Spending Daily

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Spending Daily |  July 17, 2012

 

U.S. Economy: “from muddling to near-stagnation”
The Wall Street Journal reports, “Another disappointing retail sales report prompted some economists to cut the second-quarter U.S. GDP again. Stephen Stanley, chief economist at Pierpont Securities, now sees 0.6% growth rather than 1% previously predicted. ‘As you can see, I am running out of room with regard to being above zero. The economy has downshifted from muddling to near-stagnation.’ …The problem with an economy at stall speed is it’s very susceptible to any kind of outside shock. Between the never-ending euro crisis, the so-called ‘fiscal cliff’ here in the U.S., the odds of a hard landing in China, there are far too many outside shocks lurking around for comfort’s sake.”  On top of that,

Bloomberg reports, “Retail sales in the U.S. unexpectedly fell for a third month in June as limited employment gains took a toll on consumers. The 0.5 percent drop followed a 0.2 percent decrease in May, Commerce Department figures showed today in Washington…A cooling job market is sapping the household spending that makes up 70 percent of the economy, curbing sales at retailers such as Target Corp. (TGT) and Macy’s Inc. (M).”

Obama Administration MissesAnotherBudget Deadline 
The Hill reports, “The Obama administration has missed another annual budget deadline, failing to send Congress a mid-session budget review before July 16.” Senate Budget Committee Ranking Member Jeff Sessions (R-Ala.) commented on the missed deadline saying, “Combined with $5 trillion in debt accrued since 2009, and the refusal of his Senate majority to produce a budget for three years in the midst of crisis, it reveals a troubling detachment from the financial future of our Republic.”  The article also reports that House Budget Committee Chairman Paul Ryan (R-Wis.) “pointed out that the mid-session review has never been delivered on time by Obama.”
IMF Raises Concerns Over Eurozone and U.S. “fiscal cliff”
Reuters reports, “The International Monetary Fund on Monday cut its forecast for global economic growth and warned that the outlook could dim further if policymakers in the euro zone do not act with enough force and speed to quell their region’s debt crisis…It made clear, however, that Europe was not the only risk. The IMF, which trimmed its U.S. forecasts slightly, said concerns were rising over a political battle brewing in Washington over how to avoid painful automatic spending cuts and tax increases at the start of next year…If the United States failed to deal with the ‘fiscal cliff’ it could potentially be an ‘enormous shock’ to the U.S. and other advanced economies, IMF Chief Economist Olivier Blanchard told a news conference.”

Mounting Municipal Bankruptcies

Bloomberg reports the fear of limiting access to bond markets and political stigma surrounding bankruptcy seems to be fading. With focus centered on California, many are forgetting the challenges in Nebraska. “Quirks in local, state and federal law have made Nebraska home to almost one-fifth of the more than 220 Chapter 9 bankruptcies filed in the U.S. since 1981, according to a nationwide review of federal court records. California, with more than 20 times Nebraska’s population, is second, followed by Texas and Alabama.”
Sequester Showdown on Capitol Hill

Politico reports, “The showdown over the sequester is at full force on Capitol Hill this week…The House this week will vote on a defense spending bill as well as a plan ordering the Obama administration to say how it would go about implementing the $500 billion in defense cuts set to kick in on Jan. 2.” Representative Randy Forbes (R-VA) said, “’You have found over the last several months, people have started to become more and more aware of what’s going on. The unbelievable result of sequestration is starting to hit home to people and they’re starting to say, ‘My gosh, these guys can’t be serious about letting this happen.’”

Partisan stand-off over spending cuts and taxes will dominate. Senator Pat Murray summed up this stand-off saying at a speech at The Brookings Institution on Monday, “You know what? If Democrats were willing to accept a wildly imbalanced deficit-reduction plan to avoid the automatic cuts — we would have done that back in the supercommittee. But we didn’t then, and we will not now.”

 

Europe Affecting U.S. Hiring
Reuters reports, “American companies are scaling back plans to hire workers and a rising share of firms feel the European debt crisis is taking a bite out of their sales, a survey showed on Monday. Only 23 percent of the firms polled in June plan to add to staff in the next six months, the National Association for Business Economics said on Monday.”
Obama Changing Welfare Requirement
The Pittsburgh Tribune-Review reports, “Under a new federal directive, states can apply for waivers regarding work requirements under the Temporary Assistance for Needy Families program, commonly known as welfare. Critics question the department’s authority to allow waivers and complain that the Obama administration is trying to reverse reforms from the mid-1990s.” However, the waiver is being met with resistance.The Hill reports, “Sen. Orrin Hatch (R-Utah) said he plans to introduce legislation addressing President Obama’s decision to waive work requirements in the Temporary Assistant for Needy Families (TANF) law…” Hatch said, “‘In the 16 years since the creation of the Temporary Assistance of Needy Families, no administration has concluded that they have the authority to waive the TANF work requirements.’”
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