Daily Archive: February 12, 2013

Feb
12

Barack Obama’s state of the union address to focus on jobs and economy

President will also touch on immigration reform, withdrawal of troops from Afghanistan and North Korea’s nuclear tests

Barack Obama will use his state of the union address to paint his second presidential term as an opportunity to restore “the basic bargain” which built the US into the world’s greatest economic power by ensuring prosperity for the great bulk of Americans and not the privileged few.

The president will tell Congress that it is this generation’s task to return to a time when US governments represented all the people, according to extracts released by the White House. But he will also pledge that his proposals to bolster employment will not add to the deficit.

“It is our unfinished task to restore the basic bargain that built this country – the idea that if you work hard and meet your responsibilities, you can get ahead, no matter where you come from, what you look like, or who you love,” the president will tell Congress. “It is our unfinished task to make sure that this government works on behalf of the many, and not just the few; that it encourages free enterprise, rewards individual initiative, and opens the doors of opportunity to every child across this great nation of ours.”

The key to that, the president will say, is a focus on the creation of “good middle-class jobs” – an acknowledgement that even though the economy has picked up over the past four years, many people were forced from well-paid work into minimum-wage jobs.

“That must be the North Star that guides our efforts. Every day, we should ask ourselves three questions as a nation: how do we attract more jobs to our shores? How do we equip our people with the skills needed to do those jobs? And how do we make sure that hard work leads to a decent living?” he will say.

“Tonight, I’ll lay out additional proposals that are fully paid for and fully consistent with the budget framework both parties agreed to just 18 months ago. Let me repeat – nothing I’m proposing tonight should increase our deficit by a single dime. It’s not a bigger government we need, but a smarter government that sets priorities and invests in broad-based growth.”

The Republican response to Obama is to be delivered by Florida senator Marco Rubio – a reflection of his party’s attempts to reposition itself as more moderate after its defeat in the presidential election and to win back Latino voters driven away by Republican legislation and rhetoric on immigration.

Rubio intends to challenge Obama’s assertion that it is government policies that decide the fate of America’s middle class.

“This opportunity – to make it to the middle class or beyond no matter where you start out in life – it isn’t bestowed on us from Washington. It comes from a vibrant free economy where people can risk their own money to open a business,” he will say, according to extracts released by Rubio’s office. “Presidents in both parties – from John F Kennedy to Ronald Reagan – have known that our free enterprise economy is the source of our middle class prosperity. But President Obama? He believes it’s the cause of our problems.”

Rubio will note that the economy shrank in the last quarter of 2012 and blame the president’s policies, including tax increases for the wealthy.

“If we can get the economy to grow at just 4% a year, it would create millions of middle class jobs. And it could reduce our deficits by almost $4tn dollars over the next decade. Tax increases can’t do this. Raising taxes won’t create private sector jobs. And there’s no realistic tax increase that could lower our deficits by almost $4tn. That’s why I hope the president will abandon his obsession with raising taxes and instead work with us to achieve real growth in our economy,” Rubio will say.

However, the senator’s remarks risk suggesting to Americans that the Republican party is not changing and remains primarily committed to protecting the rich.

The emphasis on jobs and the economy is expected to be central to Obama’s speech but the administration has indicated he will also touch on a wide range of other ambitions for his second term including comprehensive immigration reform. He intends to announce he will withdraw a little more than half the 66,000 troops the US has in Afghanistan by this time next year as the Pentagon prepares for the final pullout of combat forces by the end of 2014.

Obama is also likely to be pressed into addressing North Korea’s latest nuclear weapons test even as he calls for a sharp drawdown in the number of nuclear warheads, proposing to drop the US arsenal from about 1,700 to 1,000.

The president is also expected to call for a measure of gun control following the massacre of children in Newtown.

The White House and Democratic members of Congress have invited dozens of victims of gun crime or their relatives to attend the speech. Among Michelle Obama’s guests will be the parents of Hadiya Pendleton, 15, who participated in the president’s inaugural parade last month and was then killed in a shooting in Chicago.

Among others attending the speech will be former Arizona congresswoman Gabrielle Giffords, who was badly wounded in a shooting two years ago.

To counter the move by supporters of more gun control, a Texas congressman, Steve Stockman, has invited the rock musician Ted Nugent to attend. Nugent is an ardent supporter of the National Rifle Association who last year said he would either be “dead or in jail” if Obama were re-elected.

Obama is also expected to tick boxes on the need to combat climate change and speak in favour of clean energy, although there appears to be little chance of the president getting major environmental legislation through the Republican-controlled House of Representatives.

State of the union addressUnited StatesUS politicsBarack ObamaWashington DCUS CongressUS economyEconomicsUS immigrationUS domestic policyUS foreign policyChris McGrealguardian.co.uk

Feb
12

CBI presses George Osborne for more infrastructure spending in budget

Employers’ organisation calls for chancellor to pull policy levers ‘with more elbow grease’ as it cuts its forecasts for UK growth

The CBI is to press for extra infrastructure spending from George Osborne in next month’s budget after it cut its forecast for UK growth in 2013.

In its quarterly economic health check, the employers’ organisation said it was expecting expansion of 1% this year compared with 1.4% when it last made predictions in November 2012.

John Cridland, the CBI director general, said he wanted the chancellor to cut spending on the running costs of government and use the money for capital projects such as repairing roads and housing in order to give the economy a short-term boost.

“I don’t think there are any big levers for the chancellor to pull,” Cridland said. “But we want the levers to be pulled with more elbow grease so that we get more traction.”

The CBI said the downgrade to its 2013 forecast had been caused by a weaker than anticipated performance in the final three months of 2012, but that the economy would avoid a triple-dip recession and grow at a slow pace over the coming year.

It left its growth forecast for 2014 unchanged at 2%, but said the sluggishness of the economy would mean extra borrowing in both the 2013-14 and 2014-15 financial years. Net borrowing has been revised up by £9bn to £123bn in 2013-14 and by £10bn to £112.5bn in the following year – more than three times the total predicted by Osborne when he became chancellor in 2010. A weaker pound is forecast to raise the cost of imports, keeping inflation above its 2% target in both 2013 and 2014.Cridland said capital spending had been cut too aggressively after the coalition came to power and urged a rebalancing towards capital projects.

While expressing disappointment at the 0.3% contraction of the economy in the fourth quarter of 2012, he said member companies were becoming more upbeat.

“We are beginning to see the return of organic growth, with clear signs that firms offering the right products into the right markets are growing sales and expanding. Recent business surveys also give grounds for cautious optimism about our forward prospects.

“Looking ahead, external risks to the outlook in the eurozone and further afield are likely to keep growth at home and abroad in check. The potential for eurozone tensions to flare up again, coupled with tough conditions in the domestic market, explain why business confidence remains patchy. After the uncertainties of 2012, the fear of external storm clouds lingers.”

The Office for National Statistics said yesterday that Britain’s annual inflation rate was pegged at 2.7% for the fourth successive month in January, as cheaper clothes and shoes in the new year sales helped offset dearer alcohol and tobacco.

The ONS said it was the first time since recent records began in 1996 that inflation as measured by the consumer prices index had remained at the same level for four months.

Other measures of inflation showed a small increase in January. The retail price index, used as the benchmark for many pay deals, showed the 12-month rise in the cost of living rising from 3.1% to 3.3%, while the RPI, excluding mortgage interest payments, showed inflation up from 3% to 3.3%.

Higher energy prices and more expensive food are expected to nudge the cost of living higher over the coming months, adding to the squeeze on consumer spending power.

The Bank of England predicts it will be up to two years before annual price increases fall to the government’s 2% target.

Confederation of British Industry (CBI)George OsborneEconomic growth (GDP)EconomicsBudgetLarry Elliottguardian.co.uk

Feb
12

Squeezed middle must wait another decade for rise in living standards

Resolution Foundation report says earnings for low to middle income families will not reach pre-recession levels until 2023

Britain’s low to middle income families are unlikely to see their living standards return to pre-recession levels for at least another 10 years, the Resolution Foundation thinktank warns .

Its report, Squeezed Britain 2013, shows that if low to middle earnings rose by the 1.1% a year above inflation achieved in the past, average annual household incomes in this group would take until 2023 to reach £22,000 – the equivalent of where they stood in 2008.

The Foundation points out that this group’s average earnings might now have reached £27,500 but for the downturn since 2008. To reach that level over the next decade would require annual real earnings growth of 3.3%.

The foundation says such an increase in earnings is unattainable based on current projections and past experience. It points out that the Office for Budget Responsibility, the government’s forecaster, predicts average real earnings will continue to fall into 2014 at the same time as support from tax credits and benefits is due to decline.

In another extraordinary finding the foundation also says that from 1994-95 to 2009-10 the top 1% of earners accounted for the 15% of the growth in income from employment and investments, while the bottom 50% accounted for another 15%. It says the last year has shown a decline in inequality.

The report includes new polling conducted by Ipsos MORI showing voters divided about whether growth will return soon. More than a third (36%) do not believe the economy will be growing again by 2015, while 47% think it will be.

Four in 10 people do not expect to be better off in 2015 than today, compared with a similar number (42%) who think they will be. Nearly seven out of 10 people (68%) say they are cutting back on spending.

The researchers focused on the so-called squeezed middle – the country’s 10 million adults living on low to middle incomes. Their gross household incomes range from £12,000 to £41,000 depending on how many children the household includes.

They do not include the poorest 10% of households and those who receive more than one fifth of their gross household income from means-tested benefits.

The Resolution Foundation has long argued that the squeeze on the low to middle income group is not just a result of recent fiscal austerity but is a much longer-term and deeper-seated trend.

It says: “The struggle with stagnant wages, high levels of debt and a heavy reliance on rising tax credits reaches back before the financial crisis and as such it represents a major challenge for all parties. The wages of ordinary full-time workers barely grew in the five years prior to the 2008 crash and were negative for the lowest earners, despite relatively healthy economic growth.”

Even workers in the top half saw their wages grow only slowly. It was only the very richest – those in the top 5% – who experienced growth of more than 1% a year.

Households in the top 10% of the working-age income distribution accounted for 37% of the overall growth in gross income from employment and investments between 1994-95 and 2010-11, with the top 1% alone taking 13%. In contrast, those in the bottom half accounted for just 17% of overall income growth.

The report points to major long-term changes in the housing market. For the first time in recent history the majority of those on low to middle incomes under the age of 35 live in private rented property.

The report says under current circumstances it would take 22 years for a household on a low to middle income to save for an average deposit on a first-time home – in a climate of stagnant incomes and restricted mortgages.

The extent to which indebtedness is holding back households, and possibly a return to consumer demand is also underlined.

Among all households with debts in the bottom half of the income distribution, 30 per cent are “debt-loaded”, that is, they spend more than a quarter of their total income on repayments – even at a time of ultra-low interest rates.

Gavin Kelly, chief executive of the Resolution Foundation, said: “The next election will be about living standards yet little is known about what will be on offer.

Feb
12

Barclays announces 3,700 job cuts

Barclays says it will cut 3,700 jobs this year following a strategic review by its new chief executive Antony Jenkins.

Feb
12

Republic chain set for administration

Fears are growing for the future of the Leeds-based fashion chain Republic, which employs 1,000 staff, as sources say it is poised to enter administration.

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