Potash Corp., the world
The stars are aligned for Barack Obama’s re-election in November 2012. He won’t join Jimmy Carter to be the second Democrat in 120 years to lose a second term.
Five things are playing in Obama’s favor.
First, the Republicans — driven by their most conservative members in Congress — will face a primary with many candidates who will advance harsh ideological positions. Michele Bachmann, Newt Gingrich, Donald Trump and others might as well be on the Democratic National Committee payroll. House Budget Committee Chairman Paul Ryan’s reverse Robin Hood plan to cut more than $6 trillion in spending over a decade will provide the outrage, stoked by a sitting president possessed of verbal discipline.
The field of Republican weaklings is already getting smaller. This week, Mississippi Governor Haley Barbour dropped out of the race for the presidency.
Second, the Republican governors’ attacks on unions are turning off the swing voters and Reagan Democrats in Ohio, Florida, Pennsylvania and Wisconsin. Imagine the voter reaction if millions of workers lose their right to collective bargaining, and the impact that cuts in benefits and wages will have on their lives.
Democratic governors, such as Jerry Brown of California, Pat Quinn of Illinois and Andrew Cuomo of New York, are cutting — but not taking away — workers’ bargaining rights. This is a politically useful contrast for Obama. Reagan Democrats, who have won many elections for the Republicans, are a big plus for Obama in the contested states.
No Challenge
Third, no candidates are emerging to challenge Obama in the primaries. A discussion of Obama’s forgotten campaign promises and record would have public support among Democrats. Even so, the liberal base has nowhere to go to send a message about war, free-trade agreements, raising the minimum wage or union membership.
Nor does a third party or independent candidacy pose a threat, given the winner-take-all, two-party system.
Fourth, Obama has neutered much of the big corporate lobby’s zeal to defeat him. He decided from the beginning not to prosecute executives from Wall Street banking, brokerage and rating firms. Multinational companies are pleased with Obama’s position on trade, on not disturbing the many corporate subsidies, handouts and giveaways, such as the corn-ethanol subsidy.
Shelters for Wealthy
By 2014, Obamacare will deliver some 30 million subsidized customers to health-insurance companies. The auto industry is forever grateful for its bailout. Obama hasn’t moved on corporate-tax reform, tax shelters for the wealthy, or the preferential capital-gains tax treatment on the 20 percent service fees of hedge fund managers. Don’t forget last December when Obama agreed to extended tax cuts for the rich while the budget deficit gets larger guaranteed cash advance.
The military-industrial complex about which President Dwight Eisenhower warned in his farewell address 50 years ago, is still uncontrollable, leading departing Defense Secretary Robert Gates to express serious concerns. Obama has even surprised George W. Bush and Dick Cheney and his cohort of neocons, who can scarcely believe how militarily aggressive Obama has been on just about every move that liberals used to call impeachable offenses by former President George W. Bush.
Big Business
Then there’s Jeffrey Immelt, the chairman and chief executive officer of General Electric Co., who can attest to Obama’s outreach to big business. GE Capital was bailed out. The company effectively paid no federal income taxes on $14.2 billion in 2010 profit and received a $3.2 billion benefit. Immelt got a $15.5 million pay raise. And in January, Obama appointed him chairman of the President’s Council on Jobs and Competitiveness while letting him stay as head of a company receiving many government contracts and having regulation problems with the federal authorities. The corporate state doesn’t get much better than that.
Fifth, since the Republicans have little to offer by way of creating jobs, Obama need only show improvement in macroeconomic indicators, as Ronald Reagan did in 1983-1984, and proceed to showcase all the tax breaks he has signed into law for big and small businesses. Poor Americans who continue to bear the brunt of the recession are hardly going to vote Republican. It will be easy for Obama, with his oratorical skills, to paint the Republican-controlled House of Representatives as obstructionist, especially as he develops an economic plan for his second term.
Black Swans
There remain the Black Swans, events that defy prediction as those in Japan and the Middle East have shown. Handling them with firmness and calmness from the White House is what most people expect of a president. Obama will surely not repeat Bush’s mistakes after Hurricane Katrina in 2005.
Obama is averse to conflict with corporate power and disarmingly expedient in compromising with Republicans, leaving the latter to argue largely among themselves. The political duopoly lets the tactical Obama use the Bully Pulpit to his political advantage, even if his principles perish. Obama can look forward to four more years in 2012.
(Ralph Nader is the founder of Public Citizen and author of the book “Only the Super-Rich Can Save Us!” The opinions expressed are his own.)
Stocks are opening higher on strong earnings reports from Ford and 3M.
Before the market opened Tuesday, Ford Motor Co. reported its best first quarter earnings since 1998. The automaker beat Wall Street’s earnings estimates with stronger sales of new vehicles.
3M Co. said its quarterly profit jumped 16 percent from a year ago, beating analysts’ estimates. 3M raised its full-year earnings expectations despite taking a hit from the earthquake in Japan.
The Dow Jones industrial average is up 22 points, or 0.2 percent, at 12,504. The S&P 500 index is up 5 points, or 0.4 percent, at 1,339. The Nasdaq composite is up 6 points, or 0.2 percent, at 2,832.
Weak earnings reports dragged the Dow and S&P 500 lower on Monday.
Japanese Trade Minister Banri Kaieda said he asked China and South Korea to rely on scientific evidence in deciding whether to ban Japanese goods over concern they may be contaminated with radiation.
Chinese Commerce Minister Chen Deming and South Korean Trade Minister Kim Jong Hoon both agreed that will be the criteria for any import restrictions, Kaieda told reporters after meeting his counterparts in Tokyo today. Chen and Kim also said safety is their priority, Kaieda added.
Trading partners worldwide are testing Japanese products for radiation following leaks at the crippled Fukushima Dai-Ichi plant, the world’s worst nuclear disaster since Chernobyl.
China, Japan’s largest export market, earlier this month expanded a ban on imports of food and agricultural produce, threatening to exacerbate an export slump in the world’s third- largest economy after a record earthquake disrupted supply chains.
South Korea, Singapore and the U.S. have also halted imports of some products on concern that produce grown around the stricken nuclear station has been contaminated.
Japan, South Korea and China agreed on the need to accelerate negotiations to form a free-trade agreement among them, and to “resist protectionism in all forms,” according to a joint statement released after the discussions today.
It’s an anniversary few are celebrating. A year ago Saturday, with its faltering economy days away from bankruptcy, Greece ended months of speculation and requested bailout loans.
Prime Minister George Papandreou chose the remote island of Kastelorizo, and its tranquil seaside backdrop, to announce the “urgent national need to formally ask our partners to mobilize the support mechanism.”
International solidarity, he said in a televised address, would “send a strong signal to markets that the European Union is not to be toyed with, and it will protect our common interests and our common currency.”
Twelve months on, there’s little indication that that signal has been received.
Greek bonds have been axed to junk status by the three major ratings agencies. And sky-high borrowing costs have roughly doubled, along with the price of insuring debt. Greece would currently have to pay out 15-percent interest on a 10-year bond, compared with the German benchmark of 3.27 percent.
At least 160,000 more people have lost their jobs since April 23, 2010, with government austerity accelerating layoffs and business failures. And the national debt is forecast to exceed the emergency level of 150 percent of gross domestic product in 2011.
“At the moment we have a very, very difficult situation which requires a rapid response and tough measures,” economic analyst Vangelis Agapitos said. “Of course the markets also realize that there is political fatigue and political cowardice to fully take the tough measures that are necessary.”
Despite daily government denials, 47 percent of Greeks now believe the country will have to restructure its debt, while just 24 percent think it won’t be necessary, according to an opinion poll due to be published Sunday.
The survey by the Alco research company for the weekly Proto Thema newspaper used data from 1,000 people interviewed April 15-19. No margin of error was quoted but it would normally be around 3 percentage points for a survey of that size.
Support for Papandreou’s Socialists has sunk from 34.7 percent to 21.5 percent in the past 15 months, the poll found, though he still maintains a slim lead over rival conservatives.
After Papandreou’s call for help from Kastelorizo, a rescue deal was put together in nine days, just ahead of a critical refinancing deadline. Eurozone countries and the International Monetary Fund agreed to lend Greece euro110 billion _ equivalent to nearly half the country’s annual output _ through 2013.
In return for the bailout loans, Papandreou’s Socialist government slashed euro14 billion off the budget deficit in 2010 using salary and pension cuts and a raft of unpopular measures aimed at reducing waste in the public sector and protective market rules.
His government has promised debt inspectors that it will start generating a primary surplus in 2012, but fiscal targets have begun slipping this year due to the ongoing recession. And the sharp rise in public discontent is in growing contrast to calls by Greece’s central bank and analysts for bolder cost-cutting measures.
“The (national) debt is 150 percent of GDP and rising. Had it been half that amount, maybe these (austerity) measures would suffice,” Agapitos said. “The number of measures is unprecedented. So in a way, Greece is proving that the effort is there. However, the expectations are much higher and keep rising, because of the mess that Greece is in.”
Papandreou is unlikely to get much respite this Easter, with school and hospital closures planned this year and a massive privatization program prompting a general strike on May 11.
Many of his countrymen, however, are looking forward to a break from the national gloom this holiday weekend.
“I just can’t watch the news anymore _ it’s so depressing,” said window cleaner Stratis Dervendlis, who is planning a series of day-trips in and around Athens on his days off.
“The bad news is constant. It’s like reminding someone in hospital that they’re sick all the time. Instead, they should be giving us courage and telling us how we’re going to get better.”
Airfares are going up yet again.
Late Tuesday, Southwest Airlines raised all of its round-trip fares by $10. Delta (DAL, Fortune 500) initiated this latest round of price increases on Monday, and as of midday Wednesday American Airlines (AMR, Fortune 500), JetBlue (JBLU) and United Airlines (UAL) had matched it.
Industry experts say the $10 increase is likely to be adopted industrywide.
If so, this would mark the seventh time this year that domestic airlines have jacked up fares.
In the past five years, no industrywide attempt to raise fares failed when Southwest was on-board.
Southwest (LUV, Fortune 500) blames the price of fuel.
"This higher fare is to offset higher fuel costs that we continue to face in the industry," said company spokeswoman Laurel Moffat.
This year is similar to 2008, when oil prices were surging and oil hit a record high of $145 a barrel. In 2008, there were 17 successful hikes.
Oil was trading at about $111 a barrel on Wednesday.
Rick Seaney, CEO of FareCompare.com, said the industry is "on pace to break that record this year," though he believes prices won’t go too high.
"In 2007, it was not unusual to have one-third of a plane empty," Seaney said. "Today to keep revenues up, planes have to be full. And to fill up those planes, you have to be price conscious. So prices can’t get too out of whack."
When airlines announce these price increases, they are doing two things: gauging consumer appetite and the willingness of competitors to follow. Airlines are only able to charge higher prices if customers are willing to pay. And, these hikes aren’t successful unless most or all competitors match the hike.
If only one airline announces a hike, it will end up on the last few pages on airline ticket comparison sites — effectively out of view for many online shoppers.
Industry experts believe that fliers will see more airfare hikes throughout the year. Seaney said it wouldn’t surprise him if we saw one a week for the next month.
And with the summer travel season right around the corner, consumers can expect even higher airline prices.
Between June 9 and Aug. 21, airlines are charging additional summer premiums. Last year was the first year that airlines started charging summer premiums.
Demand is typically higher at this time or year, so airlines are able to charge more.
Stocks are closing higher a day after suffering their worst one-day drop in more than a month.
Health-care giant Johnson & Johnson led rising stocks in the Dow Jones industrial average after reporting earnings that beat Wall Street’s expectations.
Stocks traded in a narrow range Tuesday. Goldman Sachs and other companies reported weak earnings, and worries lingered over a warning from Standard & Poor’s about U.S. government debt.
The Dow Jones industrial average rose 65 points, or 0.5 percent, to close at 12,267. The S&P 500 index rose 7, or 0.6 percent, to 1,313. The Nasdaq composite rose 10, or 0.4 percent, to 2,745.
Two stocks rose for every one that fell on the New York Stock Exchange. Trading volume was 3.9 billion shares.
Spain’s Treasury sold 4.66 billion euros ($6.68 billion) of Treasury bills, and its borrowing costs rose after elections in Finland threatened to disrupt European efforts to stem the debt crisis.
The Treasury said it sold 3.5 billion euros of 12-month bills at an average yield of 2.77 percent, compared with 2.128 percent at the previous auction on March 15. It also sold 1.15 billion euros of 18-month bills at 3.364 percent, compared with 2.436 percent in March.
Demand for the 12-month debt was 1.63 times the amount sold, compared with 2.37 last month, and the bid-to-cover ratio for the 18-month debt was 2.04, compared with 3.51. The Treasury aimed to sell a maximum of 5.5 billion euros.
Spanish 10-year borrowing costs rose for a fourth day today after a Finnish party that opposes euro-region bailouts won enough support in elections yesterday to form part of a coalition government in the AAA-rated nation best payday advance. Borrowing costs in the euro region’s periphery also rose amid increasing expectations that Greece may restructure its debt, even as Finance Minister George Papaconstantinou said the “pain” of doing so would be worse than repaying lenders.
The gap between Spanish and German 10-year yields widened to 219 basis points after the auction, from 204 basis points on April 15. That compares with a euro-era record of 298 basis points on Nov. 30, after Ireland became the second euro nation following Greece to seek a European bailout, and an average of 15 basis points in the first decade of monetary union.
U.S. Treasury Secretary Timothy F. Geithner said the world’s major economies need greater flexibility in exchange rates to avoid economic disruptions.
A few emerging-market nations are running “tightly managed currency regimes” by using capital controls and accumulating excess reserves, Geithner said today in a statement for the International Monetary Fund’s steering committee. The controls put pressure on countries with market-driven exchange rates and fuel inflation in the countries whose currencies are undervalued, he said.
Geithner’s comments, while not identifying China, are part of the U.S.’s efforts to get the country to allow the yuan to rise further. The Group of 20 nations, including the U.S. and China, agreed yesterday to set up a process for identifying and addressing economic imbalances.
“The current system of exchange rates is an obstacle to effective international cooperation on imbalances,” Geithner said in prepared remarks to the International Monetary and Financial Committee in Washington. “Facilitating rebalancing requires broad consensus that major economies — advanced and emerging — need to allow their exchange rates to adjust in response to market forces.”
Geithner called on the IMF to take a larger surveillance role on exchange rates, reserve accumulation and capital flows. He said the U.S. “will do its part” to rein in budget deficits and address its own imbalances and called for other nations to take action.
Budget Cuts
“Others, especially those whose fundamentals call for greater exchange-rate flexibility, must also contribute,” Geithner said.
U.S. President Barack Obama has proposed cutting $4 trillion in cumulative deficits within 12 years through a combination of spending cuts and tax increases. The administration is resisting Republican calls for swifter cuts, while also pushing for a set of rules to enforce spending reductions over time.
Geithner said the administration wants to limit spending without threatening the economic recovery. He said the U.S. economic outlook has “improved substantially” since October.
The global economy faces headwinds from budgetary and banking strains in some European countries, he said. Emerging- market nations are grappling with rising commodity and energy prices and will need to craft policies that do not exacerbate global imbalances, Geithner said.
Egypt, Tunisia
The World Bank and the IMF will play an important role by providing financial support to Egypt, Tunisia and other countries in political transition, Geithner said in a separate statement today to the IMF and World Bank development committee. The World Bank also can help mitigate the effects of rising food costs, he said.
“In some countries, the recurrence of rising food and commodity prices threatens to slow economic recovery, increase poverty and undermine social stability,” Geithner said in the text of remarks. “It is critical that the international community pursue longer-term actions to improve resilience to supply shocks, particularly as global food supplies will have to increase by an estimated 50 percent over the next 20 years to meet projected demand.”
Congress sent President Barack Obama hard-fought legislation cutting a record $38 billion from domestic spending on Thursday, bestowing bipartisan support on the first major compromise between the White House and newly empowered Republicans in Congress.
“Welcome to divided government,” said House Speaker John Boehner of Ohio, Republican point man in tough negotiations with the president and Senate Majority Leader Harry Reid, D-Nev., that produced a bill no one claimed to like in its entirety.
Leader of a rambunctious new majority, Boehner said the cuts in domestic programs were unprecedented. Yet also described the measure as a less-than-perfect first step in a long campaign against federal red ink.
The White House also looked ahead to a struggle now beginning over national spending priorities in an era of soaring deficits and a $14 trillion national debt.
“We all know there are tough challenges ahead, from growing our economy to reducing our deficit, but we must build on this bipartisan compromise to tackle these issues and meet the expectations of the American people,” said an administration statement.
The bipartisan votes belied a fierce struggle that preceded passage and only narrowly avoided a partial government shutdown a week ago.
The tally in the House was 260-167. Among the supporters were 60 of the 87 first-term Republicans, many of them elected with tea party support.
The Senate added its approval a short while later, 81-19.
Even before the final votes, House Republicans pointed eagerly toward a vote Friday on their next move against mounting deficits, a comprehensive budget that claims cuts measured in the trillions, rather than billions, over the next decade. That vote is expected to be as partisan as the spending bill was not.
The measure approved Thursday will finance the government through the Sept. 30 end of the budget year, chopping $38 billion from current levels and $78 billion from the president’s request of more than a year ago.
Billions were saved by eliminating congressional earmarks, and billions more in funds from the Census Bureau, left over from the 2010 national head count, now finished.
The Environmental Protection Agency, one of the Republicans’ favorite targets, took a $1.6 billion cut. Spending for community health centers was reduced by $600 million, and the Community Development Block Grant program favored by mayors by $950 million more.
The bipartisan drive to cut federal spending reached into every corner of the government’s sprawl of domestic programs. Money to renovate the Commerce Department building in Washington was cut by $8 million. The Appalachian Regional Commission, a New Deal-era program, was nicked for another $8 million and the National Park Service by $127 million more.
While Republicans touted the cuts in the measure, Democratic supporters pointed to even deeper reductions or even outright program terminations that Republicans had been forced to give up in negotiations.
That list included a family planning program for lower-income families, federal support for National Public Radio and the funds needed to implement the health care law that Congress approved a year ago and Republicans have voted to repeal.
While Republicans were unable to muster a 218-vote majority for the spending cuts on their own, the huge freshman class broke heavily in favor, 60-27.
Normally vocal, GOP critics of the legislation did not speak during debate. “This is done. I’m prepared to move on to bigger issues,” said one of them, Rep. Bill Huizinga of Michigan.
While reaching across party lines, the legislation produced few if any enthusiastic supporters no fax payday advances.
Referring to a late lawmaker known for his sense of humor, Rep. Jim Moran, D-Va., told the House, “As Mo Udall once said, if you can find something everyone agrees on, you can count on it being wrong.”
Moran, a veteran Virginia Democrat, said the bill “does contain more good than bad.” That put him in the same category as Rep. Jeff Landry, a first-term Louisiana Republican who won office last fall with the support of tea party activists.
The bill does not cut enough, he said, but he added, “I came to Washington to cut spending.” He also cited a provision banning the District of Columbia from using its own money to pay for most abortions for lower-income women.
Liberals were unsparing in their criticism. “This bill is nothing more than a tea party checklist targeting programs that help the most vulnerable,” said Rep. Barbara Lee, D-Calif. She pointed to cuts in food programs for the poor, grants to local police departments and help for children of inmates. “It’s shameful, a moral disgrace.”
As expected, the Republican leadership swung behind the bill.
Democrats, consigned to the minority in last year’s elections, splintered. Rep. Nancy Pelosi of California, the party’s leader, voted against the bill without speaking on the floor. The second in command, Rep. Steny Hoyer of Maryland, supported it, and in doing so, cited a need to compromise for the government to function. Rep. Norm Dicks of Washington, the senior Democrat on the committee with jurisdiction over programs that were cut, also voted in favor.
The impetus for the cuts came from Republicans who took power in January, symbolized by the 87 first-termers.
Unhappy with the leadership’s first attempt at a bill, they rejected it. They then propelled a revised measure through the House in February, including $61 billion in reductions that would have cut deeply into education programs and other accounts that Obama vowed to protect.
By contrast, neither Obama nor most Democrats advocated any cuts through the remainder of the current fiscal year.
The earlier House bill included numerous other provisions unrelated to spending. Many were aimed at the Environmental Protection Agency, and would have blocked proposed rules to limit greenhouse gas, pollution into the Chesapeake Bay, mercury emissions from cement factories and more.
That bill also included a ban on federal funding for Planned Parenthood. That was a priority of lawmakers who object to the organization as the country’s largest abortion provider, although federal law already bans the use of federal funds to perform most abortions.
In the compromise negotiations, Democrats won the deletion of all of the EPA-related provisions as well as the proposed restriction on Planned Parenthood.
One non-spending provision that remains would take gray wolves off the endangered species list across most of the northern Rocky Mountains.
Wolf hunting would resume this fall in Idaho and Montana, where an estimated 1,250 of the animals have been blamed in livestock attacks. The issue would be returned to state management in Washington, Oregon and Utah.
Thursday’s legislation drew the support of 179 Republicans and 59 Democrats in the House.
Another 59 Republicans and 108 Democrats opposed the bill.
In the Senate, 48 Democrats, 32 Republicans and independent Joseph Lieberman of Connecticut voted in favor, while three Democrats, 15 Republicans and independent Bernie Sanders of Vermont were opposed.
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