O.K., the beast is starving. Now what? That’s the question confronting Republicans. But they’re refusing to answer, or even to engage in any serious discussion about what to do.
For readers who don’t know what I’m talking about: ever since Reagan, the G.O.P. has been run by people who want a much smaller government. In the famous words of the activist Grover Norquist, conservatives want to get the government “down to the size where we can drown it in the bathtub.”
But there has always been a political problem with this agenda. Voters may say that they oppose big government, but the programs that actually dominate federal spending — Medicare, Medicaid and Social Security — are very popular. So how can the public be persuaded to accept large spending cuts?
The conservative answer, which evolved in the late 1970s, would be dubbed “starving the beast” during the Reagan years. The idea — propounded by many members of the conservative intelligentsia, from Alan Greenspan to Irving Kristol — was basically that sympathetic politicians should engage in a game of bait and switch. Rather than proposing unpopular spending cuts, Republicans would push through popular tax cuts, with the deliberate intention of worsening the government’s fiscal position. Spending cuts could then be sold as a necessity rather than a choice, the only way to eliminate an unsustainable budget deficit.
And the deficit came. True, more than half of this year’s budget deficit is the result of the Great Recession, which has both depressed revenues and required a temporary surge in spending to contain the damage. But even when the crisis is over, the budget will remain deeply in the red, largely as a result of Bush-era tax cuts (and Bush-era unfunded wars). And the combination of an aging population and rising medical costs will, unless something is done, lead to explosive debt growth after 2020.
So the beast is starving, as planned. It should be time, then, for conservatives to explain which parts of the beast they want to cut. And President Obama has, in effect, invited them to do just that, by calling for a bipartisan deficit commission.
Many progressives were deeply worried by this proposal, fearing that it would turn into a kind of Trojan horse — in particular, that the commission would end up reviving the long-standing Republican goal of gutting Social Security. But they needn’t have worried: Senate Republicans overwhelmingly voted against legislation that would have created a commission with some actual power, and it is unlikely that anything meaningful will come from the much weaker commission Mr. Obama established by executive order. http://www.nytimes.com/2010/02/22/opinion/22krugman.html
Retirees Trade Work For Rent at Cash-Strappled Parks
ROMA, Tex. —An itinerant, footloose army of available and willing retirees in their 60s and 70s is marching through the American outback, looking to stretch retirement dollars by volunteering to work in parks, campgrounds and wildlife sanctuaries, usually in exchange for camping space.
Park and wildlife agencies say that retired volunteers have in turn become all the more crucial as budget cuts and new demands have made it harder to keep parks open.Estimates of the number of work-campers nationally vary, but a spokesman for Kampgrounds of America Inc., a private company that franchises camps, said that 80,000 or so might be a good guess, based on KOA’s percentage of the camping market and the number of its work-campers.
Manufacturers are gearing up to hire
Manufacturers are seeing more signs that the U.S. economic recovery is on a solid footing, opening the way for new hiring as well as call-backs for factory workers laid off during the depths of the recession. Caterpillar Inc., the Peoria, Ill.-based heavy-equipment maker, has brought back 600 workers in the past 60 days, including 100 recalled to an engine plant in Indiana last week. Allen Edmonds Shoe Corp. has been relying on overtime to meet growing demand, but is now preparing to start adding new workers at its U.S. plants in coming week. http://online.wsj.com/article/SB10001424052748704398804575071652158793106.html?mod=WSJ_hps_LEFTWhatsNews
Is Whole Foods Amid a Turnaround ?
Whole Foods Market Inc.'s fiscal first-quarter earnings soared 79% as sales at stores open at least a year rose for the first time in six quarters, a sign that discounts and a refocus on natural foods are paying off.ittle has gone right for the natural-foods company since 2006, when investors realized it was overexpanding. By the time the recession struck, Whole Foods couldn't hit the brakes fast enough. After a rally, the stock is still down 66% from its high.Recent signals suggest it is on the road to recovery. Even with unemployment around 10%, customer traffic rose during the September quarter and comparable-store sales finally turned positive in the following weeks.Investors might be troubled that Whole Foods trades at 23 times consensus earnings for calendar 2010, higher than most retailers.
U.S. to Press China on the Yuan
The mounting political tension between U.S. and China is poised to take on a more pronounced economic component—with Washington, in coming months, expected to press China over what officials see as an undervalued yuan. For U.S. officials, China's exchange rate is emerging as a top concern. President Obama and other administration officials argue that the Chinese currency is undervalued. That makes Chinese exports artificially cheap in terms of other foreign currencies, contributing to the U.S.'s large trade deficit with China and, they say, depriving Americans of jobs. http://online.wsj.com/article/SB10001424052748704804204575069321056720944.html?mod=WSJ_hps_sections_world
Wal-Mart Profit Ries, but Current Quarter Weak Wal-Mart Stores Inc. beat its guidance to post a 22% profit increase for the fiscal fourth quarter, but sales at the world's largest retailer fell short of expectations.Shares in Wal-Mart were down 1.5% at $53.25 premarket as the company's first-quarter view largely underwhelmed analysts' estimates, too. The company projects earnings between 81 cents and 85 cents a share, while analysts on average projected 85 cents, according to Thomson Reuters. For the year, its target of $3.90 to $4, compared with analysts' $3.97 forecast. http://online.wsj.com/article/SB10001424052748703315004575073053485572576.html?mod=WSJ_hps_LEFTWhatsNews
State Governments Face Trillion Dollar Gap
State governments face a trillion-dollar gap between the pension, health-care and other retirement benefits promised to public employees and the money set aside to pay for them, according to a new report from the Pew Center on the States.States promised current and retired workers a total of $3.35 trillion in benefits through June 30, 2008, said the report from the nonprofit research group, a division of Pew Charitable Trusts. But state governments had contributed only $2.35 trillion to their benefit plans to pay current and future bills, the report said. http://online.wsj.com/article
Municipalities Consider Filing Chapter 9
Just days after becoming controller of financially strapped Harrisburg, Pa., in January, Daniel Miller began uttering an obscure term that baffled most people who had never heard it and chilled those who had: Chapter 9. The seldom-used part of U.S. bankruptcy law gives municipalities protection from creditors while developing a plan to pay off debts. Created in the wake of the Great Depression, Chapter 9 is widely considered a last resort and filings under it are more taboo than other parts of bankruptcy code because of the resulting uncertainty for everyone from municipal employees to bondholders. http://online.wsj.com/article/SB10001424052748704398804575071591602878062.html?mod=WSJ_hps_sections_news
Walgreen buys Duane Reade for $618 million
Walgreen announced Wednesday it will pay $618 million for Duane Reade, New York City's largest drugstore chain. The deal will increase Walgreen's total drugstore count by nearly 4%, adding 257 stores in the New York area, where it currently operates just 70 locations.Duane Reade is Walgreen's largest drugstore purchase, a shift from a past strategy that plowed money into often disappointing purchases such as specialty-pharmacy Option Care. Walgreen previously relied heavily on rapid organic growth to expand its drugstore count. http://online.wsj.com/article/SB10001424052748703444804575071811006043210.html?KEYWORDS=Apple
The New York Times - The unemployment rate unexpectedly dipped to 9.7 percent in January, from 10 percent in December, the government reported Friday, buoying hopes that the worst job market in at least a quarter-century is finally improving. But a different survey in the Labor Department’s report found that the economy lost 20,000 net jobs during the month, muddying the picture and underscoring the formidable struggles still confronting millions of Americans. Yet with the pace of decline slowing, most experts focused on signs that the economy was recovering after the longest recession since the Great Depression.
The New York Times - Just as America’s recession begins to ebb, trouble is brewing in Europe that may prolong a downturn on the Continent and ricochet through the global economy as it struggles toward a recovery.
A rout in stock markets that began in Europe spread to Wall Street on Thursday and around the globe to Asia on Friday, amid fears that Europe may be the world’s next financial flashpoint. Pressure has been mounting across the Atlantic as Greece, Portugal and a handful of struggling countries that use the euro scramble to pay off mountains of debt accumulated from years of profligate spending.
The Dow Jones industrial average slid 2.61 percent, or 268.37 points, to 10,002.18 Thursday, after briefly falling below 10,000 for the first time since November, as American investors grew more uncertain about Europe’s economy.
Stock markets across Europe slumped as much as 6 percent, and worries that the troubles might push even big European nations like Spain into a financial crisis drove the euro to $1.37, a seven-month low against the dollar.
Markets in Europe slipped further on Friday, after a sharp sell-off in Asia, amid continued worries about government debt in several European countries and about the state of the U.S. labor market.
Job seekers line up to speak to a representative from the U.S. Customs and Border Protection agency at the Houston Diversity Job Fair in Humble, Texas, this week.
The Wall Street Journal - Concerns about the ability of the U.S. economy to create jobs added to a broader wave of fear about European finances, as fresh data showed unemployment claims rising and companies managing to boost production without adding workers.
The Labor Department reported initial claims for jobless benefits rose by a larger-than-expected 8,000, to 480,000 claims in the week ended Jan. 30. A separate report showed that companies managed to increase output for each hour worked at a seasonally adjusted annual rate of 6.2% in the 2009 final quarter, down from the third quarter's 7.2%, but still well above average.
The data reinforced doubts that a strong rebound in jobs will give U.S. consumers the wherewithal they need to contribute to a sustainable economic recovery. The market will learn more early Friday when the U.S. unemployment number for January is reported.
The latest reports "confirm that the recovery in the labor market is likely to be quite slow," said Conrad DeQuadros, an economist at consultancy RDQ Economics. "That suggests consumer spending is not going to be the major driver of growth in 2010."
Sign of Hope As Jobless Rate Dips
The unemployment rate dropped sharply last month, but employers continued cutting jobs in January as businesses remained insecure about the economic outlook. The jobless rate fell to 9.7% from 10% in December, the Labor Department said Friday, because its survey of households found more people landed jobs than entered or returned to the labor market. But a separate survey of employers, which counts how many workers are added or cut from payrolls, found that 20,000 jobs were eliminated last month. And revisions to last year's data found far more jobs were lost over the 12 months than previously predicted. http://online.wsj.com/article/SB10001424052748704533204575046960669803550.html?mod=WSJ_hps_LEFTWhatsNews Toyota plans to repair Prius brakes
DETROIT -- Toyota Motor Corp, has told dealers it's preparing a plan to repair the brakes on thousands of hybrid Prius cars in the U.S. In a message sent Friday night to dealers, a Toyota group vice president, Bob Carter, said the company is working on a plan and will disclose more details early next week. More than 100 drivers of 2010 Prius cars have complained that their brakes seemed to fail momentarily when they were driving on bumpy roads. The U.S. government says the problem is suspected in four crashes and two minor injuries. http://online.wsj.com/article/SB10001424052748704829704575049241913621402.html?mod=WSJ_hpp_LEFTWhatsNewsCollection&mg=com-wsj
Goldman Bows on CEO Pay
Goldman Sachs Group Inc., trying to show it is responsive to public pressure over its pay, said Chairman and Chief Executive Lloyd Blankfein would get a $9 million bonus for 2009, a fraction of the $68.5 million payout he got in 2007. Friday's announcement was one of the most highly anticipated pay figures in Wall Street history. As Goldman rebounded in 2009 to its most profitable year ever, the 55-year-old Mr. Blankfein became the focus of anger about sky-high bonuses on Wall Street. That criticism continued even after Goldman said last month that it would make the smallest employee payouts relative to revenue since the firm went public in 1999. http://online.wsj.com/article/SB10001424052748704533204575047132761932208.html?mod=WSJ_hps_LEFTWhatsNews
Ron Burkle Seeks 37% of Barnes & Noble
Activist investor Ron Burkle sent a letter to Barnes & Noble Inc. seeking to acquire as much as 37% of the company, up from his current stake of 19%, and blasting the book retailer for having different sets of anti-takeover rules for big investors: one applying to insiders and one applying to outsiders. http://online.wsj.com/article/SB10001424052748703422904575039713084867850.html
Gannett Co. returned to the black for the fourth quarter, helped by lower expenses and no big writedowns as it had in the year-earlier period. The publisher of USA Today and more than 80 other daily newspapers saw advertising slide another 18%, but the drop wasn't as steep as last year's, and was characterized as a stabilization. http://online.wsj.com/article/SB10001424052748704107204575038981134299578.html
Battle over UK cigarette packaging heats up
Tobacco companies are digging in to fight a possible U.K. ban on one of their last marketing tools: cigarette packaging.The U.K.'s Department of Health said Monday that it would consider mandating generic packaging for all cigarettes as part of an aggressive campaign to halve smoking rates by 2020.
Such packs would be white or brown with the brand name written in simple type and no logos or colors allowed. The packs would continue to carry large health warnings. http://online.wsj.com/article/SB10001424052748703422904575039410524001480.html
AIG Plan to Pay $100 million in bonuses draws fire
The American International Group has agreed to cut employee bonuses by $20 million and will distribute about $100 million on Wednesday, according to people with knowledge of the negotiations. But the reductions may not be enough to appease the company’s critics, who do not accept the company’s argument that it has to honor contracts from before its government bailout. http://www.nytimes.com/2010/02/03/business/03aig.html
Time Warner Posts Fourth Quarter Profit Time Warner Inc. moved back into the black for the fourth quarter, rebounding from a large write-down a year earlier and benefiting from strength in its film and television businesses.The media giant also raised its quarterly dividend 13% to 21.25 cents a share. That move comes a day after competitor News Corp. raised its six-month dividend for both classes of its stock by 25%. http://online.wsj.com/article/SB10001424052748704259304575042800323826926.html
Home Builders Cut Prices, Warn about Foreclosures
LAS VEGAS—Home builders have lost half their share of the U.S. housing market in the past two years, largely because of competition from cheap foreclosed houses. In 2009 only 7.6% of the homes sold were newly constructed, down from the average of about 16% over the previous two decades.
But home builders are fighting back, cutting prices, promising to complete homes faster, and warning about the risks of buying foreclosed property. http://online.wsj.com/article/SB10001424052748703422904575039691675728982.html?mod=WSJ_WSJ_US_News_5
Toyota's Troubles Deepen Toyota Motor Corp.'s quality crisis deepened Tuesday, as U.S. regulators accused the company of dragging its feet on fixing defective gas pedals and threatened civil penalties and further reviews of Toyota products.
The move means that Toyota's efforts to address its biggest-ever safety and public-relations mess are far from over. Last week, the administration indicated it had no issues with how Toyota had responded to the sudden-acceleration reports, which led the company to recall about six million vehicles and have been linked to at least five fatalities. http://online.wsj.com/article/SB10001424052748704107204575040353375520866.html?mod=WSJ_WSJ_US_News_6
In the midst of a punishing recession, Ohio's Third Frontier program has been a rare bright spot and a critical driver of economic growth across our state. Since the bipartisan economic-development program was enacted under former Gov. Bob Taft, state grants have helped create more than 41,000 jobs and $6.6 billion in economic activity through 2008. That was a $10 return on every dollar invested by the state.
And yet, despite the undisputable success of this effort to nurture home-grown, high-tech companies, some Republicans in the legislature oppose a robust renewal of this vital program. The Ohio House has passed a measure to extend the program for five years at a cost of $950 million, while the Republican-controlled Senate has proposed a far smaller effort of $500 million over the same time frame.
Windows 7 fails to boost PC makers profits
Microsoft Corp.'s new Windows 7 operating system has fattened the company's earnings and boosted personal-computer sales at retailers like Best Buy Co. But it hasn't increased the profits of PC giants Hewlett-Packard Co., Dell Inc. and others. While consumers purchased more than 90 million new PCs during the holiday quarter, when Microsoft released Windows 7, up 22% from a year earlier, PC revenue grew at just a single-digit rate, analysts say. http://online.wsj.com/article/SB10001424052748704343104575034233214601248.html?mod=WSJ_business_whatsNews
Obama proposes a $3.8 trillion budget
WASHINGTON—President Barack Obama proposed a $3.8 trillion budget for fiscal 2011 that will add fuel to the debate over the size and scope of government. The plan includes big increases in personal and business taxes, modest spending cuts and increased outlays for education, defense and jobs initiatives.The Obama administration has focused in the days leading up to Monday's formal release on proposals to cap so-called discretionary spending, roughly 17% of the total budget, as part of a plan to start narrowing the record $1.6 trillion gap between proposed budget outlays and tax receipts. http://online.wsj.com/article/SB10001424052748704107204575038733246595218.html?mod=WSJ_hps_LEADNewsCollection
Factory sector books best performance in five years
U.S. factory sector activity booked its best performance in more than five years in January, amid a rebound in hiring and rising price pressures. In a key report, private research group the Institute for Supply Management said Monday its index of manufacturing activity moved to 58.4 in January, the best reading since August 2004, from 54.9 in December and 53.7 in November. Readings over 50 indicate growth and describe the breadth, but not magnitude, of the change. Economists had expected the index to come in at 55.3. http://online.wsj.com/article/SB10001424052748704107204575038941133108482.html?mod=WSJ_hps_LEFTWhatsNews
Exxon Mobil's fourth quarter profit falls Exxon Mobil Corp.'s fourth-quarter earnings fell 23% as lower profit margins for refining and fuels and lower natural-gas prices were partly offset by higher prices for crude oil.
Prices for oil products like gasoline and diesel have failed to keep pace with the rising price of crude, putting intense pressure on refining profit margins, and leading to losses, shutdowns and some refiners putting operations on the block. http://online.wsj.com/article/SB10001424052748703422904575038930311563198.html?mod=WSJ_business_whatsNews
Crude oil prices climb to $72 a barrel
NEW YORK -- Crude futures rose Monday on positive corporate earnings and due to geopolitical tensions.
Light, sweet crude for March delivery recently traded 42 cents, or 0.6%, higher at $73.31 a barrel on the New York Mercantile Exchange. Brent crude on the ICE futures exchange traded 47 cents, or 0.7%, higher at $71.93 a barrel. http://online.wsj.com/article/SB10001424052748704107204575038870579452504.html
Obama proposes boosting education department spending
WASHINGTON—President Barack Obama's proposal to boost the Education Department by 9%, even as other areas get squeezed, highlights one area where the administration and Republicans have found some common ground.Most of the additional $4.5 billion in spending proposed for the Education Department new money is slated to fund competitive programs, making the budget a key part of an administration bid to transform how local school officials interact with the federal government. http://online.wsj.com/article/SB10001424052748704107204575039090128849972.html
Toyota has fix for gas pedal problems
DETROIT – Toyota Motor Corp. said on Monday that it has already begun shipping a fix to the gas pedal problem involved in the recall of millions of vehicles and forced the company to stop selling eight of its models in the U.S. and some other countries around the world.Toyota has pinpointed the issue that could, on rare occasions, cause accelerator pedals in recalled vehicles to stick in a partially open position. The issue involves a friction device in the pedal designed to provide the proper "feel" by adding resistance and making the pedal steady and stable, Toyota said. The device includes a shoe that rubs against an adjoining surface during normal pedal operation. http://online.wsj.com/article/SB10001424052748704107204575038802851805726.html?mod=WSJ_hps_LEFTWhatsNews
The Wall Street Journal - WASHINGTON—If populism is emerging as a potent new force in American politics, then government trustbusters and sympathetic Democrats in Congress stand ready to offer a new outlet. But first, they'll have to overcome a major hurdle: the judges.
Over the past three decades, U.S. courts have sharply limited the scope of the 120-year-old Sherman Antitrust Act, which has been used to target companies from Standard Oil to Microsoft Corp. In so doing, judges have clipped the wings of two agencies charged with policing anticompetitive behavior: the Justice Department and the Federal Trade Commission.
Now Democrats on Capitol Hill are joining forces with antitrust cops to push back against the judicial tide. Congress is preparing measures to reverse the effect of court rulings that have made it harder for the government to win antitrust cases and break up monopolies, while the FTC and Justice Department are trying out new legal tactics to reclaim lost powers
If successful, the efforts could presage an upswing in antitrust cases against America's leading companies and reverse the legal trends of recent years.
Sensing a shift in the political landscape, big business is girding for a fight. "Voters are demanding jobs and growth, but Washington is moving in the opposite direction by advancing an agenda focused on increased litigation against business," said Lisa Rickard, president of the U.S. Chamber Institute for Legal Reform, an offshoot of the Chamber of Commerce that seeks to ease the burden of civil litigation for businesses.
Antitrust enforcers since the 1980s have had an increasingly hard time winning cases against accused monopolists. Judges have largely agreed with the reasoning of the so-called Chicago School of economists, which holds that big companies aren't necessarily bad and that the market—not government—is best placed to promote competition.
