Tales from the Trail

We hear the White House is not wildly pleased with former budget chief Peter Orszag for abandoning the party line on tax policy this week. Now Democrats in Congress are beginning to distance themselves from President Barack Obama’s push to let taxes rise for the wealthiest Americans. We are unlikely to see this resolved before the mid-terms anyway, and there are still several different ways this could pan out. One possible compromise would be a short extension of the tax cuts for the rich and a longer extension for the middle classes, keeping any crucial decisions as far away from the 2012 campaign season as possible.

More today on the potential for a reshuffle in Obama’s inner circle after the November elections, especially if Rahm Emanuel departs for Chicago. Democratic sources tell us Larry Summers, never that happy in his role, might be among those who leave, but that Treasury Secretary Tim Geithner is likely to stay the course.

One administration official who is flagging his own retirement is Defense Secretary Robert Gates. As we report from our Aerospace and Defense Summit in Washington this week, Gates used to be viewed by the defense industry with apprehension, but these days many industry executives see his efficiency drive as both sensible and as the best way to protect the overall defense budget. It seems he will be missed.

Elsewhere, a glimmer of hope on the economy with some data on trade and jobless claims that might see some economists revising up their forecasts for third quarter growth.  And a nice blog from our Summit lifting the lid on the exclusive and secretive “Conquistadores del Cielo” club, an annual gathering of the head honchos of the aviation world, for some informal bonding and maybe a little rodeo in Wyoming.

Here are our top stories from today:

Data shows economic recovery still on track

New claims for unemployment benefits fell more than expected last week to a two-month low, while the trade deficit narrowed sharply in July, hopeful signs for the stuttering economic recovery.  The data helped to calm fears of a sharp slowdown in growth and implied the economy could start working its way out of a soft patch.

The U.S. economy continues to swim with the fishes – weekly unemployment claims are at a nine-month high and the director of the Congressional Budget Office says the unemployment rate won’t fall to around 5 percent until 2014. Not much in the way of economic sunshine today.

President Barack Obama commented on the economic cloud before heading to Martha’s Vineyard where his family is taking their end-of-summer vacation.  

We’re wondering if the Secret Service will allow the First Family to frolic in the waters off the Massachusetts island given that several great white sharks were spotted close to the Cape Cod shore at the end of July. Remember, “Jaws” the movie was filmed on Martha’s Vineyard (it’s hard to write out the movie sound of the shark approaching, but you get the picture).

How do you know the economy is souring?

One indicator that doesn’t come wrapped in a government report is political finger-pointing.

It’s an election year with a sluggish economy and so Republicans and Democrats want to make sure voters know it’s the other’s fault — or at the very least not their own fault.

Take a look at the response to the jobless data today which showed weekly unemployment benefit claims reached a nine-month high.

Slowly but surely, more economists and experts are expressing some optimism about the economy, saying the worst might be over. New indicators released this morning support that sentiment.

Richmond Federal Reserve President Jeffrey Lacker told the Danville Register & Bee newspaper that he thought the economy was leveling out and there was “reason for hope.”

Government data released today showed the U.S. economy contracted more slowly than expected in the second quarter of the year. Other figures showed the number of U.S. workers filing new claims for jobless benefits dropped last week and those collecting long-term unemployment benefits fell to the lowest level since April.

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It’s a tale of two cities, Washington D.C. versus Chicago.
 
With President-elect Barack Obama holding frequent news conferences in Chicago to appoint members of his cabinet and lay out his plans for the future and President George W. Bush keeping a low profile in Washington, Americans could be forgiven for thinking they have a new executive capital.

Today the focus will be on both Washington, where a $14 billion bill to bail out the United States’ struggling automakers will be debated in the Senate, and Chicago, where Obama will announce former Senate leader Tom Daschle as the country’s next health secretary.
 
Obama is due to hold a news conference at 11 a.m. EST (600 GMT) to name Daschle, a Democrat from South Dakota, and give more specifics about his plan to provide affordable healthcare to all Americans. Daschle faces the Herculean task of revamping America’s ailing healthcare system.
 
A new Wall Street Journal/NBC news conference  poll found that 73 percent of adult Americans approve of the way Obama has handled his preparations for becoming president on Jan. 20, while 38 percent say they have a more favorable impression of him since the Nov. 4 election.
 
Obama is likely to face more questions at the news conference on the scandal involving Democratic Illinois Gov. Rod Blagojevich, who was arrested on Tuesday and charged with attempting to sell Obama’s Senate seat. Obama has called on the governor to resign.

Illinois’s Lieutenant-Governor Pat Quinn told NBC’s Today breakfast television show that Blagojevich would be impeached if he did not resign. Quinn, who is next in line to replace Blagojevich, said he had not spoken to the governor since the summer of 2007.
 
In Washington, the Senate is due to debate a proposal giving $14 bln in emergency loans to struggling auto-makers after it was passed in the House of Representatives by 237-170 votes on Wednesday night. But it is expected to face stiff opposition from skeptical Republicans who want greater accountability from the carmakers in exchange for the loans.
 
Democrats in Congress and the White House want the measure passed urgently, fearing that the collapse of the auto industry would fuel unemployment and deepen the recession.
 
The U.S. Labor Department reported on Thursday that the number of workers filing claims for jobless benefits jumped to a 26-year high last week. Data last week showed employers cut half a million jobs in November, the largest number in 34 years.
 
But it was not all doom and gloom on the morning TV shows, which perhaps not surprisingly, found time to show pictures of the January 2009 cover of men’s magazine GQ. The cover shows a naked Jennifer Aniston wearing just a necktie.