Bill Clinton Endorses Obama's Revenue Increase Proposal & Deficit Reduction Plan

CBS's Bob Schieffer spoke with former President Bill Clinton on President Obama's proposed plan to increase taxes on millionaires, how to put the unemployed back to work and how his Clinton Global Initiative will help create jobs.


Sources: CBS News

Standard & Poor's Fires Back At Criticism Of U.S. Downgrade! Endorses Tax Increases!!

Amid Criticism on Downgrade, S.&P. Fires Back


A day after Standard & Poor’s took the unprecedented step of downgrading the creditworthiness of the United States government, the ratings agency offered a full-throated defense of its decision, calling the bitter stand-off between President Obama and Congress over raising the debt ceiling a “debacle,” and warning that further downgrades may lie ahead.

In an unusual Saturday conference call with reporters, senior S.& P. officials insisted the ratings firm hadn’t overstepped its bounds by focusing on the political paralysis in Washington as much as fiscal policy in determining the new rating. “The debacle over the debt ceiling continued until almost the midnight hour,” said John B. Chambers, chairman of S.& P.’s sovereign ratings committee.

Another S.& P. official, David Beers, added that “fiscal policy, like other government policy, is fundamentally a political process.”

Administration officials at the White House and Treasury angrily criticized S.& P.’s action as based on faulty budget accounting that discounted the just-enacted deal for increasing the debt limit.

The agreement set spending caps in the fiscal year that begins Oct. 1 and calls for a bi-partisan Congressional “super committee” to propose more deficit reduction — for up to $2.5 trillion in combined savings over a decade.

“The bipartisan compromise on deficit reduction was an important step in the right direction,” the White House press secretary, Jay Carney, said in a statement on Saturday. “Yet, the path to getting there took too long and was at times too divisive. We must do better to make clear our nation’s will, capacity and commitment to work together to tackle our major fiscal and economic challenges.”

The ratings agency put additional pressure on the joint Congressional committee to find additional spending cuts, tax hikes or both to bring down the inexorably rising national debt.

Still, the posturing on Capitol Hill continued.

“Unfortunately, decades of reckless spending cannot be reversed immediately, especially when the Democrats who run Washington remain unwilling to make the tough choices required to put America on solid ground,” Speaker John A. Boehner, an Ohio Republican, said in a statement.

Senate Majority Leader Harry Reid said the downgrade affirmed the need for the Democratic approach, which would combine spending cuts with tax increases.

The decision, he said, “shows why leaders should appoint members who will approach the committee’s work with an open mind — instead of hardliners who have already ruled out the balanced approach that the markets and rating agencies like S.& P. are demanding.”

Even as the ratings agency insisted on Saturday that its move shouldn’t have come as a shock, it reverberated around the world as political and financial leaders scrambled to assess its impact on the already troubled world economy.

China, the largest foreign holder of United States debt, said on Saturday that Washington needed to “cure its addiction to debts” and “live within its means,” just hours after the S.& P. downgrade.

While Europeans had girded for a possible downgrade, the news that S.& P. had actually yanked the United States’ AAA rating was nonetheless received with a degree of alarm in the corridors of power across the Continent. Finance Minister François Baroin of France questioned the move Saturday, noting that the figures used by S.& P. didn’t match those of the Treasury, and overstated the federal debt by about $2 trillion.

Mr. Baroin said he found it curious that neither Moody’s nor Fitch, the two other major ratings agencies, had reached a similar conclusion. Moody’s has said it was keeping its AAA rating on the nation’s debt, but that it might still lower it.

“We have total confidence in the solidity of the American economy,” Mr. Baroin said in an interview on French radio. Nonetheless, he added, the decision confirms that the world’s most developed economies are confronted with the same urgent priorities: to lift growth and reduce public and private debt.

The lowering of a core financial instrument of the global economy is freighted with symbolic significance, but carries few clear financial implications. The downgrade could lead investors to demand higher interest rates from the federal government and other borrowers, raising costs for local governments, businesses and home buyers. But many analysts say the impact could be modest, in part because the other ratings agencies, Moody’s and Fitch, have not downgraded the government at this time.

The wrangling over the downgrade to AA+ from AAA stretched over days. S.& P. executives came to the Treasury Department earlier in the week to meet with a group of administration officials led by Mary J. Miller, the assistant secretary for financial markets, who is one of the government’s main liaisons to the rating agencies, according to a government official with knowledge of the meeting.

At the meeting, the S.& P. executives walked the Treasury team through its analysis, the official said. Even then, Treasury officials raised concerns about the methodology. S.& P. pointed out that there were at least three sets of assumptions that could be made to project future growth in government spending, according to the official.

The Congressional Budget Office projects spending in two ways — one that shows Congress increasing spending for the domestic and defense programs it finances annually by the projected rate of inflation, and another that shows spending rising by a higher amount pegged to the expected growth in the nation’s gross domestic product.

The Treasury argued for a third way, that would make sure that whichever so-called base line S.& P. used, it would take into account the spending caps and deficit reduction that Congress and the White House agreed to in the recent debt-limit deal.

Rumors of a potential downgrade started swirling through the financial markets on Friday morning, causing stocks to fall sharply. Although Moody’s and Fitch had affirmed the government’s AAA rating late Tuesday afternoon, S.& P. was silent.

But around 1:30 p.m on Friday, S.& P. sent a memorandum outlining its preliminary position, including specific figures underscoring their argument for a downgrade. Treasury officials were told that S.& P. planned to make its announcement after 4 p.m., when the stock market closes, according to two administration officials.

Treasury officials flagged a concern over how S.& P. crunched the numbers. S.& P. had chosen to assume that government spending grew at the pace of economic growth, rather than rely on numbers that incorporated the new spending limits into its actual budget projection. That is what Treasury officials are now calling a $2 trillion error — and raised the issue with S.& P.

In Saturday’s conference call, the Mr. Chambers said the $2 trillion difference, in one scenario for 2021, equals only about 2 percent of gross domestic product, and doesn’t alter the fundamental reality that the country’s debt burden will continue to rise.

Randy Neugebauer, a Texas Republican who heads the House Financial Services’ subcommittee on oversight and investigations, said that while it was appropriate for S.& P. to consider the political situation in its analysis, it was speculative of it to use predictions of what Congress will likely do in the future as a rationale for a downgrade.

“One thing that puts them out in uncharted waters is trying to predict what the political environment is going to be,” Mr. Neugebauer said. “They’re not predicting an overly cooperative environment in Congress and that’s a very subjective call.”

The ratings agencies, for their part, spent Saturday trying to defend their positions on the nation’s debt. Moody’s and Fitch analysts said Saturday that a downgrade remains a possibility. “Our rating is AAA until the day it changes,” said David Riley of Fitch in London. “That being said, we haven’t formally reaffirmed the rating.”

Moody’s has reaffirmed the AAA, though it put the country on negative watch on Tuesday. The company’s sovereign analyst said Saturday that his company is not as concerned about Washington’s political gridlock.

Steven Hess, a Moody’s analyst, said the debt deal “is not enough, but we thought a downgrade would be premature given that they have come up with a plan for deficit reduction.”

Sources: AP, CNN, Fox News, NY Times, Youtube

Standard & Poor's Blames Congressional Bickering For U.S. Credit Downgrade; World Reacts!

Obama administration official: S&P move 'a facts-be-damned decision'

A senior Obama administration official is calling Standard & Poor's move to downgrade U.S. credit "a facts-be-damned decision," saying the rating agency admitted to an error that inflated U.S. deficits by $2 trillion.

U.S. Treasury officials received S&P's analysis Friday afternoon and alerted the agency to the error, said the administration official, who was not authorized to speak for attribution.

The agency acknowledged the mistake, but said it was sticking with its decision to lower the U.S. rating from a top score of AAA to AA+.

"This is a facts-be-damned decision," the official said. "Their analysis was way off, but they wouldn't budge."

Other sources familiar with the S&P matter called the move political and said the decision was rushed out too quickly.

The White House is now in wait-and-see mode -- hoping the decision and the S&P analysis face outside scrutiny, the official said.

"A judgment flawed by a $2 trillion error speaks for itself," a Treasury Department spokesperson said.

John Chambers, head of sovereign ratings for S&P, admitted there was an error in a CNN interview Friday night, saying "we agree with the Treasury's position on this and our figures reflect that."

But he also said the error "doesn't make a material difference -- it doesn't change the fact that your debt-to-GDP ratio ... will continue to rise over the next decade," he told "AC360."

In July, S&P placed the United States' rating on "Credit Watch with negative implications" as the debt ceiling debate devolved into partisan bickering.

To avoid a downgrade, S&P said the United States needed to not only raise the debt ceiling, but also develop a "credible" plan to tackle the nation's long-term debt.

Chambers said the slowness at raising the debt ceiling and the political infighting led to the move. In announcing the downgrade, S&P cited "political risks, rising debt burden; outlook negative."

"The downgrade reflects our opinion that the fiscal consolidation plan that Congress and the administration recently agreed to falls short of what, in our view, would be necessary to stabilize the government's medium-term debt dynamics," the agency said.

The immediate implication of the downgrade was unknown. "Only time's going to tell how we're going to be affected," former U.S. Comptroller General David Walker told CNN's Anderson Cooper. "Interest rates that affect the U.S. government ultimately can ripple throughout the economy, which is not good news given our weak economic condition already."

S&P has not spelled out what the United States has to do to regain its AAA rating, sources said.

However, Chambers said "it's going to take a while to get back to AAA." Walker, who served as comptroller general from 1998 to 2008, said he wasn't "totally surprised" by the downgrade, saying S&P in April "made it very clear that they were looking for at least a $4 trillion reduction in the projected deficit over the next 10 years.

Within hours of S&P's move, both parties were playing the blame game. Former Sen. Rick Santorum of Pennsylvania, who is among a field of Republican contenders for the 2012 presidential nomination, attributed the downgrade to a lack of leadership.

"The markets are scared and the credit downgrade has happened because the president and this Congress continue to address the symptoms and not the disease," he said in a statement.

Former Utah Gov. Jon Huntsman said the downgrade was due to "out-of-control spending and a lack of leadership in Washington"-- a sentiment echoed by several GOP lawmakers, including House Speaker John Boehner.

"The spending binge has resulted in job-destroying economic uncertainty and now threatens to send destructive ripple effects across our credit markets," Boehner said in a statement.

Mitt Romney, the former governor of Massachusetts and also a GOP presidential contender, called the downgrade "a deeply troubling indicator of our country's decline under President Obama."

South Carolina GOP Sen. Jim DeMint, meanwhile, called on Obama to replace Treasury Secretary Timothy Geithner immediately.

"The president should demand that Secretary Geithner resign and immediately replace him with someone who will help Washington focus on balancing our budget and allowing the private sector to create jobs," DeMint said in a statement.

On the Democrats' side, Senate Majority Leader Harry Reid stressed "the need for a balanced approach to deficit reduction that combines spending cuts with revenue-raising measures like closing taxpayer-funded giveaways to billionaires, oil companies and corporate jet owners."

A special joint committee of Congress will recommend further deficit reduction steps totaling $1.5 trillion or more, with Congress obligated to vote on the panel's proposals by the end of the year.

"This makes the work of the joint committee all the more important, and shows why leaders should appoint members who will approach the committee's work with an open mind -- instead of hardliners who have already ruled out the balanced approach that the markets and rating agencies like S&P are demanding," Reid said.

Chambers, however, told CNN that "there's plenty of blame to go around," calling it "a problem that has been a long time in the making well over this administration and the prior administration."

It was a sentiment echoed by many, who took to social media sites Facebook and Twitter to communicate about the issue.

"Not really a surprise the credit rating was lowered. Both parties acted like children. Compromise is like using a water gun to put out fire," tweeted Michael Ross, who uses the Twitter handle MWRoss.

Rich Tucker, 36, of Charlotte, North Carolina, used humor to get his point across, tweeting that Standard and Poor's had also just downgraded the Beatles to the Monkeys.

"OK, done with the S&P downgrade jokes ... truly sucks that we are here ... we all need to sacrifice to get out of this hole," Tucker tweeted.

Later, Tucker told CNN that he believed "there is almost no one who isn't to blame for where we are." "We are all in this situation as a country together, and we are going to all have to sacrifice to get out of it," Tucker said.


Sources: CNN

Obama's July 2011 Jobs Report: 117,000! GOP's Fake Debt Crisis Failed!

U.S. Posts Stronger Job Gains Amid Fear

As the United States economy continued to wobble, employers added 117,000 jobs in July, staving off a panic that had threatened to engulf the financial markets.

Though the government’s monthly snapshot of the labor market brought a sigh of relief to traders on Friday, the net new jobs created was not enough to provide much comfort to those who have been waiting for the recovery to kick into high gear. The unemployment rate slipped a notch to 9.1 percent, but that was mainly because some people had simply given up looking for work.

The net new jobs created in July exceeded the dismal number reported in June, but the total was barely sufficient to accommodate normal population growth, exceeded the 18,000 net new jobs originally reported in June. The Labor Department also revised its estimate of American job growth in June to 46,000.

Stock markets, pummeled on Thursday on increasing pessimism over the American economy, drew about even in early trading, retreating from a 1 percent bounce higher at the opening.

The latest jobs numbers came in a week when Congress finally agreed to a deal to raise the country’s debt ceiling and cut government spending. Deep divisions remain between the two political parties on how to cut spending further at a time when many economists worry that the economy can ill afford it.

“It gives us some temporary relief,” said Nigel Gault, chief United States economist at IHS Global Insight. “But all we can say is it’s a bit better than the two previous months. I suspect, though, that relief will probably not last too long as people refocus on what they think will happen in the future.”

Indeed, other signs that the recovery has slowed to a crawl are mounting. The Commerce Department reported earlier this week that consumer spending, which accounts for up to 70 percent of economic activity, actually declined in June for the first time in nearly two years. A closely watched survey of manufacturers showed that employment in July grew at a slower rate than in June and that new orders of factory goods actually fell. Housing prices are still extremely weak.

With extended unemployment benefits scheduled to expire at the end of this year, there are still 13.9 million people out of work, 6.2 million of whom have been searching for jobs for six months or longer. Another 8.4 million are working part-time because they couldn’t find a full-time job, and 1.1 million have become so discouraged that they have stopped looking for work altogether. Including such people, the broader measure of unemployment was 16.1 percent.

In a sobering note, only 58.1 percent of the population is working, lower than at any point in 28 years.

With consumer confidence on a knife’s edge and orders slipping, employers have been reluctant to add workers. “We just don’t see where there is much incentive for companies to ramp up hiring at a time when there’s so much uncertainty gripping the country,” said Bernard Baumohl, chief global economist with the Economic Outlook Group.

Mr. Baumohl, who said the risk of a fall back into recession had certainly increased, said the most likely prospect was that the economy would continue in a “muddle through” phase. “I don’t think we’re going to see anything major happen in the labor markets until well into the fall,” he said.

Sources: CNN, NY Times, PBS, Youtube

Horn Of Africa Famine Captures World's Attention! Help On The Way?

Horn of Africa famine: How to help

Somalia, already one of the world's poorest countries, is in midst of an epic humanitarian catastrophe, as a third of its popultion - 3.7 million people - face starvation. Throughout the Horn of Africa, in countries like Ethiopia and Kenya, as many as 11 million people are currently at risk of severe malnutrition or starvation as the region faces the worst drought conditions in 60 years.


The drought conditions, combined with an ongoing struggle between the Somali government and Islamic militants, as well as a recent rise in food prices, have all combined to create conditions that have stretched aid agencies thin.


The Horn of Africa region is now full of refugee camps, some with occupants numbering in the hundreds of thousands. Every day, countless families arrive half-dead out of the desert seeking help.


Many aid agencies say they have the capacity to address some of the worst results of the crisis, but they lack the funding to do so. Fortunately, there are many ways to help. Below is a list of some of the aid organizations with relief operations in the Horn of Africa, along with links to their donation pages.

UNICEF is among the most active charitable organizations supporting children in Somalia. They say as many 640,000 children are acutely malnourished in southern Somalia alone. Their programs support 16 stabilization centers, 201 outpatient therapeutic programs, and 325 supplementary feeding programs. To donate money to UNICEF, visit here. To learn how you can donate your time.

The U.N.'s World Food Program is the world's largest humanitarian organization fighting hunger, and is funded entirely through donations. Their work in the Horn of Africa is extensive and crucial. To find out how to donate to the WFP.

Save the Children is one of the world's leading independent nonprofit organizations. It has made an urgent call to donors to provide life-saving help to thousands of families in Ethiopia, Kenya and Somalia. "Eighty percent of the refugees are children and the majority of the remainder are women," says Duncan Harvey, Save the Children's Deputy Country Director in Ethiopia. To find a list of the many ways to help Save the Children with their work in East Africa.

The International Rescue Committee responds to the world's worst humanitarian crises and helps people to survive and rebuild their lives. Founded in 1933 at the request of Albert Einstein, the IRC offers lifesaving care and life-changing assistance to refugees forced to flee from war or disaster. To support their work helping refugees in the famine.

Doctors without Borders, founded in 1971, provides independent, impartial medical assistance to those most in need in crisis zones throughout the world. They have been working actively with Somali refugees in northern Kenya since 2009. To find out about the many ways to support their medical mission.

CARE is a leading humanitarian organization that places special focus on working alongside poor women because, they say, equipped with the proper resources, women have the power to help whole families and entire communities escape poverty. Their immediate efforts for Somalia refugees in Kenya include safe water, sanitation, and emergency aid to newly arrived refugees. Individuals, especially children, who are suffering from malnutrition and medical problems are referred to supplementary and therapeutic feeding programs and stabilization units. Families are provided with emergency rations while awaiting access to general food distributions. To donate to CARE's East Africa program.

Mercy Corps is a global aid agency that works for long periods of time in areas that have experienced some kind of shock. They currently work with Somali refugees in Kenya, and plan on expanding their mission to alleviate the famine into Somalia and Ethiopia. To find out how to donate.

The International Committee of the Red Cross has operations in Kenya and parts of Somalia helping refugees. To donate to the Red Cross.

World Vision is a Christian humanitarian organization dedicated to working with children, families, and their communities worldwide to reach their full potential by tackling the causes of poverty and injustice. They are currently undertaking famine relief operations in Kenya, Ethiopia and Somalia. To donate to their effort.

American Jewish World Service is an international development organization that has a long-standing presence in East Africa and is working with humanitarian organizations already on the ground to provide critical aid to refugees, internally displaced persons and host communities, including food, water and sanitation, medical support and personal safety. To find out how to donate to AJWS' effort in the region.

Islamic Relief USA is a legally separate and independent member of a global family of collaborating relief organizations that was awarded its sixth consecutive four-star rating by Charity Navigator in 2009. They already had relief projects in Ethiopia, Kenya and Somalia prior to the current crisis. To find out about volunteering with or donating to Islamic Relief USA.


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Sources: CARE, CBS News, Youtube, Google Maps

Dow Plummets Amid Global Fears From GOP Engineered Debt Crisis! (Tea Party Backlash)

Stocks Down Over 4% in Global Sell-Off

Stocks around the world fell sharply Thursday on intensifying investor fears about a slowdown in global economic growth and worries about Europe’s ongoing debt crisis, which is centered now on Italy and Spain.

Stock market indexes in the United States and Europe dropped more than 4 percent as Japan intervened to weaken its currency and the European Central Bank began buying bonds to try to calm markets.

At the close, the Standard & Poor’s 500-stock index was down 60.27 points, or 4.78 percent, to 1,200.07. The Dow Jones industrial average was off 512.76 points, or 4.31 percent, to 11,383.68, and the Nasdaq was down 136.68, or 5.08 percent, to 2,556.39.

It was the biggest percentage drop since February 2009.

Following accelerating falls over the past two weeks, the stock market is now officially in “correction” territory, defined as a drop of 10 percent to 20 percent since the latest peak.

The S.&P. 500 has fallen 10.6 percent since its recent high of 1,363.61 on April 29, underlining the new negative investment sentiment about the economy and Europe.

“We are now in correction mode,” said Sam Stovall, chief investment strategist at Standard & Poor’s. “We could have another couple of weeks to go before it bottoms.”

The last time the market was in a correction was last summer, when it fell 16 percent before recovering.

A fear haunting markets is that the United States economy may be heading for a double-dip recession. And even after a second major rescue package for Greece and the agreement to raise the debt ceiling in the United States, investors are concerned that world leaders have not done enough to address fragile underlying economic growth, while Europe’s debt problems have moved on to the much bigger economies of Italy and Spain.

Mohamed El-Erian, chief executive of the bond giant Pimco, said investors were selling risky assets like stocks “globally prompted by concerns about the weakening economic outlook, spreading contagion in Europe and insufficient policy responses.”

With Thursday’s dive, the three major American indexes had erased all of the gains made so far in 2011, with the S.&P. and Nasdaq markedly below the start of the year.

In afternoon trading, the Dow, an index of 30 blue-chip stocks, was about 9.4 percent off of its most recent closing high of 12,810.54, reached on April 29. But it was 18 percent below its all-time high of 14,164.53, on Oct. 9, 2007.

Since the beginning of 2008, there have been 17 days with drops of 4 percent or more – 13 in 2008 and 4 in 2009.

Unnerved by policymakers’ apparent inability to get ahead of Europe’s festering debt crisis, European stock markets turned sharply negative across the board.

In Britain, stocks closed down 3.43 percent. In Germany, the DAX index dropped 3.4 percent. In France, the CAC 40 closed down 3.9 percent.

“This is the worst it has been in Europe,” said Jens Nordvig, currency economist at Nomura Securities in New York. “The current rescue package was not enough to cope with the size of the problems posed by Italy and Spain. We need a new framework that can cope with those two countries, and without it markets are on their own and are falling.”

Major indexes in Italy, Spain, France and Switzerland all closed Thursday more than 20 percent below their 2011 highs, while Germany was off nearly 15 percent and Britain’s decline was more than 11 percent.

The selling has extended to many other markets. Mexican stocks are off almost 14 percent from their highs earlier this year, and Brazil’s major index has lost more than a quarter of its value.

Yields on Italian government bonds, already above 6 percent, rose sharply, adding to concerns that the nation’s current debt position is unsustainable. Yields on Spanish debt also increased. This was despite large-scale intervention by the European Central Bank, which for the first time since March began buying bonds in an apparent attempt to prevent the region’s sovereign debt crisis from engulfing Italy.

The markets had expected some concrete action from Prime Minister Silvio Berlusconi on Italian’s worsening debt situation in public remarks late Wednesday. But they were disappointed when he defended the country’s fundamentals and said current packages were enough to foster economic growth. The Italian stock market opened up but then slipped sharply.

Since many of Europe’s banks hold the bonds of countries like Italy and Spain, concern is turning to the health of the banking system as these bonds drop in value. With warning signs flashing that some European banks are struggling to fund themselves in increasingly expensive credit markets, the E.C.B. also moved to help weaker banks by expanding its lending to institutions in the euro area at the benchmark interest rate. Bank stocks nevertheless fell sharply in Europe.

Jean-Claude Trichet, the president of the E.C.B., said the bank had acted in response to “renewed tensions in some financial markets in the euro area.”

He said that uncertainty created by the debate in the United States to raise the debt ceiling had unnerved European markets as United States investors had become increasingly reluctant to lend to European banks. “It’s clear the entire world is intertwined,” he said. “What happens in the U.S. influences the rest of the world.”

But the E.C.B.’s steps were not enough to help Europe’s bond markets.

Laurent Bilke, an analyst at Nomura in London, said the E.C.B. had been buying government debt of Portugal and Ireland in order to calm these markets. But it had not been buying Italian and Spanish government debt, and that had unnerved investors.

He said the E.C.B. council had also not been united in its decision to take extraordinary measures to intervene in the markets, and that fact had spooked markets.


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Sources: AP, CNN, NY Times, White House, Youtube, Google Maps

GOP Engineered Debt Debacle: Job Growth Killer & Hurt United States' Reputation

Spending cuts: Here comes the hard part

After months of political wrangling, lawmakers have managed to pass a bill that raises the debt ceiling and cuts spending.

Now for the hard part.

Congress cut spending, but still has to decide which programs and agencies will receive less money.

Really, that's where the rubber always meets the road. And the deadline for making those tough choices is just around the corner.

The next fiscal year starts on Oct. 1, and legislators are still light years from putting together a spending plan for next year.

And this new bill -- which cuts spending -- is being dropped into the appropriations process at what amounts to the last minute.

"It's now August," said Craig Jennings, federal fiscal policy director at OMB Watch, which monitors federal spending. "They have to get this done by the end of September, and the Senate hasn't done anything."

Complicating matters is the fact that Congress has to actually cut spending, rather than increase it.
Debt ceiling: What the deal will do

In April, lawmakers set discretionary spending levels at $1.050 trillion for the current fiscal year.

The law President Obama signed Tuesday sets discretionary spending levels for 2012 at $1.043 trillion and at $1.047 trillion for 2013 -- or an accrued total of $10 billion below current levels.

And what is discretionary spending anyhow?

It's a small section of the budget that includes funding for food inspectors, the FBI and education grants, among many other programs and services people associate with government.

But the debt ceiling bill doesn't speak to which agencies or specific programs should bear the brunt. Instead -- it says cut, and cut now.

Meanwhile, a senior senator from the Pacific Northwest will have very different spending priorities than a newly elected House member from Florida, and those differences are highlighted when it's time for the federal government to dole out money.

"Congress still has to do the usual fighting," said Jennings. "They still have to break down spending for each agency, and there are still going to be disputes between the House and Senate."

That sounds an awful lot like what happened with the fiscal 2011 budget, when the normal appropriations process degenerated into a protracted battle that brought the government to the edge of a shutdown.

Congress passed seven short-term stopgap measures called "continuing resolutions" over the course of six months.

Of course, short-term spending bills are nothing new. Congress has enacted at least one every year for all but three of the past 30. But seven in one year was unprecedented, and indicative of partisan gridlock.

The latest will expire on the last day of September, a deadline now just weeks away. Because lawmakers have made such little progress on setting agency funding levels, it now seems a short-term bill is a guaranteed.

Jennings said there is the potential for another food fight -- especially if Republicans consider the spending caps to be a ceiling, rather than the target level of spending.

"If Republicans want to go lower than the caps, they can do that," Jennings said.

In other words, get ready for a contentious few months.


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Sources: CNN, Google Maps

Christine LaGarde: Elected First Female IMF Chief! Sarkozy's Win!

IMF names France's Lagarde managing director

Christine Lagarde, the finance minister of France, was voted to the post of managing director of the International Monetary Fund on Tuesday.

Lagarde, the first woman to run the global financial institution, will succeed Dominique Strauss-Kahn, who was arrested last month in New York on sexual assault charges.

The vote on the influential post came at a crucial time for the IMF, which has been working closely with the European Union and the European Central Bank to provide financial support for Greece and other troubled European economies.

In a brief statement, the IMF's executive board said Lagarde will serve a five-year term as the managing director and chairman of the international financial institution beginning next month.

"I am deeply honored by the trust placed in me by the Executive Board," Lagarde said in a statement.

The only other contender was Mexican Central Bank chief Agustin Carstens, who was supported by Australia, Canada and Mexico.

The IMF said it selected Lagarde by a consensus vote.

"I would like to thank the Fund's global membership warmly for the broad-based support I have received," said Lagarde. "I would also like to express my respect and esteem for my colleague and friend, Agustín Carstens."

U.S. Treasury Secretary Tim Geithner announced his support for Lagarde earlier Tuesday.

"Minister Lagarde's exceptional talent and broad experience will provide invaluable leadership for this indispensable institution at a critical time for the global economy," Geithner said in a statement.

Lagarde was also backed by the United Kingdom, Germany and most European powers, as well as some Asian and African nations.

The IMF, which is made up of 187 member countries, has traditionally been led by a Western European official.

For Greece, the real challenge is still ahead

Some developing nations had pushed to break that tradition, arguing that the IMF should consider candidates from rising economic powers in Asia and South America.

"I will make it my overriding goal that our institution continues to serve its entire membership with the same focus and the same spirit," said Lagarde.

The fund was established in 1947 to help rebuild the international monetary system after World War II. In addition to monetary cooperation and exchange rate stability, the IMF works to facilitate international trade and promote economic growth around the world.

The IMF has been led by John Lipsky, a veteran deputy managing director, since May 19.

Strauss-Khan pleaded not guilty earlier this month to seven charges involving a May 14 incident in which a housekeeping employee at New York's Sofitel hotel accused him of sexual assault.

Once considered a top candidate in France's next presidential race, Strauss-Khan officially resigned from the IMF on May 19. He is being held under house arrest in a Manhattan apartment on $6 million in bail money.

Lagarde, 55, has been French President Nicolas Sarkozy's finance minister since June 2007. She also served as the country's to foreign trade official.

A lawyer by training, Lagarde was a partner at the international law firm of Baker & McKenzie before going into politics.

According to her official biography, Lagarde was born in Paris to school teachers and has two children of her own.

She was a member of the French national synchronized swimming team and was inducted into the nation's Legion of Honor in 2000.


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Sources: CNN, Google Maps

Jobs! Where Are They? America's Small Businesses!

The Workforce: Where Will The New Jobs Come From?



Later this year, a marketing manager will sit down for his first day of work at HomeAway, a company that helps people rent their vacation homes online. In the firm's sleek Austin, Texas, headquarters, a glass-wrapped building decorated with travel souvenirs, the marketer will flip on his computer and do his job — a job no one has done before. This, you see, will be a brand-new job, one of the most coveted commodities of economic recovery.

How this job will come to exist is at the heart of the most pressing problem in the economy today. Since the start of the recession in December 2007, the U.S. has shed 8.4 million more jobs than it has gained. The unemployment rate hovers near 10%, and broader measures of labor-market woes that include underutilized workers are as high as 16.8%. Go down the nation's list of economic problems — from mortgage defaults to state-budget shortfalls — and joblessness lurks in the background.

Even as other economic signals have started to turn positive, the jobs situation has remained bleak. In February, the economy lost a net 36,000 jobs, which is leagues better than the 726,000 lost in February a year earlier but points in the wrong direction all the same. Were the economy to magically start generating jobs at a healthy clip — say, 200,000 a month — it would still take 3½ years to return to where we were, never mind the jobs we need for new entrants to the workforce.

This reality has triggered a nearly convulsive political response, given that elections are won and lost over the state of the economy and the mind-set of wage earners.

That's why President Barack Obama, in his State of the Union address, called jobs his "No. 1 focus" and proposed repurposing bank-bailout money to lend more to small businesses, which would then, presumably, generate jobs. On March 17, Congress passed a job-creation bill that includes, among other things, an estimated $13 billion worth of tax incentives to coax companies into adding to their payrolls.

The cold truth of the matter, though, is that there's not much Washington can do to gin up permanent jobs on such short notice. The federal government is a key player in engendering job growth in the long term — by establishing smart policy in areas such as trade, education, immigration, health care, energy, infrastructure and taxes — but over the course of months or even a few years, there's little it can effectively do besides hiring directly or stepping in as a buyer of goods and services.

The great American job-creation machine always has been and will continue to be private enterprise.

The problem is that companies are beat-up from the longest economic contraction since the Great Depression. Plenty of economists think the worst is now behind us, but firms are still plagued by uncertainty about how fast the economy will recover.

Nor can they plan responsibly without knowing the bottom-line costs of the massive new initiatives out of Washington on health care reform and carbon-emission regulation. Even companies that are financially fit often don't feel like taking the risk of ramping up operations and hiring more workers. There's been political pressure on banks to lend, but the problem for some bankers, like Frost Bank CEO Dick Evans, is that many businesses are debt-shy. "I'm aggressively trying to make loans, but right now they don't want to borrow," he says. "At this point," says Harvard Business School strategy expert Michael Porter, "the No. 1 thing that will create jobs is the perception and confidence that the economy will start growing again."

The good news is the perception as well as the reality is improving in some areas of the country. Just 12 out of 384 metropolitan areas ended 2009 with more jobs than they had at the beginning of the year, but more recently, the numbers have been looking better. Over the past six months (through January), 72 cities gained jobs, according to a Moody's Economy.com analysis of data from the U.S. Bureau of Labor Statistics. That may seem like a slow start, but it's a meaningful one to people being hired in places like Flagstaff, Ariz., Augusta, Ga., and Lansing, Mich.

Austin lands on that list too. The central Texas city of 760,000 has a few built-in advantages over other cities. The University of Texas and the state government — Austin is the capital — provide some economic stability. And as the Southwest's technology center, Austin is home to many high-growth (though high-risk) companies.

It is also a music mecca and the gateway to Texas hill country, attributes that help it attract desirable workers. For all these reasons, it hasn't been battered quite as hard as other cities by the recession; the unemployment rate was nearly 3 points below the national average at the end of last year.

Still, the metro area has seen big job losses from major employers, including the computer maker Dell and semiconductor manufacturers like Freescale and Advanced Micro Devices. It's not hard to find the desperate stories here that you find throughout the rest of the country: the woman laid off from book publishing two years ago who hasn't been able to find a permanent job since; the interior decorator who used to have a six-figure salary and now sells furniture for $30,000 a year.

Yet Austin also offers a model of hope. The city's surfeit of computer-programming talent allowed a video-game outfit to hire 50 developers and designers in the past two months. A manufacturer is building a new plant north of town to take advantage of the growing commercial-lighting industry even as its construction-related business falls off. A pharmaceuticals start-up is looking for new lab workers.

Some companies are expanding, and others — markers of the city's entrepreneurial spirit — are starting from scratch. Austin is emerging as one of the first pockets of the country where people are getting back to work, showing that even in this dreary economic environment, job creation can happen — and illustrating how it will eventually take root around the nation.


One Created Job

To start to understand the process, swing by HomeAway's downtown Austin headquarters. This is where, sometime in the next nine months, a marketing manager will show up for his first day of work at one of the economy's newest jobs.

The story of how this job will come to exist starts five years ago, with one man's frustration at how hard it was to find and rent a beach house for his family vacation. Brian Sharples, who was between jobs at the time, didn't understand why he couldn't go to a single website — as he would go to Expedia for airline tickets — to find a comprehensive list of houses for rent. So, with a business partner, he started such a site. Five years later, the company has $120 million a year in sales, employs 600 people in five countries and is ramping up its marketing push to grow even larger. That's why it needs a new marketing manager in Austin.

HomeAway is hiring for a very simple reason: people who own houses and want to rent them out are happy to pay $300 a year to have the company spread the word — which it did in a Super Bowl commercial. "Jobs get created by providing a product or service that's better than what's out there," says Sharples. "There was an existing market for vacation rentals, and we've created efficiencies in that market. Now that it's cheaper and more efficient, more people are doing it, and the market is expanding."

In other words, to create jobs, start by creating something people are willing to pay for.

That's not as self-evident as it may sound. There is no shortage of theories about why companies aren't adding jobs faster. Banks won't lend to enable them to expand. Extra workers are too expensive because of taxes and health care costs. But the real clog in the nation's job-creating machinery is much more basic: a lack of demand for goods and services.

Just ask small businesses. American Express did that in a January survey, asking, What would most spur companies to go out and hire? An increase in customer demand, according to 42% of the respondents. Tax credits and better access to loans trailed, at 11% and 5%, respectively.

To see that dynamic in action in Austin, cut diagonally across the street from HomeAway and pop into the headquarters of Whole Foods. For a decade, the upscale grocery chain saw sales grow at about 20% annually. Last year, sales barely budged up 1% — and the 30 stores that executives planned to open around the country were trimmed to 15. Those 15 stores added nearly 4,000 jobs — just half as many as would have been gained had people kept buying organic peppers and salted caramels at the same pace. "There's too much thinking about how to create jobs," says James Manyika, a director of the economics-research outfit McKinsey Global Institute, "and not enough about how to create demand."

Why is that? Well, focusing on demand is a tricky thing to do. For decades, the economy's engine of demand has been American consumers — a population now overindebted, underemployed and endowed with a newfound sense of thrift. The explosion in credit-card and home-mortgage debt before the recession tells us the demand that was there was never sustainable. This is why the President now talks about doubling exports over the next five years and the importance of passing trade agreements with countries like South Korea, Panama and Colombia. If we can't sell to ourselves, there is at least partial salvation in selling to others.

It's also the reason the job-creation bill passed by Congress includes an accelerated tax break for companies buying equipment. Companies that sell equipment need people to build it, and companies that buy equipment need people to run and maintain it. Many firms outside of financial services have surprisingly solid balance sheets, Manyika points out, and might be wooed into investing sooner rather than later. That would drum up sales for the firms they'd be buying equipment from.

That prime-the-pump logic is also behind the use of the government to create demand — what we know as stimulus spending. Last year's $787 billion American Recovery and Reinvestment Act has received its fair share of criticism for funds being dispersed too slowly and for not doing enough to stem unemployment. But in Austin, Bruce Matous has a different point of view. "This saved my family business," says the president of Matous Construction.

Matous is referring to a $28 million contract to upgrade the Hornsby Bend Biosolids Management Plant, a city-owned facility that recycles sewage sludge and yard clippings into lawn fertilizer. The city desperately needed to upgrade its 1980s-built anaerobic digesters (you can see the foam insulation chipping off) and now has the money to do so, thanks to a 30-year interest-free loan from the federal stimulus package. To get the project funded, the city applied to the Texas Water Development Board, which had been handed stimulus money by the Environmental Protection Agency.

Driving around Hornsby Bend, Matous points to a group of half a dozen workmen and says, "We would have laid off all those guys." The construction industry has been brutalized in Austin, as it has been nationally, and by the end of last year, Matous was looking at just a few more months of work in the pipeline. Then he won the Hornsby Bend contract. Now the company is fielding job applications from people 200 miles away and is creating business for other firms, from the equipment maker Caterpillar to R&R Industries, a California outfit that makes yellow safety vests and just sold a couple hundred of them to Matous.

Injecting money into the system — whether through consumer spending, business investment or stimulus funds — is a short-term fix designed to get the gears moving again. That re-establishment of momentum is an important part of economic recovery. But getting things moving isn't the same as keeping them moving. In the long term, there is only one way to create enough jobs for the economy: innovation.


Start-up Nation

Twenty miles south of Austin, in a nondescript industrial park, sits a bland, corrugated-metal building with a roll-up door. Inside the building sits the future of the U.S. economy.

Or at least part of the future. Five and a half years ago, the lights went on at Xtreme Power with half a dozen employees and a vision to make wind power an easier sell. One of the big stumbling blocks in persuading utilities to buy wind is its unpredictability. The wind blows, and then it stops, while utilities' customers demand a constant flow of power. Xtreme's solution: a shipping-container-size power-management system that takes in energy from wind farms, stores it and then smoothly releases an uninterrupted supply of it out the other end.

That innovation carries real economic value. Wind-farm operators want to sell more power, and they'll pay for something that helps them do that. As a result, jobs are created. Xtreme, which employed 57 people at the beginning of 2009, installed its first major system in Hawaii over the summer and now has $100 million worth of orders in the pipeline. The firm currently employs 105 people and is again looking to grow. Its plan is to buy a factory in Wixom, Mich., that Ford shut down in 2007.

It's the dream scenario of the green-technology revolution: a plant that used to make Lincoln Continentals starts churning out the mechanical apparatus of wind-power storage. Michigan autoworkers, knocked off their feet by a collapsing industry, put their skills to use in the quintessential "industry of tomorrow." Once those high-value manufacturing jobs are in place and a group of workers has money to spend, other jobs follow — at doughnut shops, hair salons, real estate brokerages and law firms.

Green jobs are hardly the economic cure-all they are often made out to be. They currently account for only about 0.5% of the U.S. workforce, and plenty of the industry's job growth is likely to happen overseas. China is already the world's largest manufacturer of solar panels. But the model provided by green-energy players is the right one: create new products and new markets, and watch new jobs flow. Without the personal computer, we wouldn't have Google and its 20,000 employees. Without everyday low-cost pricing, we wouldn't have Walmart and its 2.1 million.

Austin provides a useful lesson in how to stay on top of the innovation game. Start with an educated population (43% of Austin residents have a bachelor's degree or higher), mix in a robust venture-capital scene (one of the best outside Silicon Valley), add a supportive community of peers (groups like Bootstrap Austin band together hundreds of entrepreneurs) and wrap all that up with a state government unafraid to throw money at companies that need a little help getting off the ground.

Over at the University of Texas, the nonprofit Austin Technology Incubator houses fledgling firms, plying them with business-plan advice, contact with financiers and lots of coffee over which to share ideas and solve problems. The incubator's 20-year record: more than 200 companies and thousands of jobs created. "Companies don't start unless they're resourced," says Rob Neville, who launched one company with the help of the incubator and is now scaling up another, Savara Pharmaceuticals, in anticipation of support from the Texas Emerging Technology Fund.

These new companies are key to job growth. People talk about small businesses being such great generators of jobs, but a more precise assessment is that young businesses are. John Haltiwanger, an economist at the University of Maryland, has been studying government data for 25 years and has determined that about a third of all new jobs created come from start-ups. Furthermore, young companies add jobs faster. From 1980 to 2005, the typical 15-year-old firm added jobs at a rate of 1% a year, the typical three-year-old firm at a rate of 5%. "These are the rocket ships of the economy," says Haltiwanger.

Of course, young firms are also more likely to flame out and vaporize their jobs — but job destruction is, perhaps surprisingly, par for the course no matter what the size of a company. Even in the recession, about 4 million people a month have been landing jobs. We just don't feel the impact of that because more people have been losing them, leaving us with fewer employed people overall. That constant churn can be jarring for individual workers, but it represents one of the key strengths of the American economy: flexibility. That's certainly true for established companies too.

To see why that matters, stop by Ringdale, a company in the northern Austin suburb of Georgetown. One of Ringdale's main business lines used to be security systems, but as the construction of new buildings has remained depressed, so have sales of things like the ID-card readers that go inside them. Ringdale's response: throw more resources, including employees, at its burgeoning line of light-emitting-diode products, for which it holds a number of patent applications, thereby answering increased demand for low-energy commercial lighting. "We've redeployed," says CEO Klaus Bollmann, whose firm will open one plant expansion in a few months (accounting for an additional 10 to 15 jobs) and a second, larger one next year (120 more jobs). As the economy shifts, reinvent.

That good advice isn't just for companies.


Rewiring The Workforce

In northwest Austin, in cubicles packed with toys and rock-band posters, people in T-shirts and jeans are hard at work creating a video game that someday will be played online by thousands of people at a time. It takes years to produce such a complex game, representing a major investment for California-based Electronic Arts. Why is this happening in Austin? Simple. "The talent pool is here," says local BioWare studio co-head Gordon Walton.

In the national job-creation discourse, jobs often start to sound like things that companies one day decide to hand out. In reality, job creation is also a function of the labor supply. It's not just about firms wanting to hire but also about having people they can usefully employ. There are only four or five cities in the U.S. where Electronic Arts would be likely to develop such a complicated product. Austin is one of them partly because it has a tech-savvy population and a history of fielding such work — and also because it's an easy place for people to train for the profession, with local colleges offering courses in game design and programming.

In a down economy, plenty of people assume responsibility for reinvention. Lindsey Spratt lost her job as an assistant audio engineer and is now studying to be a chef at the Texas Culinary Academy. Rob Carruthers was laid off from a job as a project manager at a software company and is putting his dual engineering-business background to use as a consultant to tech start-ups and schools.

Austin also illustrates a systematic approach to making sure people have the right skills to match what companies need. For the past two years, Workforce Solutions, a government-funded not-for-profit, has been partnering with businesses and local schools like Austin Community College to develop a series of training courses to help people upgrade their skills and earn certifications. The modules are built to be accessible to people well into their careers — recognizing that a 40-year-old isn't likely to have two or four years to return to school full time — and focus on Austin's up-and-coming industries, like biotech, renewable energy and video-game development. "When these jobs come, we'll have the people with the skills to move into them," says Workforce executive director Alan Miller.

Employers are stepping up too. A few blocks east of the state capitol stands a hospital, one of 10 in the metro area owned and run by the not-for-profit Seton Family of Hospitals. An adjacent building that used to be a children's hospital now houses a clinical-education center. Wards and operating rooms are filled with patients — sophisticated, computer-controlled dummies that nurses-to-be can use to receive valuable training. One dummy even gives birth.

Health care as an industry is booming in most places, and Austin is no exception. Over the past three years, Seton has built three medical centers and hired 2,300 people. But getting people into those jobs — nearly 30% of which are for nurses — is a multipronged process. A few years ago, there was a waiting list to enter nursing school in Austin. Seton had to hire nurses trained in the Philippines. Now, with the clinical-education center's extra capacity and new partnerships with nursing programs at local colleges, Seton can hire locally.

That sort of coordination among workers, educators and companies is vital, considering that it can be difficult if not impossible for individuals to know which job to train for next. Even the head of Workforce Solutions admits that focusing on biotech, green energy and video games is really just an educated guess based on Austin's historical strengths and industries that seem poised to grow. One of the reassuring things about capitalism is that over time, workers and companies are pretty good at figuring out the most productive ways to get together. In the short term, though, that realignment can be a struggle.

Even so, there is a clear trend emerging: tomorrow's jobs will require people to add more value than ever before. Consider Samsung's only semiconductor-fabrication plant outside South Korea, which sits in northeast Austin. Since the fall, the factory, which makes flash memory for devices like smart phones and iPods, has been undergoing a $500 million upgrade. In advance of the plant's early-summer reopening, Samsung will hire about 200 engineers and technicians to run and service the new, more sophisticated equipment inside. But with the new factory and those new jobs, 500 other positions have been eliminated: robots, not people, will now transport silicon wafers.

That's actually not so awful, economically speaking. Innovation and increased efficiency are the lifeblood of any economy. But it does mean that as we tackle the topic of creating jobs, we must realize that the sustainable ones will be those that build from a human being's unique abilities, like problem solving and creativity. If we want to encourage high-quality-job creation, we need to find a way to enable economic evolution. We need to set the stage for companies to create tomorrow's goods and services, and we need to be prepared to support workers in their quest to adapt.


Washington Isn't The Answer

In Washington, the bulk of the response to job loss has been to drum up short-term demand. Last year's stimulus package kept the economy from spiraling further downward. Current proposals to extend unemployment benefits and send $100 billion to struggling local governments would have a similar effect — allowing consumers and cities to keep on spending.

Tax cuts for businesses that hire — and then retain — workers will likely wind up doing more of the same. No businessman in his right mind is going to add the long-term liability of a worker simply for the short-term benefit of a tax break. On the other hand, such incentives may accelerate some hiring that would have eventually happened anyway, and that would put more money into consumers' pockets faster. Of course, extra spending and tax cuts contribute to the $1.5 trillion federal deficit, and that drags on the economy.

Easing the flow of credit, especially to small businesses, has also been a major policy push — and a tricky one to size up. The efficient reallocation of capital is key to any economy but especially to one like the U.S.'s, which counts on dynamism as a competitive advantage. Lending to businesses is down; that much is true. But is that because banks are overly cautious and asset-impaired or because businesses are uncertain about the future — or just aren't creditworthy borrowers? A recent survey by the National Federation of Independent Business found that companies that couldn't borrow typically had declining sales or depressed real estate values. Simply opening the lending spigot doesn't seem to be the answer.

All these ideas are short-term. That's understandable. People who are out of work want immediate solutions. Politicians wouldn't be doing their jobs if they didn't try to give voters what they want.

The conundrum is that the most useful things government can do to encourage job growth aren't flashy initiatives with quickly visible results. "There's no magic wand we can wave over companies that will induce them to go out and hire people," says Matthew Slaughter, an economist at Dartmouth's Tuck School of Business. "We need to think long-term."

If Congress wants more and better jobs in the U.S., it should do things like create a permanent tax break for companies that invest in research and development, make it easier for foreigners who get science and engineering Ph.D.s at American universities to stick around after graduation, and spend serious time and money improving the nation's infrastructure, including the electric grid and broadband network. Such initiatives will not create many jobs that can be tallied on a spreadsheet. What they will do is more important: lay the groundwork for businesses to innovate and grow.

The same is true on the worker side of the equation. If the key characteristics of the American economy are flexibility and forward motion, then we would all be better off if people felt more support — both financial and social — to invest in their education, switch jobs and industries and venture out to start new firms.

Establishing job creation as a discrete goal is a misleading enterprise. Beyond cyclic swings in demand, what we're really talking about creating is not jobs but ideas and technologies and more efficient ways of producing and selling goods and services. If that sounds like a harder goal to set, let alone achieve, that's because it is.

Yet as Austin richly illustrates, in the wake of the worst economic downturn in generations, that sort of innovation is starting to happen. And from that, the jobs will follow.


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Sources: CNN, TIME, Google Maps