Bloomberg: ‘Cash Rebates Like Booze For Alcoholics’

Bloomberg Ridicules Washington On Economy

‘Cash Rebates Like Booze For Alcoholics’

U.S.Resembling A ‘Third-World Country’

NEW YORK (CBS/AP) ― Mayor Michael Bloomberg has unleashed another flurry of jabs on Washington, ridiculing the federal government’s rebate checks as being “like giving a drink to an alcoholic” on Thursday, and said the presidential candidates are looking for easy solutions to complex economic problems.

The billionaire and potential independent presidential candidate also said the nation “has a balance sheet that’s starting to look more and more like a third-world country.”

President Bush signed legislation Wednesday that will result in cash rebates ranging from $300 to $1,200 for more than 130 million people.

The federal checks are the centerpiece of the government’s emergency effort to stimulate the economy, under the theory that most people will spend the money right away.

But Bloomberg does not believe it will do much good. And his harsh words at a news conference Thursday reflect the view among some of his associates that the country’s economic woes present a unique opportunity for him to launch a third-party bid for the White House.

The theory among those urging him to run for president is that a businessman who rose from Wall Street to build his own financial information empire might be particularly appealing as the fiscal crisis worsens.

Publicly, Bloomberg says he is “not a candidate,” and explained recently he is speaking out on national issues as part of an “experiment” to influence the dialogue in the race.

His tirade against the candidates and the economic stimulus package on Thursday began when he was asked how that experiment is going.

In his answer, he praised Democrat Barack Obama for the plan the Illinois senator outlined on Wednesday that would create a National Infrastructure Reinvestment Bank to rebuild highways, bridges, airports and other public projects. Obama projects it could generate nearly 2 million jobs.

Last month, Bloomberg and Govs. Arnold Schwarzenegger of California and Ed Rendell of Pennsylvania announced a coalition that would urge more investment in infrastructure.

“I don’t know whether Senator Obama looked to see what I’ve been advocating, or not — you’ll have to ask him — but he’s doing the right thing,” Bloomberg said.

But then the mayor went on to say that while the presidential candidates appear to be talking more about the economy now, they are looking for quick fixes to please voters instead of focusing on the roots of the problem.

“Nobody wants to sit there and say, ‘Well there’s no easy solution,”‘ Bloomberg said. “They want to send out a check to everybody to stimulate the economy. I suppose it won’t hurt the economy but it’s in many senses like giving a drink to an alcoholic.”

A spokesman for the mayor said later that Bloomberg was trying to say Washington can’t stop itself from spending, and was not insinuating that Americans who receive checks are part of the problem.

The mayor last month said the economic stimulus package was shortsighted, and presented his own views on where the federal government should be focusing its attention. Specifically, he said the government should adopt a capital budget to oversee long-term infrastructure spending, instead of the current year-to-year spending.

It should also offer financial counseling, modified loans, and in some cases, subsidized loans to homeowners who find themselves unable to afford their mortgages.

He says that the government should also think differently about immigration, and that bringing more workers in rather than keeping them out is the key to long term economic stability.

(© 2008 CBS Broadcasting Inc. All Rights Reserved. This material may not be published, broadcast, rewritten, or redistributed. The Associated Press contributed to this report.)

Mexican President: Immigration reform now

Courtesy of the Houston Chronicle:

SACRAMENTO, Calif. — Mexican President Felipe Calderon told a joint session of California’s Legislature on Wednesday that the United States and Mexico are at a historical point in their relationship and called for comprehensive immigration reform.

“Future generations will judge us by the decisions we (make) today,” Calderon said in his first visit to California since he was elected in 2006. “Did we work together to provide organized and humane migration, or did we continue to allow hundreds to die each year?”

Mexico “loses a great deal” with each Mexican who makes the dangerous trek across the border in search of better jobs, Calderon said. Hundreds die during the journey, and the president said immigration costs his nation “our bravest, our youngest and our strongest people.”

“My administration is working hard to create the conditions that will enable each Mexican to find, in our land, well-paid opportunities for employment,” Calderon said, adding that Mexico has taken steps to tighten border security.

Mexico and the United States, he said, “must take a comprehensive approach” to immigration that is “legal, safe and organized.”

Unlike two years ago, when about a half-dozen Republican lawmakers boycotted Mexican President Vicente Fox’s speech to the Legislature in a protest over illegal immigration, Calderon was warmly received.

But after the speech, Republican state Sen. Tom McClintock of Thousand Oaks said it was “inappropriate” for Calderon to “lecture” the Legislature about U.S. policies.

“I don’t think it’s any of Mexico’s business what America does with its own immigration policy, just as it’s none of America’s business what Mexico does with immigration policy,” McClintock said.

Assembly Speaker Fabian Nunez, D-Los Angeles, who spent part of his childhood in Mexico, said McClintock did not have “a valid argument.”

“Any president of any nation has a right to their own point of view,” said Nunez, who praised Calderon for his efforts to improve Mexico’s economy and stem illegal immigration.

Outside the Capitol, a small group of Mexicans living in the United States protested Calderon’s visit.

“Felipe Calderon represents a bureaucratic and corrupt system — that’s why Mexicans come here,” said Rudolfo Parel, a farmworker.

Wednesday was the final day of Calderon’s five-day coast-to-coast tour of the United States during which he sought to allay concerns that his nation is indifferent to illegal immigration to this country.

The president acknowledged that illegal immigration is controversial issue “in this great nation” but added, “Mexican-American workers are a large reason for the dynamic economy of California.”

“The harvester in Delano, the dishwasher in Los Angeles, the construction worker in San Francisco (and) the executive in the Silicon Valley … all of them work hard for the prosperity of this state,” he said.

Mexico also accounts for about $20 billion in exports annually from California, and California’s agricultural exports to Mexico have nearly doubled since 2002, making it one of the state’s fastest growing export markets.

In a prepared statement, Gov. Arnold Schwarzenegger, who hosted a luncheon for Calderon after his speech, did not touch on the issue of illegal immigration. But he said he looked forward to working with Calderon on building on California’s partnership with Mexico.

The governor, who attended Calderon’s inauguration, said the Mexican president “is on the same page with California on many issues, such as increasing trade, creating more jobs, improving our aging infrastructures and improving the quality of life for our people.”

During Calderon’s visit, he and Schwarzenegger signed an agreement to jointly fight climate change and discussed boosting trade and combating drug trafficking.

In his speech to the Legislature, Calderon said Mexico needs investment from California just as the United States needs Mexican laborers.

“The choice is not between migration and (border) security or between migration and prosperity,” he said. “The choice is between a future of integration and success or a future of distrust and resentment.”

Mitt Romney Will Endorse John McCain

NEWPORT, R.I. (AP) - Officials have told The Associated Press Mitt Romney will endorse former rival John McCain. He will endorse the Republican front-runner on Thursday. The officials have told spoke on condition of anonymity. Romney will release his 288 delegates and urge them to back McCain.

The former Massachuttsetts governor dropped out of the race last week. It became apparent that toppling McCain would be near impossible.

Fonda drops the ‘C-word’ on The Today Show

Caution: THIS CONTAINS ADULT LANGUAGE. If you are sensitive to adult language, please do not watch this.

WSJ: Will McCain give up his Senate seat?

Will McCain Give Up His Senate Seat?

 

Alex Frangos reports on the presidential race.

Arizona Rep. John Shadegg said Monday he won’t run for re-election to the House, but he is interested in a Senate seat.

That got us thinking: Will John McCain give up his Senate perch to concentrate on running for president, and thus open a spot for Shadegg? We dug into our notebook and it just so happens that Washington Wire posed the question to the likely Republican nominee last Wednesday.

“If I get the nomination, we’ll figure it out,” he said on board his chartered jet from Phoenix to Washington. The 24-year congressional veteran, whose Senate term expires in 2010, lamented the time he has spent away from the Senate in the past year. “It’s very hard. I’ve missed a lot of votes, there’s no doubt about it.”

McCain also talked about the last time a Republican senator got the nomination: Bob Dole in 1996. Dole gave up his Kansas seat in order to concentrate on the election. “I remember discussing it with him, and frankly, I recommended that he not do it,” McCain said. He noted that Dole was the majority leader at the time and had a “forum” to speak his agenda. But he understood Dole’s rationale, given that as majority leader, his schedule was much busier than that of a little old senator such as himself.

There is a long history of senators and their White House ambitions. Lyndon Johnson benefited from a law change that allowed him to run simultaneously for his Senate seat and the vice presidency in 1960. He won both. Lloyd Bentsen took advantage of that law in 1988 and to good effect since he and Michael Dukakis lost. Joe Lieberman made the same move in 2000, when he kept his Connecticut seat while losing the vice presidency.

Arizona rules on Senate vacancies dictate that the governor (currently Janet Napolitano, a Democrat and Barack Obama supporter) must appoint an interim senator from the same party as the departing senator, and an election would be held at the next general election.

Officials: Wire could have decapitated Border Patrol agents

WASHINGTON (CNN) — U.S. border officers found a wire between two fences along the U.S.-Mexican border that, when stretched taut, could have seriously harmed or even decapitated Border Patrol agents, Congress was told Wednesday.

“It was configured in a way so that, if it was pulled, it would take off the head of a Border Patrol agent riding in an open car,” Homeland Security Secretary Michael Chertoff said at a House budget hearing.

The wire was discovered Saturday when authorities monitoring a surveillance camera saw two people on the north side of the border east of the San Ysidro Port of Entry, in the San Diego sector.

Border Patrol agents sent to the area found a thick metal wire tied to a secondary fence.

The wire stretched across the border road and led into Mexico through a hole in the primary fence, according to U.S. Customs and Border Protection.

When pulled tight, the wire would be about 4 feet high — about neck level for an agent riding on an all-terrain vehicle, CBP said.

Officials said they suspected that drug or illegal immigrant smugglers were involved.

No arrests were made on either side of the border. The wire was removed, and no injuries or damage took place, CBP said.

All AboutU.S. Customs and Border Protection

The Latest, Sexiest 2008 Polls

First, Zogby has some new numbers out about potential matchups. Obama beats everyone, McCain beats Clinton and Clinton can only top Huckabee right now.

Obama Vs. McCain: Obama, 47%, McCain 36%, Undecided 17%

Obama Vs. Huckabee: Obama 49%, Huckabee 34%, Undecided 17%

McCain Vs. Clinton: McCain 42%, Clinton 37%, Undecided 21%

Clinton Vs. Huckabee: Clinton 40%, Huckabee 37%, Undecided 22%

Rasmussen has some new national numbers out for botht he Democrats and Republicans. The most surprising is Barack Obama. He now leads nationally 49% to 37% over Clinton. Just two weeks ago, Clinton had a ten point national advantage over Obama in a Fox News poll. Even more surprising; Obama leads Clinton among women, 46% to 41%. Rasmussen has McCain over Huckabee, 47% to 34%.

In Rasmussen’s head to head match ups; Obama beats McCain 46% to 42% while McCain beats Hillary 48% to 41%. 53% of people surveyed have an unfavorable view of Hillary. It’s tough to win and election with those numbers.

Biz Week: How low will the Fed cut rates?

 

How Low Will the Fed Go?

Chairman Bernanke is hearing it from all sides, but the rate doves appear to have the upper hand

by Peter Coy

As Federal Reserve Chairman Ben S. Bernanke and company consider how far to cut interest rates, they are getting harangued from all sides. Slash rates drastically to keep the financial system from freezing up, say some backseat drivers. No, say others, there’s no sign yet the economy as a whole is in enough trouble to warrant deeper cuts.

The discussion over what to do next is tied to a different debate about whether the Fed made a mistake and cut rates too far in 2003 and 2004. Back then, under former Chairman Alan Greenspan, the Fed dropped the fed funds rate—the main short-term interest rate it controls—as low as 1%. In doing so, it staved off the economic collapse many economists feared after the tech bust and stock market decline. However, critics charge that the amount of money the Fed pumped out was so large it led to harmful speculation in the housing market. Morgan Stanley (MS) economist Stephen Roach says the Fed became a “serial bubble blower.”

Investors seem to expect that big cuts will win the day. As of Feb. 13, the fed funds futures market was betting the funds rate to be cut from 3% to 2.5% at the next Fed rate-setting meeting on Mar. 18, according to a Bloomberg Financial Markets calculation. Further out, the futures market anticipates the fed funds rate will go to 2% by June.

Bad News Keeps Coming

Robert DiClemente, Citigroup’s (C) head of U.S. economic and market analysis, is predicting a bottom of 2.25% but concedes it could well go lower. Says DiClemente: “There’s this very nasty chemistry between economic weakness and financial instability and back. It just keeps feeding on each other until the Fed breaks the circle.” One of Wall Street’s biggest bears, David Rosenberg, North American economist for Merrill Lynch (MER), thinks the funds rate will hit 1%.

Certainly the bad financial news keeps coming. On Feb. 11, American International Group (AIG) announced it will be forced to write down the value of its mortgage-related financial instruments by nearly $5 billion. On Feb. 13 the biggest U.S. mortgage insurer, MGIC Investment, posted a record quarterly loss of $1.47 billion because of a huge rise in delinquencies.

There’s no sign of a pickup in the credit markets. Banks are burdened with leveraged-buyout loans they can’t sell. They’re sharply tightening standards for loans on commercial real estate, which until now had held up much better than residential real estate. And the sharp decline in home prices, which triggered the credit crunch and shows no sign of ending, looms large.

Cuts Not an Easy Call

Bernanke and others at the Fed are attuned to the risks. A leading scholar on the Great Depression, Bernanke has made clear in speeches his determination not to let the credit crunch drag down the overall economy. One influential Fed governor, Frederic Mishkin, argued in a Jan. 11 speech that monetary policymakers “may need to react aggressively” in times of financial turmoil and take preemptive action even before the macroeconomic fallout is apparent.

But that doesn’t mean big rate cuts are an easy call. Bernanke faced dissent in each of the last two rate-cutting votes, by St. Louis Fed President William Poole on Jan. 22 and Dallas Fed President Richard Fisher on Jan. 30. Laurence Meyer, a former Fed governor who is vice-chairman of St. Louis-based Macroeconomic Advisers, predicts the Fed will cut only another quarter- or half-point and is likely to be raising rates again by yearend.

Hawks say there’s no need to run the risk of reinflating bubbles because the economy is fundamentally healthy and inflation is a greater risk than recession. Including food and energy prices, the consumer price index rose 4.1% in 2007, notes Ken Mayland, president of ClearView Economics in Pepper Pike, Ohio. And on Feb. 13 the Census Bureau reported a 0.3% gain in retail sales in January, bolstering hopes that consumers will keep the U.S. out of recession.

Repeating Recent History?

Tom Sowanick, chief investment officer of Clearbrook Financial, a Princeton (N.J.) asset manager, says the economy is getting all the help it needs from the recent rate cuts, the fiscal stimulus package signed Feb. 13 by President Bush, and corporate actions such as Warren Buffett’s offer on Feb. 12 to reinsure $800 billion of municipal bonds for strapped bond insurers. Big rate cuts would be required, he says, only if Buffett’s offer isn’t accepted by the major insurers, leading to rating downgrades, or if it turns out financial institutions still haven’t come clean about the extent of their recent losses.

The rate-cutting skeptics also worry the Fed will overcorrect and drive the economy into a new round of speculation. They argue that in 2003 and 2004 the Fed erred on the side of stimulus when it wasn’t needed and set the stage for the housing bubble. “Everyone’s wondering whether that was too far,” says Mayland. “I’d be real surprised if we see 1% again.”

The more dovish, alternate viewpoint is that the ultralow interest rates of 2003-04 were not the real problem. Rather, the policy mistake was raising rates so rapidly afterward. In the space of only two years, the Fed jacked up interest rates by more than four percentage points, faster than the markets could adjust.

In retrospect, it’s clear the higher rates had an unexpectedly negative impact on the housing market. Starting with the third quarter of 2005, private investment in new residential structures began decelerating sharply. Nevertheless, the Fed didn’t stop hiking rates until June, 2006. Since it takes 12 to 18 months for changes in interest rates to have their full effect, housing was getting hit hard long after it had started to slow.

Raising Rates, Lowering Standards

Part of the problem was that the official figures at the time were misleading, showing a stronger housing market than actually existed. For example, when the Fed raised rates in January, 2006—at Greenspan’s last meeting as Fed chairman—the available numbers seemed to indicate that new-home construction was rising at a very strong 11% annual rate in the fourth quarter of 2005. In fact, the rate was half that, once all the revisions were in.

The rate hikes also had a perverse effect: Lenders were determined not to lose customers when rates rose, so they lowered standards. The default rate on mortgages loans made in 2006 and 2007 was much worse than that of loans made during the lower-rate period.

Fed policymakers reject the notion that they tightened rates too much from 2004 to 2006. They were worried about inflation accelerating, and they didn’t see a 5.25% fed funds rate as being particularly high in historical context. On the other hand, they dismiss the contention of skeptics such as Roach that the Federal Reserve eased too much in 2003 and 2004. That’s important because it means Bernanke is not likely to shy away from cutting rates if the Fed believes the economy demands it.

How low will rates go? As low as they need to.

Coy is BusinessWeek’s Economics editor.

WSJ: The Skinny on the Stimulus Plan

TAX REPORT By TOM HERMAN

The Skinny on the Stimulus Plan

What’s in it for me?

That’s the question millions of taxpayers are asking after Congress approved an economic-stimulus package last week that includes one-time payments to more than 131 million households. President Bush is planning to sign the package into law today, and a Treasury Department spokesman says the payments are expected to begin flowing in May.

Under the legislation, most people who pay federal income taxes will get up to $600 for individuals, or as much as $1,200 for married couples, with an additional $300 per child. But many upper-income Americans will get nothing because of income limits. The amounts begin to phase out for incomes above $75,000 for individuals and $150,000 for married couples who file jointly. Many low-income Americans who pay little or no federal income tax will get something, too. To get a payment this year, you have to file a tax return for 2007. Congress also approved business-tax breaks, including one especially designed for small businesses.

Elements of the plan can be tricky, such as the mechanics of the phase-outs. Here are answers to some of the most frequently asked questions affecting individuals, based on interviews with government officials, accountants and tax lawyers.

Q: How much will I get?

A: As with so many tax questions, the answer is: It depends. Here are a few examples:

A married couple with no kids and adjusted gross income for 2007 of $140,000 typically would get $1,200. A married couple with the same income, with two kids under 17, would get $1,800. A married couple with the same income, with 10 kids, would get $4,200.

There are other rules that apply to many low-income people, such as Social Security recipients and military veterans receiving disability benefits. For example, someone who is single with no kids and $3,000 in Social Security benefits would be eligible for a $300 payment, according to CCH, a Wolters Kluwer unit that publishes tax and other business information.

The Treasury estimates payments to individuals will total about $112 billion.

Q: How is the income phase-out supposed to work?

A: The Senate Finance Committee says the amount of the credit “is phased out at a rate of 5% of adjusted gross income beginning at $75,000 ($150,000 in the case of joint returns).”

Rough translation: You lose 5% of the dollar amount above the applicable cap — such as $50 for each $1,000 above the cap.

For example, suppose you’re married and file jointly, have no kids, and your adjusted gross income for 2007 was $174,000. In that case, you made too much to qualify for the payment. Why? Your income was $24,000 over the cap. Multiply $50 times 24. That’s $1,200, the amount you would otherwise have received.

If you’re single (and have no kids) and your 2007 income was $87,000, you wouldn’t get anything, either. That’s because your income was $12,000 over the cap.

Some people will get reduced amounts because of the phase-outs. Suppose you’re married, file jointly, have $175,000 in wages and two qualifying kids. In that case, you typically would be eligible for a $550 payment. (Without the phase-out provision, you would have gotten $1,800. Because of the phase-out, it’s reduced by $1,250, leaving $550.)

Q: Why did Congress impose income limits?

A: Lawmakers wanted to get the money into the hands of people most likely to spend it quickly and help reinvigorate the economy. “The rebates will go to middle-income Americans and those aspiring to it,” says a statement from House Speaker Nancy Pelosi, a California Democrat. “The wealthiest taxpayers are not eligible for this relief.”

Q: Do I have to file a federal income-tax return for 2007 in order to get something this year?

A: Yes. “You have to file a return for the 2007 tax year in order to receive a rebate check” during 2008, says an aide to Senate Finance Committee Chairman Max Baucus.

The IRS “will calculate the rebate from that return, estimating the reduction in tax liability for 2008 that results in the rebate check,” the aide says.

Q: Suppose I have Social Security income and no tax liability for 2007. Do I still have to file a return to get a payment from the government this year?

A: Yes. Those with Social Security income but no tax liability “should take special note of the need to file a return this year,” replies the Baucus aide. “Nothing will change about the taxability of their Social Security income, but they do need simply to report the SS [Social Security] income on a return to receive the rebate.”

Q: Do I have to figure out how much I’m supposed to get this year?

A: No. You don’t have to apply. The Internal Revenue Service is supposed to handle it for you. As one congressional staffer put it, “all you have to know how to do is open an envelope” — or tell the government how to zap your money electronically into your account.

Q: Will Uncle Sam tax these payments?

A: No, say representatives of the U.S. Treasury Department and congressional tax-writing committees.

Q: But what about all these rumors that the payments will cut into what I get as my refund next year?

A: They’re wrong, congressional staffers say. “Please be aware that there have been erroneous reports that stimulus rebate checks are an advance on next year’s tax refund, so that any refund a taxpayer might normally receive would be reduced by the amount of the 2007 stimulus check,” says the Baucus aide. “This is not correct.”

Amy McAnarney, executive director for H&R Block’s Tax Institute, says, “The actual credit will be calculated on your 2008 return. If you’re due a higher credit, you’ll get the remainder next year when you file. If you received a higher credit than you should have, you do not have to pay anything back.”

“What might happen next year,” a House staffer says, “is that somebody who didn’t get their full amount this year could get more, based on their return for 2008. For example, if you had a child born in 2008 and you were within the income caps, you’ll get another benefit of $300 next year when you file your return for 2008.”

Q: How much of a stimulus will all these checks provide to the economy?

A: Nobody knows, but about half of the analysts in a recent survey by WSJ.com said they thought the stimulus package would give the economy a “modest but welcome” lift. A further 24% thought it would have a “significant effect” on consumer spending.

The package also includes new breaks for businesses. For example, the plan doubles the amount that many small businesses can write off immediately for capital investments made this year to $250,000 from $125,000.

Q: Where can I get more details?

A: The IRS (irs.gov) plans to post additional information soon, a spokesman says. Meanwhile, try the Web sites of the Senate Finance Committee (finance.senate.gov), House Ways and Means Committee (waysandmeans.house.gov) and the Joint Committee on Taxation (www.house.gov/jct). Also check out the CCH Web site (cchgroup.com). Click on the “Tax Legislation Update” banner to get to the special “CCH Tax Briefing.”