Managing editor of NBC News Brian Williams talks to Jimmy about the big stories and Washington.
Sunday, July 31, 2011
Taking the Hill: Inside Congress
The most stunning pictures of a day in the life of the U.S. Congress. Check it out
With more than 30,000 employees and 535 legislators between the House and Senate, the U.S. Capitol complex is like a city unto itself. Months ago, NBC News received permission to flood the Hill with cameras for a day-in-the-life documentary shoot. What no one knew at the time is that the Capitol would be in the midst of grinding talks over the national debt while we were there. This slideshow consists of photos taken while dozens of NBC TV cameras roamed the buildings and grounds this past Wednesday, July 27. The resulting documentary, "Taking the Hill: Inside Congress," airs Sunday, July 31 at 7 p.m. ET. 
As the day begins, Brian Williams, anchor of NBC's "Nightly News" and host of "Inside Congress," waits for House Speaker John Boehner, R-Ohio, to emerge from the Memorial Doors after his arrival at the Capitol. Speaker Boehner was under immense pressure to deliver enough Republican votes to pass his debt-ceiling plan and it showed in his demeanor.
Reid Postpones Key Budget Vote
Tom Williams/Roll Call
Sen. Tom Coburn said Saturday he had “good vibes” about an imminent debt deal.Updated: 11:25 p.m.
Senate Majority Leader Harry Reid(D-Nev.) postponed a procedural vote on his budget plan Saturday night, just hours after Congressional Republicans announced they had re-entered negotiations with the White House and three days before a Treasury deadline to avoid government default.
The Senate is now slated to vote on the Reid plan, which lost significant momentum Saturday, on Sunday at 1 p.m.
“There are negotiations going on at the White House to avert a catastrophic default on the nation’s debt. There are many elements to be finalized and there is still a distance to go before any agreement can be completed, but I believe we should give everyone as much room as possible to do their work,” Reid said late Saturday night on the floor. He said that in several conversations with the White House throughout the evening, he was asked to give negotiators more time for a deal to be reached.
The new deal being discussed between the White House and Congressional leaders is strikingly similar to existing offerings from both Reid and Boehner, with approximately $1 trillion in immediate discretionary cuts and additional savings to be negotiated by a new Congressional committee tasked with producing a framework by year’s end.
The key sticking point yet again appears to be on a so-called “trigger,” or a built-in mechanism in the agreement that would pressure the newly created panel to actually produce the savings lawmakers seek.
"The trigger is the most important part of it right now. There's a new approach to it, different approach, which I think will work. Key parts of its are unresolved. But it appears that both sides actively are trying to make it work," Senate Majority Whip Dick Durbin (D-Ill.) said late Saturday.
"Sequestration is part of it obviously. They would have to have it. What we're trying to do is how to make sequestration painful for both sides," Durbin added, referring to mandatory across-the-board cuts, including to entitlements and defense spending, that would be enacted if the panel fails to produce the extra trillions in savings. Durbin denied earlier reports of a link between the expatriation of the Bush-era tax cuts and the second round of savings
The new deal being discussed between the White House and Congressional leaders is strikingly similar to existing offerings from both Reid and Boehner, with approximately $1 trillion in immediate discretionary cuts and additional savings to be negotiated by a new Congressional committee tasked with producing a framework by year’s end.
The key sticking point yet again appears to be on a so-called “trigger,” or a built-in mechanism in the agreement that would pressure the newly created panel to actually produce the savings lawmakers seek.
"The trigger is the most important part of it right now. There's a new approach to it, different approach, which I think will work. Key parts of its are unresolved. But it appears that both sides actively are trying to make it work," Senate Majority Whip Dick Durbin (D-Ill.) said late Saturday.
"Sequestration is part of it obviously. They would have to have it. What we're trying to do is how to make sequestration painful for both sides," Durbin added, referring to mandatory across-the-board cuts, including to entitlements and defense spending, that would be enacted if the panel fails to produce the extra trillions in savings. Durbin denied earlier reports of a link between the expatriation of the Bush-era tax cuts and the second round of savings
Such a mechanism, however, is sure to raise ire from rank-and-file Democrats who would not want the added pressure of those types of cuts to be associated with the second phase of negotiations later this year. Democrats have for months insisted that any trigger or final deal include revenues in addition to spending cuts. But by bundling defense and Medicare cuts, Democrats could increase the pressure on Republicans in an election year to negotiate in good faith lest they appear to be favoring the wealthy at the expense of seniors or the troops.
Earlier Saturday, the original Reid plan, which would cut $2.4 trillion over the next 10 years in addition to establishing a panel to find more savings by the end of 2011, was voted down in the House.
Earlier Saturday, the original Reid plan, which would cut $2.4 trillion over the next 10 years in addition to establishing a panel to find more savings by the end of 2011, was voted down in the House.
Across the Capitol, 43 Senate Republicans sent a letter to Reid indicating they could not support the majority leader’s framework. Nevertheless, Congress is running out of time to dispatch legislation to President Barack Obama’s desk. Given Senate procedure, any single Senator could filibuster a vote on Reid’s plan, forcing the Nevada Democrat to use 30 hours at a time before moving on to the next phase of voting and requiring him to find 60 votes to proceed on the measure.
The news that McConnell and Speaker John Boehner were again in talks with the White House, after Boehner pulled back twice from such talks, seemed to catch Hill Democrats off guard. Democratic sources said that at the time, Republicans had not been engaging directly and that Kentucky Republican’s pronouncement set off Democratic leaders.
Reid and House Minority Leader Nancy Pelosi (D-Calif.) met with Obama at the White House Saturday, as McConnell and Boehner told reporters they were working with the administration and were “confident” a solution would be found to raise the debt ceiling and avert default.
Reid had secured the White House’s blessing earlier for his plan, but Saturday’s developments seemed to indicate he was at risk of being edged out of talks yet again. Late Saturday night, Senate Democratic aides pointed to Reid’s closing remarks as indication of his willingness to find an agreement, saying that he is actively participating in discussions and that any agreement reached will include a long-term extension of the debt ceiling, a requirement that has united Democrats even when they have diverged from the White House position on trickier issues like entitlements.
Reid and McConnell engaged in a series of uncomfortable exchanges on the Senate floor Saturday, with the most tense sparring match coming after he had returned from the White House. Reid had requested the presence of all Senators to the floor, only to say that McConnell’s characterization of a deal being “close” between the GOP and the White House were “untrue.”
McConnell fired back: “I might say, I actually cut short a conversation with the vice president to come out here for this live quorum. I’d like to get back to work so we can hopefully solve this problem.”
Even Republican rank and file leaving the floor seemed to be projecting conflicting messages. Sen.Saxby Chambliss (R-Ga.) told a small group of reporters, when asked whether an agreement was closer, that talks had gone “the other way.” Moments later, Sen. Tom Coburn (R-Okla.) said that he had just talked to McConnell and got “good vibes” about an imminent deal.
The swiftly changing tides, both political and legislative, come against the backdrop of a ticking clock that is adding pressure to all sides to broker a deal. But it’s possible Obama alienated Democrats Saturday by again working around them to try to find a solution with Republicans, especially if he put entitlements back on the table without also including revenues, which long has been the Democratic demand.
US economy: The Tea Party is a real threat to America
Although ultra-conservatives are not in control of the White House and the Senate, they feel they have the political wind at their back
Editorial
The Observer, Sunday 31 July 2011
Article history
Presidential candidate and ultra-conservative congresswoman Michele Bachmann prays every day for guidance. "The American people are looking for someone who will say, 'No'," she said last week. "I will be that person… I won't raise taxes. I will reduce spending. I won't vote to raise the debt ceiling. And I have the titanium spine to see it through."
Developing her theme, she added that the little people of America, factory workers and housewives, tell her: "'Michele, stand strong. Michele, don't cave.' The American people are scared to death they have lived through the pinnacle of American greatness, that we may be in decline."
The struggle to secure a deal between the Republicans and Democrats to lift the $14.3 trillion cap on the country's national debt is seen by disinterested onlookers as a foolish squabble between self-serving politicians, whose silliness risks potential default on the US's national debt and a first-order financial crisis within the next 48 hours.
If only it were just an ordinary political squabble. The reason the US is so close to economic calamity is that its politicians have existentially different views of the world. As the US faces stagnation and retreat from "the pinnacle of American greatness", these differences have become crucially important. This goes to the heart of how the US can recover its greatness.
Bachmann, with her "titanium spine" and communion with God, is no normal Washington politician. Nor is she alone. There is the chair of the house budget committee, Paul Ryan. There is first-time congressman Jim Jordan, head of the Republican study committee that represents two-thirds of the Republicans in the house. For all of them, representatives of the Tea Party movement, the cause of the US's problems is the federal government, federal spending and federal debt.
Taxation is not merely coercive, it takes money from efficient taxpayers and transfers it to inefficient government. To raise taxes in any circumstances is immoral and undermines the US economy.
These are not politicians given to compromise. Their predecessors in the Republican party did so, securing tax cuts but only at the price of rising national debt because spending has not been cut. The new generation is going to pursue this matter to the end – and the only deal they are prepared to sanction is a short-term fix that will bring the whole issue back to congress in the new year – presidential election year.
While the Democrats now control the Senate and the presidency, they were routed last year in the elections for the house by the Tea Party movement.
The Democrats know that being the defenders of debt, deficits and taxes does not play well with the US electorate, and that to allow another wrangle over the national debt limit in six or nine months is tantamount to signing a political suicide note. Better secure a deal with the Republicans now than allow this fight to go into 2012.
This goes to the heart of the stand-off. Although the ultra-conservatives are not in control of the White House and the Senate, they feel they have the political wind at their back. Why compromise when they can get all they want – no increase to the debt limit and the entire pain being taken by swingeing cuts to federal spending? Which is why President Obama and Democrat Senate leader, Harry Reid, have given so much ground. The Democrats' latest plan for deficit reduction contains virtually no tax increases, despite Obama's insistence it is a balanced package with the rich and corporate America taking some of the burden. But it does require that the issue be taken off the table until after next year's elections.
Within Republican ranks, there is virtually no incentive to bargain; until the US is confronted with the need to maintain debt within the $14.3 trillion cap, no one knows what the consequences will be.
Some Republicans may be concerned about slashing much-loved social programmes, while others worry that they will get the blame if there is a calamity. But there are many who refuse to see why Bachmann and co should get credit for their intransigence, while others bargain responsibly and risk the wrath of voters.
Economically, the Tea Party argument is feeble. Countries' debts are not like individual households; they can be serviced over generations. In the aftermath of a credit crunch, a country that tries simultaneously to cut public and private debt will suffer prolonged economic stagnation or depression. The cost in lost opportunity, broken lives and bust businesses is too high to slash public debt; indeed, the right action may be to increase it.
Nor is tax in essence different from any other fee: it is the cost of services rendered, and some services such as defence, security, healthcare and investment in innovative technology are best rendered by society as a whole. Hence taxation.
All the US's great advances – in the internet, computers, aerospace, space, the internal combustion engine, drugs, optics – have had the federal government as their sponsor. A well-designed social security system offers people security while not removing their incentive to work; well-judged federal spending on innovation boosts the economy; a banking system needs federal deposit insurance and a central bank as a lender of last resort when banks are distressed.
But in the land inhabited by Michele Bachmann, these propositions are false; they undermine US self-reliance and individualism and obstruct America's road back to greatness.
In vain do conservative supporters in Wall Street and business urge the Tea Party Republicans to moderate their opposition – they are dismissed as Democrat stooges.
Nor do the Democrats help their case. In democracies, you argue, argue and argue, but even Obama's eloquence has been silenced in the search for a deal. The Democrats seem to have stopped believing.
Maybe there will be a bargain at one minute to midnight, but until the Tea Party Republicans are exposed as dangerous charlatans and their support recedes, the threat to the US is ever-present.
Debunking the Big Lie Right-Wingers Use to Justify Black Poverty and Unemployment
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Tempest in a Tea Party
By MAUREEN DOWD
Published: July 30, 2011
SO I was chatting with Chris Coons, the new Democratic senator from Delaware who had a rare win over the Tea Party when he beat loony Christine “I’ve Dabbled in Witchcraft but I Am Not a Witch” O’Donnell in the midterms.
Fred R. Conrad/The New York Time
Coons is a smart guy who’s alarmed at finding himself in a vicious combat zone that makes “Shark Week” look like a guppy party.
He said he felt as if he were in “an alternative universe.” He wonders if the president, rather than using an analogy about late credit card payments, should explain that failing to raise the debt ceiling is like the nation’s refusing to pay its mortgage. And he glumly noted that there would be a “bouquet of blame” for everyone if Congress and the White House allowed the country to “Titanic.”
“You know,” I told the suffering senator, “there is an easy solution.”
He looked up hopefully.
“Witchcraft,” I beamed. “Too bad we don’t have a senator who knows some spells.”
Ancient incantations and eye of newt — not that Newt — would be the only way to conjure up a less embarrassing group of leaders.
The world is watching in fearful — and sometimes gleeful — fascination as the Tea Party drives a Thunderbird off the cliff with the president and speaker of the House strapped in the back. The Dow is hiding under the bed with a glass of single malt. Can it get more excruciating? Apple has more cash than the U.S. government.
Amid the chilling anarchy, there’s not a single strong leader to be seen — not even a misguided one. All the leaders are followers. You have to wonder if President Obama at some level doesn’t want to lead. Maybe he just wants to be loved.
The citizens of this country tremble at the thought that these are the people governing them. Should we stick our money under our mattresses? It’s not only the economy that gets nourished by confidence; it’s also politics.
The maniacal Tea Party freshmen are trying to burn down the House they were elected to serve in. It turns out they wanted to come inside to get a blueprint of the historic building to sabotage it.
Like gargoyles on the Capitol, the adamantine nihilists are determined to blow up the country’s prestige, their party and even their own re-election chances if that’s what it takes. (Many are worried about primary races with even more dogmatic challengers, which is a truly scary thought.) If they can drag President Obama off his pedestal, even better. They think he looks down on them and sneers at their values.
Democratic lawmakers worry that the Tea Party freshmen have already “neutered” the president, as one told me. They fret that Obama is an inept negotiator. They worry that he should have been out in the country selling a concrete plan, rather than once more kowtowing to Republicans and, as with the stimulus plan, health care and Libya, leading from behind.
As one Democratic senator complained: “The president veers between talking like a peevish professor and a scolding parent.” (Not to mention a jilted lover.) Another moaned: “We are watching him turn into Jimmy Carter right before our eyes.”
Obama’s “We must lift ourselves to a higher place” trope doesn’t work on this rough crowd. If somebody at dinner is about to kill you, you don’t worry about his table manners.
More and more, 2008 looks like the tulip mania.
When Obama came before the cameras Friday to say that “any solution to avoid default must be bipartisan,” many Democrats wish he had just gone all unilateral and taken Bill Clinton’s advice to invoke the 14th Amendment. They yearned to see the president beat the political suicide bombers over the head with the Constitution. Impeaching a constitutional lawyer for saving the economy would be an even more difficult sell than impeaching a rogue for fibbing about a dalliance.
The Gingrich revolution pulled Republicans to the right of the Reagan revolution and the Tea Party revolution pulled Republicans to the right of the Gingrich revolution. The difference, though, is existentially striking: The Reagan and Gingrich forces wanted a leaner government, but they still believed in government.
The sighing, spectral Harry Reid does not look up to the task of taking on the freshman wolfen.
The laconic president emerges from the sidelines periodically to warn about economic default, but we’re already in political default.
Consider what the towel-snapping Tea Party crazies have already accomplished. They’ve changed the entire discussion. They’ve neutralized the White House. They’ve whipped their leadership into submission. They’ve taken taxes and revenues off the table. They’ve withered the stock and bond markets. They’ve made journalists speak to them as though they’re John Calhoun and Alexander Hamilton.
Obama and John Boehner have been completely outplayed by the “hobbits,” as The Wall Street Journal and John McCain called them.
What if this is all a cruel joke on us? What if the people who hate government are good at it and the people who love government are bad at it?
On the Marines' Wish List: A Pricey Jet Fighter
By NATHAN HODGE
NAVAL AIR STATION PATUXENT RIVER, Md.—As Washington flirts with default, the U.S. Marine Corps ferried journalists Friday to a Navy base in southern Maryland to view an exotic spectacle: the new Marine stealth jet, the F-35B Joint Strike Fighter, taking off and landing.
According to military officials, this was the media's first chance to see the supersonic aircraft's most unique feature, its ability to hover and land vertically. It was also a chance for the Marine Corps to argue for keeping the program funded in an era of tremendous fiscal uncertainty.
"We're all concerned about the budget, we're all concerned about what's happening financially in our country," said Gen. James Amos, the commandant of the Marine Corps. "And … this airplane is more expensive, it's the most expensive variant [of the F-35 Joint Strike Fighter]."
The main question, Gen. Amos continued, was this: "Is the juice worth the squeeze?"
For the Marine Corps, the answer thus far has been a resounding yes. The F-35B is one of three versions of the next-generation Joint Strike Fighter, being developed by Lockheed Martin Corp. The Marine Corps wants the F-35B to replace three aircraft in its inventory. Particularly important is finding a replacement for the AV-8B Harrier, an aging jump-jet that is neither supersonic nor stealthy.
Gen. Amos said the short take-off and vertical landing capability of the F-35B means the U.S. military will continue to be able to operate fixed-wing jets from both big Navy aircraft carriers and smaller amphibious ships, as well from primitive and improvised runways, giving U.S. commanders a wider range of options.
Lt. Col. Fred Schenk, who piloted the jet fighter in the demonstration, said it handled much better than the Harrier. "The airplane, hands down, is much more stable than the Harrier."
But the larger Joint Strike Fighter program is also the Pentagon's costliest procurement project. With a projected price tag of $382 billion, it has been in the budget-cutting crosshairs for months, and critics in Washington have questioned whether the U.S. military can afford a planned fleet of 2,400 Joint Strike Fighters. The Marine Corps version of the aircraft, which is the most technologically complex, has come in for the most scrutiny. Gen. Amos said the Pentagon hasn't yet determined the price of an individual F-35B.
Last year, the co-chairmen of President Barack Obama's deficit panel recommended outright cancellation of the F-35B. Earlier this year, then-Defense Secretary Robert Gates put the Marine jet on a two-year "probation" to determine whether it is reliable enough, and affordable enough, for the service to buy in significant numbers.
Despite early development setbacks, Gen. Amos said Marines now "have reason for optimism" on the F-35B. Last year, for instance, the aircraft made 10 vertical landings in testing. This year, the jet has made 119 vertical landings.
In May, the Pentagon predicted that the total cost of owning and operating a fleet of 2,400 F-35 Joint Strike Fighters would top $1 trillion over five decades, causing outrage on Capitol Hill. Sen. John McCain (R., Ariz.) even offered an amendment that proposed putting the entire program on hold if there were additional cost overruns and schedule delays. While that measure didn't progress out of the committee level, Sen. McCain pledged to keep his focus on reining in the costs of the F-35.
"Money can be saved by slowing down the [F-35] program," said Loren Thompson, a defense analyst at the nonprofit Lexington Institute. "But because it's still in development, the logical alternative would be to ask if all three variants are needed."
In addition to giving the press a chance to see a version of the Joint Strike Fighter, the trip to Patuxent River was also a chance for reporters to fly aboard the MV-22 Osprey ($66.6 million apiece) a unique aircraft that can take off and land like a helicopter, but cruise at the speed of a fixed-wing turboprop (cost per flight hour: $10,600).
The Marines were quick to point out that the Osprey, like the F-35B, had a long and troubled development. But the Osprey today is flying missions in Afghanistan, and in March, the aircraft rescued the pilot of an Air Force F-15E Strike Eagle Fighter that crashed in Libya.
"What's the value of that aircraft to the Marine Corps—and certainly at least one Air Force pilot?" said Lt. Col. Jason Holden in a pre-flight briefing. "Priceless."
Economy Losing Its Cushion
davidgregory Piece in today's @WSJ about US economy losing its cushion - tough story about the shape of our economy
By JON HILSENRATH and SARA MURRAY
The resilience of the U.S. economy, which rebounded from wars, terror attacks and a crash in tech stocks in the past quarter century, has been weakened in the aftermath of the housing bust, and shock absorbers that cushioned blows in the past are no longer working.
The government on Friday reported that the economy grew at a rate of just 1.3% in the second quarter, failing to bounce back from knocks earlier in the year. Estimates of first-quarter growth were also revised down to 0.4%. As a result, the pace of economic recovery has been one of the worst since World War II, weaker than all but the short-lived recovery of the early 1980s. That’s particularly bad news as the economy confronts the threat of a default on the nation’s debt.
Among the reasons the economy is so vulnerable: Debt-laden consumers with scant savings are prone to slash spending when their incomes drop. Household confidence is more fragile. Individuals are moving less often to find jobs, making it harder for firms to fill vacancies. And the government, for decades the rescuer of last resort with interest-rate cuts, tax reductions and spending increases, has run out of string.
Economists label the late 1980s, 1990s and early 2000s “The Great Moderation,” a period in which the ups and downs of the economy were muted. That epoch is over. James Stock, a Harvard economist who helped coin that label, says that the volatility of economic output, income and consumption looks more like it did 25 years ago. “In this recession and its aftermath, those smoothing mechanisms, those shock absorbers, clearly have been damaged,” he says.
The U.S. economy has been expanding for two years now, and forecasters had been expecting it to pick up steam in the second half, powered by robust overseas demand, investment at home by cash-rich companies and a renewed willingness of consumers to spend as they reduce their debt burdens. But Friday’s GDP report and the impact of Washington’s debt-ceiling stalemate on consumer and business confidence as well as on financial markets are raising doubts about that outlook.
It could be years before Americans feel that they’ve pared enough debt to start spending readily. Household debt levels, at 112% of annual income, remain high. To get back to a 1990s debt-to-income ratio of 84%, incomes would need to be nearly $4 trillion higher, which is about nine years worth of income growth, according to Credit Suisse estimates.
The U.S. economy was hit hard earlier this year by shocks. The earthquake in Japan disrupted auto production in the U.S. The Middle East turmoil drove up oil prices. U.S. consumer spending, adjusted for inflation, actually fell in April and May, which is unusual.
“We were anticipating that 2011 was going to be a fairly decent year,” says Robert Olson, chairman of Winnebago Industries, the recreational-vehicle maker. “We hit February and it really felt like people flicked a light switch.” Now, Winnebago is holding off on parts and equipment orders to work down a $33 million buildup in inventories.
Debt is central to the fragility. The ability to borrow in bad times helped limit the economy’s bumps in the 1990s and early 2000s. Karen Dynan, an economist at the Brookings Institution, a Washington think tank, says that, on average, a $100 short-term hit to incomes only pushed spending down by $5 during that stretch because consumers could borrow to smooth things out. Now, she says, they’re stretched too thin to do that.
“I’m running out of things to cut,” says Pat Sonnek, 50 years old, of Gibbon, Minn. Five years ago, Mr. Sonnek lost his job programming mainframe computers. So he earned an online degree, got into accounting and took cash out of his home to help make ends meet during the transition.
Today he has a $110,000 mortgage to pay off on a home worth less than that and $80,000 in student loans coming due. He is making $36,000 a year as an accountant for a small Internet retailer, less than half the $80,000 he made before. He commutes 55 miles to work every day, which meant rising gas prices “hit pretty hard.” He and his wife, who has a part-time job as a school custodian, have gotten rid of their landline telephone, cable-television service and cut back on fresh fruits and vegetables. If he needed a few thousand dollars now, he says, “I’d have to go begging to friends and family.”
Robert Hall, a Stanford University professor, finds that three-quarters of households don’t have two months worth of income socked away as cash or other liquid assets. Federal Reserve researcher Karen Pence finds that 41% of households can borrow less than $3,000 on their credit cards and 23% have been turned down or discouraged from applying for credit.
In March 2001, as a recession began, 40% of those surveyed by the University of Michigan felt they would be better off financially in a year. By the end of the year, even after the Sept. 11 terror attacks, the measure of optimism had risen to 45%.
Confidence has been less resilient recently. In February, 30% said they expected to be better off financially in a year; in July, it was 20%, an all-time low.
When bad news hits today, individuals and businesses are less apt to keep spending. Both their spirits and their savings are spent.
“I’m totally discouraged,” says Tanya Griffin, 53. After eight months of unemployment, she took a job as a $150,000-a-year manager of product development for a large retailer in Boston. Now she commutes across country because she can’t sell the Issaquah, Wash., home where her children—ages 16, 18 and 21—are still living.
She pays roughly $4,000 a month there between the mortgage and upkeep, plus rent in Boston. “It’s pretty much living paycheck to paycheck,” she says. With no savings left to fall back on, she is cutting back on clothes, sporting activities for her children and eating out.
Other workers aren’t moving to where jobs are. In 2009, 2.9 million U.S. households moved for a new job or a job transfer, the Census Bureau said, down from 4.5 million a decade earlier.
One reason is they can’t. Eliseo Otero, 40, planned to leave Las Vegas in 2010. A $61,000-a-year civil engineer who drafted computer plans for roadways and construction subdivisions, he lost his job in 2008. Since then, he has been making $9,000 to $15,000 a year as a security guard and temporary staff worker for Vegas events. The dream of leaving, he says, is shot because of a $200,000 mortgage on a home he can’t sell.
Trussbilt LLC, which makes security products for correctional facilities, says it can’t get workers to come to Huron, S.D., where the firm has manufacturing facilities and the unemployment rate is less than 5%. In August 2008, Eric Christensen, vice president for finance. recruited about a dozen workers from Elkhart, Ind., where unemployment was 9% and rising. They all ended up returning home after a stint in South Dakota, in part because they were tied to families that couldn’t move and homes they couldn’t sell, he says.
Meantime, the government’s ability to serve as a shock absorber is crimped. In 2003, when an economic recovery stumbled, the Bush administration pushed through tax cuts to get cash into the hands of households and the Fed pushed down interest rates to ease borrowing. In 2008 and 2009, the Obama administration and the Fed did it again, boosting federal spending in an $800-billion stimulus and cutting interest rates to near zero.
Now, with deficits high, the federal government is moving toward cutting spending. The Fed, which can’t cut short-term rates below zero, is reluctant to pursue another round of buying mortgages and Treasury securities to push down long-term interest rates and stimulate growth.
White House, Republicans Reach Tentative Debt Deal
By Heidi Przybyla - Jul 31, 2011 12:40 AM ET
President Barack Obama today said Republicans and Democrats are in “rough agreement” on their plans to raise the nation’s debt limit with just four days before a threatened U.S. default and the time for compromise is “now.” Photographer: Brendan Smialowski/Getty Images
U.S. Senate Majority Leader Sen. Harry Reid (D-NV) speaks during a news conference July 30, 2011 on Capitol Hill in Washington, D.C. Photographer: Alex Wong/Getty Images
The tentative outlines of the accord include spending cuts of $1 trillion and creation of a special committee to recommend additional savings of up to $1.8 trillion. The new panel would have to act before the Thanksgiving congressional recess in late November or government programs including Defense and Medicare would face automatic, across-the-board cuts, the person said.
A White House official familiar with the talks cautioned after reports of the framework surfaced last night that no final agreement has been reached among involved in negotiations.
The prospective agreement wouldn’t include increased net revenue, a sticking point for Republicans who’ve been adamant that any deal with tax increases couldn’t pass the Republican- run House.
Democrats, including those who run the Senate, have been insistent that any deal must be a “balanced approach” that includes revenue, raising questions about whether President Barark Obama would find the support of his party for the plan.
Obama Demand
Obama has been demanding an increase in the $14.3 trillion debt limit that lasts through the 2012 election, when he is seeking another term.
Obama and congressional leaders yesterday began their new attempt to prevent a U.S. government default on its debt, with Republicans and Democrats expressing greater optimism a deal may be within reach before an Aug. 2 deadline.
Senate Majority Leader Harry Reid, last night said he was “confident that reasonable people from both parties should be able to reach an agreement.”
Reid, in remarks on the Senate floor before details of the framework emerged, cautioned that “there are many elements to be finalized and there is still a distance to go before any arrangement can be completed.” Still he said, “I am glad to see this move toward cooperation and compromise.”
To give the negotiations more breathing room, Reid pushed forward by 12 hours a planned test vote today on his pending measure to raise the $14.3 debt ceiling and cut government spending. The planned 1 a.m. vote was rescheduled for 1 p.m. at the Capitol.
Earlier Mitch McConnell, the Senate Minority leader, said he was “more optimistic” and that negotiators have “got a chance of getting there.” John Boehner, the House Speaker of Ohio, also voiced confidence an agreement could be reached.
Markets
Financial markets were restrained in reacting to the impasse on a debt deal through July 29.
Treasuries rallied, sending yields on 10-year notes to the lowest level since November. The yield on 10-year Treasury notes declined 15 basis points to 2.79 percent in New York.
Stocks fell as economic growth trailed forecasts. The Standard & Poor’s 500 Index slipped 0.7 percent and tumbled 3.9 percent this week for its worst slide in a year.
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