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Simpson Bowles to Offer Up a New Tax Code

WASHINGTON—Deficit hawks Alan Simpson and Erskine Bowles on Tuesday will propose a detailed plan for rewriting the tax code and implementing deep new spending cuts, hoping to offer a path to compromise for Democrats and Republicans, according to an outline of the plan.

Messrs. Simpson and Bowles co-chaired the White House’s 2010 deficit-reduction panel, which put together a bipartisan package of tax and spending changes that fell flat after the administration and congressional leaders took a look.

They will try once again on Tuesday, at a time when Washington budget talks have entered a particularly frosty period. Republicans and Democrats say they want to reduce the federal budget deficit but are far apart on how and by how much.

Many lawmakers left Washington late last week for recess this week, having made little progress in talks to avert roughly $85 billion in federal spending cuts scheduled to begin March 1. These cuts will run through September unless Congress intervenes, something many analysts believe is becoming less likely each day.

Mr. Simpson, a Republican, and Mr. Bowles, a Democrat, say their new proposal would reduce the federal budget deficit by $2.4 trillion over 10 years, more than the $1.5 trillion package that White House officials have said is their goal. Obama administration officials say any deficit-reduction package must include new tax revenue as well as spending cuts.

House GOP leaders have not yet detailed the size of the deficit-reduction package they will propose, but they have said it would balance the budget within 10 years, which would put it in the $4 trillion range. They have said, though, that it won’t include any tax increases….”

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Obama to Press GOP on Averting Sequester

“WASHINGTON (AP) — Facing yet another fiscal deadline, President Barack Obama is urgingcongressional Republicans to accept more tax revenue in order to avert looming, across-the-board budget cuts due to take effect in less than two weeks.

Obama, fresh off a three-day Florida golfing trip, was to press his case during an event at the White House on Tuesday morning. Emergency responders, a group of workers the White House says could be affected if state and local governments lose federal money as a result of the cuts, were joining him.

The $85 billion in cuts, known as the sequester, will start taking effect on March 1 unless Congress acts. The White House says the sequester could derail an economy still suffering from high unemployment and sluggish growth.

Obama wants to offset the sequester through a combination of targeted spending cuts and increased tax revenue. The White House is backing a proposal unveiled last week by Senate Democrats that is in line with the president’s principles.

But that plan was met with an icy reception by Republicans, who oppose raising more tax revenue in order to offset the cuts. GOP leaders say the president got the tax increases he wanted at the beginning of the year when Congress agreed to raise taxes on family income above $450,000 a year.

The White House said Obama on Tuesday would call on congressional Republicans to compromise and accept the Senate Democrats’ proposal.

The Democrats propose to generate revenue by plugging some tax loopholes. Those include tax breaks for the oil and natural gas industry and businesses that have sent jobs overseas, and by taxing millionaires at a rate of at least 30 percent.

Meanwhile, a bipartisan proposal Tuesday by co-chairs of an influential deficit-reduction commission called for reducing the deficit by $2.4 trillion over the next 10 years, with much of the savings coming through health care reform, closing tax loopholes, a stingier adjustment of Social Security’s cost of living increases and other measures….”

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Amidst the Noise

[youtube://http://www.youtube.com/watch?v=ybBa_Ygg1rE 450 300]

Link for iPhone users: http://www.youtube.com/watch?v=ybBa_Ygg1rE


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Immigration Plans Leaked, Republican Bipartisan Bill Thwarted

“WASHINGTON—New details of a White House immigration plan have been released, upsetting Senate Republicans working on a bipartisan bill and threatening to complicate the delicate legislative process now under way.

President Barack Obama had already outlined his principles for an immigration overhaul and had said he would offer a bill if the Senate negotiations stall. Many Republicans and some Democrats have cautioned him to keep his distance from the process for fear of driving away potential GOP support.

But on Saturday, USA Today reported new details of the fallback legislation the White House is preparing, including details of an eight-year path for the 11 million people who are in the country illegally to qualify for citizenship and a four-year transition period for employers to implement systems to verify the legal status of new hires.

The new details, which were confirmed by a person familiar with the legislation, weren’t surprising or particularly controversial, people from both parties said Sunday, and the major differences between the White House and Senate approaches were already well known. But key Republicans said they feared the leak could jeopardize the delicate talks by making it appear Mr. Obama was trying to influence the legislation….”

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G-20 Agrees to “Target Exchange Rates for Competitive Purposes”

“Group of 20 finance chiefs shifted toward a tougher stance on exchange rates as they sought to tame speculation of a global currency war without singling out Japan for criticism.

After all-night negotiations in Moscow, the club of the biggest developed and emerging economies agreed not to “target our exchange rates for competitive purposes,” according to an official who saw a draft of a statement to be released today and asked not to be identified because the document isn’t public yet. That marks a strengthening of language from previous drafts and runs closer to what the Group of Seven rich nations said earlier this week.

“It was quite clear last night that everyone around the table wants to avoid any sort of currency disputes,” Canadian Finance Minister Jim Flaherty told reporters today. U.K. Chancellor of the Exchequer George Osborne said countries must avoid their past mistake of using currencies “as a tool of economic warfare.”

Policy makers are attempting to soothe concern that governments are increasingly trying to weaken exchange rates to spur growth through exports. The risk is a 1930s-style spiral of devaluations and protectionism if other countries retaliate to safeguard their own economies.

Yen Decline…”

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G-20 Misses Previous Goals, Finding it Hard to Sing Kumbaya

“Group of 20 governments disagreed over the strength of new fiscal goals as they risk missing the targets set three years ago.

After committing at a Toronto summit in 2010 to halve budget deficits by this year, most advanced nations are now facing failure on that score and on a related pledge to stabilize their debt by 2016.

As G-20 finance chiefs meet in Moscow, the challenge now is to find a replacement for the Toronto goals after weak economic growth hamstrung fiscal consolidation worldwide. While German Finance Minister Wolfgang Schaeubleadvocated “concrete” targets, Russian official Ksenia Yudaevasaid formal commitments would be “counterproductive.”

“We might want to have long-term principles and particular strategies for countries with high deficit levels,” Yudaeva, Russia’s G-20 sherpa, said in an interview. “But I don’t think we need any precise commitments like during Toronto. It should be much more flexible.”

The G-20 will discuss adopting a new deadline for deficit goals and may set 2016 as the new target date, Russian Finance Minister Anton Siluanov said today. Given the debt burden of industrial nations, “a credible path of debt reduction is really essential and the positive environment should be used by the G-20 countries,” Schaeuble said.

Fiscal Stance…”

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The EU Proposes a Financial Transaction Tax

“The European Union proposed a far- reaching tax on financial transactions which could be collected worldwide as soon as Jan. 1 next year by the 11 nations that have so far signed up to participate.

The EU plan invokes “residence” and “issuance” ties to firms in participating countries, in a bid to prevent traders from escaping the levy by trading outside the tax’s zone, according to the proposal unveiled by EU Tax Commissioner Algirdas Semeta today in Brussels. To escape the proposed tax entirely, firms in other nations would have to entirely cease financial-services business with the 11 nations involved, according to the EU.

The proposal marks a new stage in the EU’s efforts to raise revenue from the financial sector and curb what it sees as a “patchwork” of local levies. Like a prior, failed proposal for all 27 EU nations, today’s plan would set a rate of 0.1 percent for stock and bond trades and 0.01 percent on derivatives trades.

The EU estimates the arrangement could raise 30 billion euros ($40 billion) to 35 billion euros per year. It would need approval by the 11 participants to proceed. All EU nations can sit in on the talks and have the option to join.

The proposals exclude certain types of trading from the scope of the tax: day-to-day transactions by individuals and non-financial firms; primary offerings of stocks and bonds; and trades with central banks, the European Stability Mechanism and other official institutions. It also excludes primary market trades in units of collective investment funds along with certain restructuring operations.

Bond Sales…”

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EU to Present Draft Terms for U.S. Trade Deal in March

“The European Union aims to complete trade talks with the U.S. within two years now that leaders on both sides of the Atlantic have pledged to move ahead, EU Trade CommissionerKarel De Gucht said.

A transatlantic trade deal is progressing after President Barack Obama promised to pursue an agreement to expand the world’s largest economic relationship in his State of the Union speech yesterday. The 27-nation EU says the accord will seek to lower tariffs, ease regulatory barriers and expand access in investment, services and public procurement.

“We are committed to making this relationship an even stronger driver of our prosperity,” Obama, EU President Herman Van Rompuy and European Commission President Jose Barroso said today in a joint statement. The EU may complete its preliminary work by mid-year, Barroso told a Brussels news conference.

The EU plans to present draft negotiating plans in March to kick-start the talks, which it says may lead to an accord that will add 86 billion euros ($116 billion) a year to the bloc’s economy. While trade and investment between the U.S. and the EU was valued at $4.5 trillion in 2011, the two governments have been at odds over issues including farm subsidies, health protections and regulatory standards.

Sensitive Issues….”

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The G-7 Pledges to Not Target Currency and Start a Currency War

“The world’s major industrial nations sought to soothe mounting fears of a currency war with a pledge to avoid devaluing their exchange rates in the pursuit of stronger economic growth.

“We reaffirm that our fiscal and monetary policies have been and will remain oriented towards meeting our respective domestic objectives using domestic instruments, and that we will not target exchange rates,” the Group of Seven’s finance ministers and central bank governors said in a statement released today in London.

The stance is tougher than the G-7’s last joint comment on exchange rates in 2011 and marks an effort to avoid a 1930s- style spiral of retaliatory devaluations in which weak economies try to boost exports by driving currencies down. It follows an outbreak of concern that Japan’s new campaign to beat deflation is an outright attempt to weaken the yen, an allegation its government again denied today.

The yen pared gains versus the dollar after the statement’s release and as Finance Minister Taro Aso said the G-7 acknowledged Japan is not chasing a weaker yen and that its monetary policy is aimed at reversing a decline in prices. The yen traded at 94.33 per dollar at 10:25 a.m. in London after strengthening as much as 0.5 percent.

No Pressure…”

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Thomas E. Ricks: “50-50″ Chance Chuck Hagel Withdraws”

“Thomas E. Ricks, who is well-sourced in Democratic national security policy circles, says there’s a “50-50” chance Chuck Hagel withdraws from consideration for the secretary of defense job.

Ricks says that Hagel “didn’t do well” in his Senate hearing last week, and didn’t seem “interested in the job.”

“He has the votes, but not much else,” writes Ricks. “His big problem is that no one much wants him running the Pentagon. Congressional Republicans consider him a traitor. Congressional Democrats see him as anti-gay and anti-abortion, undercutting their support for him. And Northeastern Democrats (and some others) worry about his stance on Israel. Democratic support in the Senate appears more dutiful than passionate.”…”

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Japan Vows Foreign-Policy Response to Territorial Incursions


“Japanese Prime Minister Shinzo Abe signaled he will implement a more robust foreign policy in the midst of disputes with Russia and China that underscore his push to boost defense spending.

Japan yesterday said two Russian fighter jets intruded on its airspace, which Russia’s Defense Ministry denied. The alleged incursion followed accusations that Chinese ships used weapons-targeting radar on a Japanese destroyer and helicopter last month near islands claimed by both countries. China today issued a denial and accused Japan of spreading falsehoods, while the Foreign Ministry in Tokyo summoned the Chinese ambassador.

“When our sovereignty and national interests are threatened we must change our foreign policy to firmly express our point of view,” Abe told parliament today.

An escalating of tensions with Russia may distract Abe as he copes with a dispute with China that has prolonged Japan’s recession and brought U.S. calls for a diplomatic solution. The government is proposing the first increase in Japan’s defense budget in 11 years to cope with mounting incursions by Chinese ships and planes into Japanese-administered waters.

Abe this week denounced China’s use of fire-control radar on Japanese naval targets last month, calling it a “one-sided provocation.” Yesterday he said the dispute highlighted the need to keep lines of communications open, adding that summits are good forums for addressing friction.

‘Too Silent’…”

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Obama to Nominate REI CEO Sally Jewell for Interior Secretary


“An administration official said President Barack Obama has picked the head of outdoor gear company REI as Secretary of Interior.

The president plans to announce the nomination of REI President and CEO Sally Jewell Wednesday afternoon. That’s according to an administration official who spoke on a condition of anonymity ahead of the president’s official announcement.

REI sells clothing and gear for outdoor adventures with more than 100 stores across the country. Prior to joining REI, Jewell spent 19 years in the commercial banking industry, according to her biography on REI’s Web site.

If confirmed, she would replace outgoing Interior Secretary Ken Salazar.”

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Three Cheers: City in Virginia Becomes First to Pass Anti-Drone Legislation

“Charlottesville, Va., has become the first city in the United States to formally pass an anti-drone resolution.

The resolution, passed Monday, “calls on the United States Congress and the General Assembly of the Commonwealth of Virginia to adopt legislation prohibiting information obtained from the domestic use of drones from being introduced into a Federal or State court,” and “pledges to abstain from similar uses with city-owned, leased, or borrowed drones.”

The resolution passed by a 3-2 vote and was brought to the city council by activist David Swanson and the Rutherford Institute, a civil liberties group based in the city. The measure also endorses a proposed two-year moratorium on drones in Virginia.

Councilmember Dede Smith, who voted in favor of the bill, says that drones are “pretty clearly a threat to our constitutional right to privacy.”

“If we don’t get out ahead of it to establish some guidelines for how drones are used, they will be used in a very invasive way and we’ll be left to try and pick up the pieces,” she says….”

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Uncle Sam Will Be Stuffing a Medical Bill in With Your Tax Bill This Year


“When they file their returns this year, some Americans will get a medical bill with their tax bill.

Starting next January, the Affordable Care Act mandates that every American have health coverage, and those who remain uninsured will pay a penalty. The extent to which one is eligible for federal subsidies to buy insurance, and the penalties for failing to comply with the mandate, will both be determined using one number: the adjusted income reported to the Internal Revenue Service this year. “So much of the Affordable Care Act is being implemented through the tax code,” says Kathy Pickering, executive director of the Tax Institute at H&R Block. And for many taxpayers, “their tax situation will factor into health-care decisions as well,” she says….”

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Germany Leads a Coalition to Speed Up Bondholder Losses in Failing Banks

Germany, the Netherlands and Finland want to speed up European Union plans to force losses on senior bondholders of failing banks, three European government officials said.

The three AAA rated euro-area states last week called for regulators across the EU to gain so-called bail-in powers as soon as 2015, rather than in 2018 as currently proposed, said the officials, who declined to be identified because the talks are private. The European Central Bankhas warned that 2018 is “far too far away” for the new rules, which seek to insulate taxpayers and the euro area’s firewall fund from rescue costs.

The bail-in push from the Germans, Dutch and Finns was made during Jan. 29-30 technical meetings in Brussels, the same week that the Dutch government shielded senior bondholders of nationalized lender SNS Reaal NV. (SR) Dutch Finance Minister Jeroen Dijsselbloem said that step was needed to prevent a spike in funding costs for SNS Reaal and other lenders in the country.

Accelerating the loss-sharing rules would give the euro zone more tools to avoid taxpayer rescues like those provided toGreece, Ireland, Portugal and Spain and sought by Cyprus. It also could ease concerns about financial liability within the euro zone once the ECB takes over financial supervision within the 17-nation currency bloc.

Banking Union..”

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IRS Ruling To Create Millions Of Uninsured Americans As It Undermines The Very Intent of Obamacare

“The devil is always in the details.

While many opponents of the Affordable Care Act have been busy stressing over the penalty they would be required to pay should they fail to purchase health insurance come 2014, it turns out that the IRS is clearing the way to reduce the number of Americans subject to the penalty—while making it near impossible for millions of people to afford suitable coverage for their families, subverting the very purpose of the law itself.

It begins with a poorly drafted provision in the healthcare reform law stating that individuals who receive their health insurance as a benefit of employment will be permitted to take a pass on their company policy and elect to buy their coverage on the health exchange—allowing them to take advantage of the federal healthcare subsidies available to low and middle income Americans—if their company provided health insurance policy is deemed ‘unaffordable’.

‘Unaffordable’ is defined as requiring the employee to pay more than 9.5% of the employee’s household income towards his or her employer provided healthcare benefit.

As an example, let’s take an employee who earns $35,000 a year. According to the IRS rule, if that employee is paying less than $3,325 a year towards their healthcare benefit, that employee will be required to stick with the company health insurance policy and would be barred from taking advantage of the federal subsidies available in the form of tax credits that the exchanges have to offer.

The Kaiser Family Foundation’s 2012 survey of what employees pay towards their employer provided healthcare benefit reveals that the average, individual employee made an annual contribution of $951 towards their health benefit. Thus, there would not appear to be much of a problem here.

But this is where it gets ugly…

The same Kaiser Family Foundation survey reveals that the average contribution of employees who are paying towards a family policy is $4316 a year—a number well in excess of the 9.5% of earnings for someone making just $35,000 a year…”

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The IMF Censures Argentina for Under Reporting Inflation

“The International Monetary Fund’s historic rebuke of Argentina is likely to cement its outcast status among global investors while failing to persuade the government to boost the credibility of its economic data.

Argentina on Feb. 1 became the first nation to be censured by the IMF after the Washington-based lender said that President Cristina Fernandez de Kirchner’s government isn’t addressing concerns that it’s underreporting inflation, which analysts forecast is more than double the 10.8 percent official rate. While the move won’t have an immediate effect, it takes the country a step closer to sanctions that include expulsion.

“This official action makes it quite apparent to those who may want to invest in Argentina that there’s trouble,” said Albert Fishlow, a former top U.S. diplomat to Latin America.

Still, Argentina’s feuding with foreign investors dates back to its 2001 financial meltdown, which Fernandez blames on the fund, and she is unlikely to change the course of policy that is being shaped by other influences, such as the price of soybeans, he said. Argentina is the world’s third-largest exporter of the crop, which is the nation’s biggest source of hard currency.

“It’s a big drama and this isn’t the final act,” Fishlow said in a phone interview from New York.

Argentina has been locked in a battle with the IMF and investors since its 2001 default on $95 billion of debt. The government hasn’t allowed the fund to review its finances, as required of all members, since 2006, the same year it paid off its entire debt with the IMF to end what Fernandez’s late husband and predecessor, Nestor Kirchner, called the lender’s “dictatorship.” Relations grew even more tense after Kirchner replaced senior staff at the Indec statistics institute.

Disputed Data….”

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