Washington Extra – I see your gauntlet, and raise you a gauntlet

September 13, 2010

On Friday, President Barack Obama threw down the gauntlet to Republicans on taxes, effectively daring them to vote against a tax cut for the middle classes, just so that they can give an average of $100,000 in tax cuts to millionaires.

boehner_MitchOver the weekend, Republican leader of the House John Boehner seemed to shirk the challenge, but on Monday, Senate minority leader Mitch McConnell picked up the gauntlet and threw it right back. McConnell has promised to introduce legislation “today” to ensure that “no one in this country pays higher income taxes next year than they are right now.” There are no Republicans who support a tax hike, he said, effectively daring Democrats to vote for higher taxes when the economy is in the mire.

Washington Extra is not sure who will blink first. But whichever side you take in this debate, one thing is for sure: this “wrestling match,” as Obama called it, or game of high-stakes political poker if you prefer, does the economy no good at all.

Another big story bubbling up this week is a series of hearings on the Hill over China’s currency and trade policies, with Treasury Secretary Tim Geithner among those scheduled to appear. We are told that 93 lawmakers in the House have signed a letter urging Democratic leaders to get tough with China over its exchange rate practices. This looks from the outside more like political posturing than any real threat that legislation will be passed this year, but Beijing will be watching closely. The yuan has risen less than one percent since its currency peg was eased ahead of the G20 summit in June, but that appreciation has quickened in recent days, in what might be an attempt to dampen congressional anger.

Here are our top stories from today…

Senate Republicans firm on tax cuts for rich

Senate Republicans have enough votes to block President Barack Obama’s plan to extend tax cuts for the middle class while allowing those for the rich to expire, a spokesman for the Senate Republican leader said. Republicans scrambled to regroup on the tax issue ahead of November 2 congressional elections after House of Representatives Republican Leader John Boehner appeared to open the door for a possible compromise.

For Kim Dixon and Thomas Ferraro, click here.

Small-business bill could be Democrats’ last hope on jobs

Democrats in the Congress have a late chance to show frustrated voters they are trying to boost the sluggish economy with a plan to extend help to small businesses before the November midterm elections. As lawmakers return from a month-long break this week, Democrats aim to pass their small-business bill out of the Senate by the end of the week and send it to the House of Representatives for final approval.

For more of this story by Andy Sullivan, read here.

House lawmakers urge action on China currency

Ninety-three lawmakers have signed a letter urging Democratic leaders in the House of Representatives to schedule a vote on a bill to get tough with China over its currency exchange rate practices, a lawmaker’s office said. “So far we have 93 members signed on to the letter,” a spokeswoman for Representative Tim Ryan told Reuters in an e-mail ahead of congressional hearings this Wednesday and Thursday on what steps the United States should take to deal with China’s exchange rate policies.

For more of this story by Doug Palmer, read here.

For a Q+A on the issues, click here.

US sets steep duties on China seamless steel pipe

The Commerce Department announced steep final anti-dumping and countervailing duties on hundreds of millions of dollars of seamless steel pipe from China. The decision is a victory for the United States Steel Corp, V&M Star LP, TMK IPSCO and the United Steelworkers union, who filed a petition asking the Commerce Department for import relief.

For more of this story by Doug Palmer, here.

Analysis: Unusual uncertainty strikes U.S. economic forecasters

U.S. economists are having an unusually tough time predicting the path of a recovery that doesn’t seem to fit neatly into a bullish or bearish box. Forecasts for economic data are all over the map, causing confusion about whether the actual readings are better or worse than expected and what that might mean for growth prospects.

For more of this story by Anooja Debnath and Emily Kaiser, click here.

Pentagon expects Saudis to commit to $30 billion in arms: source

The Obama administration will soon notify Congress of an arms deal with Saudi Arabia worth up to $60 billion, but the kingdom is expected to only initially commit to about half that, a senior defense official said . The official, speaking on condition of anonymity, said the package would include 84 new Boeing Co F-15 fighter jets and upgrades to another 70 of them.

For more of this story by Phil Stewart, read here.

Pentagon to release affordability directives

Pentagon acquisition chief Ashton Carter plans to unveil detailed affordability directives for U.S. weapons makers at a mid-afternoon news conference at the Pentagon on Tuesday, a spokeswoman said. Carter told reporters in July he expected to unveil 16 directives for industry and defense officials in mid-September about how to meet Defense Secretary Robert Gates’ goal to cut overhead costs by $100 billion over the next five years.

For Andrea Shalal-Esa’s full story, click here.

Geithner says U.S. economic recovery not fast enough

Treasury Secretary Timothy Geithner said the U.S. economy was recovering but not fast enough and Washington needed to do more to boost growth and create jobs. In a speech to the Congressional Hispanic Caucus Institute, Geithner urged support for a small business lending package the Senate is set to debate this week.

For more of this story by Donna Smith, read here.

Violent crime falls for third straight year: FBI

Violent crime in the United States fell in 2009 for the third straight year, with the number of murders dropping to a level not seen in four decades, according to FBI statistics. Violent crime dropped 5.3 percent in 2009, including a 7.3 percent decline in murders, an 8 percent drop in robberies, a 4.2 percent decline in aggravated assaults and 2.6 percent fall in rapes, according to the final 2009 statistics.

For more of this story by Thomas Ferraro, read here.

U.S. posts $90.53 billion budget deficit in August

The United States posted a $90.53 billion budget deficit in August, Treasury Department data showed. The August deficit was slightly below the $95 billion expected by economists polled by Reuters and smaller than the $103.56 billion budget gap a year earlier.

For more of this story by Corbett Daly, read here.

Industry has sway over food safety system: study

The food industry is jeopardizing public health by withholding information from food safety investigators or pressuring regulators to withdraw or alter policy designed to protect consumers, said a survey of government scientists and inspectors. A study released by the Union of Concerned Scientists found one-in-four of those surveyed have seen corporate interests forcing their agency to withdraw or modify a policy or action designed to protect consumers during the past year.

For more of this story by Christopher Doering, read here.

What we are blogging…

Obama should call a truce with Wall Street

The pre-election economic treats that President Barack Obama handed out this week included several intended specifically for business: research and development tax credits, for instance, and the small-business tax breaks he is pushing to introduce in the face of Republican congressional opposition. But these familiar sweeteners won’t be nearly enough to reverse one of the most significant estrangements of the first two years of the Obama administration — the rift between the White House and business.

For more of this column by global editor at large Chrystia Freeland, click here.

For more stories from our Washington correspondents visit www.reuters.com and stay informed.

Photo Credit:  REUTERS/Kevin Lamarque ( McConnell (R) and Boehner after a meeting with Obama June 10, 2010)

One comment

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Let me ask a question regarding President Obama’s tax cut to the middle class, by phasing out the Bush tax cuts to the rich. Which group – the middle class or the rich – will recycle the majority of the funds received back into the economy, and therefore provides a greatly needed boost to economic activity?

I put it to you that in the present economic climate the people controlling and holding the wealth are not actively investing, rather there are looking to indicators of continued and robust economic growth before once again investing in equities. It therefore follows suit, they will simply sit on the tax cuts if extended.

If however the rich are able to put the fear of double dip recession behind them will look to shore up their investment portfolios, whereas the stimulus however packaged need be directed to the consumption of goods and services.

It is by directing the tax cuts to the middle class one drives the consumption of goods and services, with the added addition of working to the benefit of the rich as economic activity and therefore asset prices increase, fuelled by the uptick in consumption.

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