdown the opposition called "humiliating".Earlier this year, Swan declared the "deficit years of the global recession" over and since then he has insisted a surplus was on the cards, despite plunging commodities prices sending clear signs that all was not well.The government of Prime Minister Julia Gillard had forecast a surplus of Aus$1.1bn for 2012/13, hoping to salvage its flagging popularity among voters with an election due next year. Swan's climb down came after the Finance Department's latest monthly statement showed tax revenue in the first four months of the financial year was down Aus$3.9bn on expectations. "That's a really big hit to revenue, it's a huge whack to revenue," Swan told reporters. "Obviously dramatically lower tax revenue now makes it unlikely that there will be a surplus in 2012/13."He said volatility in the global market, combined with lower commodity prices and the high Australian dollar had created a "very unusual" situation."That unusual combination of events has weighed heavily on our revenues, particularly our business tax revenues," he said. Swan declined to speculate on the magnitude of any deficit."At the end of the day, I don't care about the political outcomes, I care about the economic outcomes," he said. "And the responsible course of action here in terms of the economic jargon is to let the automatic stabilisers work on the revenue side of the budget."The conservative opposition said it was another broken promise. "What this demonstrates is you just can't trust this government to manage the economy and you just can't trust this government to tell the truth," opposition leader Tony Abbott said. In the May budget, Swan announced the surplus plans funded by deep cuts to defence and foreign aid spending. He vowed an ambitious Aus$33.6bn in savings, slashing Aus$5.5bn from military spending and trimming Australia's overseas aid by Aus$2.9bn, along with a raft of other reforms to tax and welfare benefits.

Death penalty moratorium in UN

A record 111 countries voted on Thursday for a moratorium on capital punishment at a keynote UN General Assembly human rights meeting. Although not legally binding, campaigners say the vote held every two years sends a strong signal to the slowly shrinking number of nations including China, Iran and the United States that still execute prisoners.There were 111 votes in favour of a moratorium, four more than in 2010.Among the 41 countries that voted against the moratium were the United States, China, Japan, India, Iran, North Korea and Saudi Arabia. Thirty-four countries abstained. European nations have pressed hard for votes backing a moratorium. But Norway's ambassador Geir Pedersen said the growing numbers backing an end to capital punishment show "this is no longer dominated by western countries. This is a global campaign." "The importance of the vote is that it sends a very strong message to the international community across the board," Pedersen. "The General Assembly is the one place where all nations are represented and you have a strong majority in favor of a moratorium." "There is a global trend toward fewer countries executing people and for us, it is an important issue of principle," the ambassador added. Pedersen said that when he raises objections to the death penalty in bilateral talks with countries that impose capital punishment, "we have the feeling that they are on the defensive."About 150 countries now have a moratorium or an outright ban on capital punishment. Just 21 nations were reported to have carried out executions in 2011, according to rights groups.But the rights groups said the countries that still carry out executions remain hardcore. China executes thousands of prisoners a year, rights groups say, and Iran put to death more than 650 people in 2011, making it the highest per capita executioner. Some countries defended maintaining their capital punishment at a UN committee meeting last month where 110 countries voted for a moratorium. Japan said it had to keep the possibility of hanging prisoners because "heinous" crimes are still being committed. Thursday's vote was held a day after UN Human Rights Commissioner Navi Pillay called on Iraq to move toward abolishing the death penalty. Iraq executed 70 people in the first six months of this year, compared to 67 for the whole of 2011, and 18 in 2010, according to the UN mission in the country. "The number of executions so far in 2012, and the manner in which they have been carried out in large batches, is extremely dangerous, cannot be justified, and risks seriously undermining the partial and tentative progress on rule of law in Iraq," Pillay said. A world congress against the death penalty is to be held in Madrid in June.