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Health Carriers Hanging Tough Despite D.C. Debacle

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Health Carriers Hanging Tough Despite D.C. Debacle

By Alan Farley | April 6, 2017 — 12:01 PM EDT

Health insurance carriers are holding intermediate support levels despite chaotic political swings that have generated massive opposition to Republican health care reform efforts. This resilient price action tells us investors and market players aren’t worried, at least yet, that industry profits will suffer when the smoke clears, and new legislation becomes the law of the land.

A number of major carriers have already pulled out of ACA coverage, lowering their exposure to legislative surprises, but that might not protect them because new laws are likely to impact the entire system from premium gathering to final payments. Also, taking insurance away from tens of millions of current policyholders could also have an adverse and chaotic effect because that entire premium base will be lost.

UNH

Dow component UnitedHealth Group, Inc. (UNH) broke out above the 2005 high at $64.61 in 2013 and entered a powerful trend advance that continued to post new highs into the first quarter of 2017. Rally momentum escalated after the November election, signaling optimism that new administration policies would underpin profitability. The company pulled out of ACA coverage in 2016.

It hit an all-time high at $172.14 on March 16th and turned lower, posting greater than average selling volume during Congressional negotiations that broke down near month’s end. The decline settled on the 50-day EMA about two weeks ago, with the stock holding like glue to that intermediate support level into April. The selloff had an adverse impact on institutional sponsorship, with On Balance Volume (OBV) falling to the lowest-low since January.

AET

Aetna, Inc.(AET) topped out at $60 in December 2007, following a 7-year uptrend, and sold off to the mid-teens during the 2008 economic collapse. It returned to the prior high in 2013 and broke out, entering an uptrend that peaked at $134.40 in June 2015, ahead of an intermediate correction that found support in the low-90s in the first quarter of 2016. The subsequent recovery wave reached resistance after the election, but the stock failed to break out, instead of turning lower into February.

A bounce at the 200-day EMA gathered momentum into mid-March but reversed about 2-points under the 2016 high, dropping back to the 50-day EMA during the health care debate. On Balance Volume (OBV) has been dropping like a rock since 2016, signaling a bearish divergence that opposes a bullish cup and handle breakout pattern. This marks a major bull-bear standoff that could last into the second half of 2017.

HUM

Humana, Inc.’s (HUM) pattern looks similar to rival AET because the companies were locked into a merger agreement until the Federal government nixed the deal in January 2017. HUM topped out in the upper-80s in January 2008 and sold off into the upper-teens in March 2009. It took more than two years for the subsequent bounce to reach resistance at the prior high, ahead of a 2014 breakout that stalled near $220 in May 2015.

The stock carved a long rounded base into the second half of 2016 and took off in a strong rally that reached the prior highs in December. It pulled back into January 2017, testing the 200-day EMA and returned to resistance once again, completing a cup and handle breakout pattern. The stock is also sitting on the 50-day EMA after the reform debacle but has attracted much strong buying interest than its former suitor.

The Bottom Line

Health insurance carriers have pulled back to their 50-day EMAs and entered holding patterns after the administration, and House of Representative failed to deliver health reform legislation to the U.S. Senate. While UnitedHealth Group has carved the strongest rally in recent years, Humana now shows the greatest upside potential, after completing a cup and handle pattern backed by strong buying volume.
Published at Thu, 06 Apr 2017 16:01:00 +0000

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The Case for Socialized Medicine

by DarkoStojanovic from Pixabay

The Case for Socialized Medicine

By: John Browne | Thu, Mar 30, 2017


Last week the American political establishment was shaken to its foundation
when the Republican Party leadership withdrew the American Health Care Act
(AHCA) just before the vote was to be taken on the floor of the House of Representatives.
Besides being a most unusual procedure, it exposed a fundamental split in the
country,reflected not merely in Congress but within the Republican Party. GOP
purists, represented by the House Freedom Caucus, demanded more significant
roll backs in socialized medicine that were contained in the Ryan plan. Their
refusal to back the plan, after years of promising complete repeal, doomed
the bill.

Given the political and popular landscape, the legislative fiasco should cast
serious doubt that Washington will ever be able to take any meaningful steps
to roll back government involvement in health care. Although widely considered
a failure of design and execution, Obamacare seems to have succeeded in one
important mission: It has created an even greater dependency on government
in the health care marketplace. Getting government out is now much more difficult
than it was just eight years ago. This may have been the democrats’ plan from
the start. As a result, the choice conservatives now face is to embrace an
increasingly complex, cumbersome, and inefficient public/private hybrid system,
or to acknowledge the political reality and make the most palatable lemonade
they can from the lemons that are available. Believe it or not, that may argue
for a deeper embrace of socialized medicine.

Contrary to the current rhetoric, Obamacare was not in fact America’s first
foray into socialized medicine and it did not represent the kind of crossed
Rubicon that Republicans like to accuse it of being. The door had first been
opened in the Second World War when government imposed wage controls that gave
incentives to employers to bundle health insurance into compensation packages.[1] When
the government then made employer-provided insurance tax deductible, such plans
became the norm. But the government really charged into the market in 1965
with the creation of Medicare and Medicaid. For many years, Republicans have
had to twist themselves into logical pretzels in order to argue that Obamacare
is socialism while Medicare is not.

In granting a brand new entitlement, Obamacare did nothing to address the
problems that have plagued the U.S. health care system for decades. It did
not encourage competition among insurers, it demanded a “one size fits all” approach
to coverage, and most egregiously did nothing to contain the rising medical
costs that threaten to bankrupt the nation. To add insult to injury, it required
that people buy insurance that they really didn’t want.

Although the Ryan plan removed the obligation of individuals to buy coverage,
it made many of Obamacare’s shortcomings worse. It left pre-existing condition
requirements in place, which would guarantee that premiums and deductibles
would continue to rise. It did not relax the state restrictions on insurance
competition, nor did it seek to contain medical costs. In other words, the
Ryan plan would have put Republicans on the same hook from which the Democrats
are now hanging. The alternative of a repeal without a replacement, so much
wished for by the hard right, would have created the kind of political chaos
that would virtually guarantee a Republican massacre in 2018 and 2020.

However, Republicans may still, for now, be able to lay claim as the party
of fiscal responsibility. And as a result, I would suggest a basic cost-benefit
analysis. It is clear from almost any standpoint that the socialized health
care available in other developed nations like the UK, Canada and the 34 developed
free market economies of the Organization for Economic Co-operation and Development
(OECD) delivers health care more efficiently than in the U.S.

In October 2012, PBS Newshour reported the U.S. as the world leader in cancer
treatment and health care research. Given our private wealth and the strength
of our university hospitals, this should come as no surprise. But what we have
gained in high end coverage, we have lost in everyday care. The same report
mentioned that there are only 2.4 practicing doctors and 2.6 hospital beds
per thousand people, which is far below the OECD averages of 3.1 and 3.4 respectively.
In addition, the American life expectancy is 78.7 years, in 2010, versus the
OECD average of 79.8 years. (Jason Kane, 10/22/12)

The World Bank reports that, in 2014, the U.S. spent 17.1% of GDP or $9,403
per person on health care. The UK spent 9.1% of GDP or $3,935 per head; Canada
10.4% or $5,292; the EU 10.0% or $3,613′. In 2000, despite spending approximately
twice the amount per head of any other nation, or group average of nations,
the World Health Organization rated the U.S. health system at only 37th, Canada
30th, and the UK 18th out of 191 nations. (WHO Global Health Expenditure Database)
Clearly, we are not getting what we think we are paying for.

Many OECD countries like the UK and Canada have what is termed a ‘single payer’
system sponsored by the state. In the UK, this means that the National Health
Service provides basic ‘bangers and mash’ coverage which includes provisions
for prior conditions and catastrophic illness. Yes, wait times to see a physician
for non-acute conditions are generally longer than in the U.S., but the bureaucratic
process of paying through insurance, with its never-ending forms, co-pays,
deductibles, and network providers, is largely absent.

In the UK, a thriving private health system that provides higher end ‘roast
grouse and soufflé’ services runs alongside the “bangers and mash” state system.
This means that wealthy people with access to greater resources can still seek
care above and beyond what is available through the state. But since the level
of base care is widely regarded as adequate, the two-tiered system does not
generate significant class resentment.

Furthermore, this system allows top specialists to continue serving in the
public system while supplementing their low state income with the higher fees
paid in their private practices. And while doctors in the UK generally make
less than their U.S. counterparts, they are also free of the crushing malpractice
insurance which tends to be a great equalizer.

I have lived for long periods of my life in the UK and the US, I have had
a good deal of exposure to the two health care systems. And while both offer
mixtures of public and private care, the UK’s is much closer to the type of
socialized medicine that has long been the goal of the American left. I have
always considered myself a conservative but the UK system seems preferable
to the monstrosity that has been created by Washington sausage making.

Of course any state system would involve rationing on some level. But if such
guidelines are developed democratically, public acceptance of such limits can
be achieved. By acquiescing to a move towards a single payer system, Republicans
would be in a strong position to ensure that cost containment would be a priority.
In that sense, conservatives could potentially strike at the root of the health
care problem: The inexorable rise in costs and the crushing burden that health
care currently places on the economy. Currently, the push for socialized medicine
has been the province of the Democrats, with the primary energy coming from
the extreme left figures such as Bernie Sanders and Elizabeth Warren. The worst
scenario for health care would be to allow such big spenders and class warriors
to set the agenda.

Given that many countries have succeeded in providing better overall health
care outcomes with universal coverage and at far less cost, it should not be
too much of a stretch for Congress to take the final step and accept an extension
of Medicare to all. Of course, taxes would have to increase to pay for it,
but citizens and businesses would no longer have to pay for insurance themselves.
If the cost of health care can be brought down, the net result is less money
for health care and more for everything else.

I have never been a fan of socialized anything. But in the modern world of
instantly diffused outrage and the increasing frustration with a health care
system that is clearly dysfunctional, Republicans should recognize the political
reality and seize the initiative. A soberly devised plan could vastly streamline
health care delivery, minimize waste, control costs, provide basic care for
all, and perhaps even deal a harsh blow to tort lawyers. Moderate Democrats
would jump on board in droves and President Trump and the Republican Congress
could emerge as winners.

Observers should not count President Trump as down. He has a reputation for
coming back. He may recognize a political winner when he sees it and look to
ditch the ideological baggage of his own party. Trump was not put into office
by card carrying conservatives but by middle class populists who would support
anything that makes their lives less anxious.

I believe that private enterprise always delivers higher quality and lower
prices than government. This is true for goods and services and it also would
be true for health care if the markets were allowed to function freely (which
they have not). But voters today do not perceive health care as a good or a
service, but as a right. Conservatives can argue this point, but they will
lose the emotional battle, which is where this fight will occur.


[1] – BERDINE, Gilbert.
Supply and Demand: Government Interference with the Unhampered Market in U.S.
Health Care. The Southwest Respiratory and Critical Care Chronicles, [S.l.],
v. 2, n. 7, p. 21-24, july 2014. ISSN 2325-9205. Available at: <http://pulmonarychronicles.com/index.php/pulmonarychronicles/article/view/143/353>.
Date accessed: 29 mar. 2017.

Read the original article at
Euro Pacific Capital


John Browne

John Browne, Senior Market Strategist
Euro Pacific Capital, Inc.

John Browne

John Browne is the Senior Economic Consultant for Euro Pacific
Capital, Inc. Mr. Brown is a distinguished former member of Britain’s Parliament
who served on the Treasury Select Committee, as Chairman of the Conservative
Small Business Committee, and as a close associate of then-Prime Minister Margaret
Thatcher. Among his many notable assignments, John served as a principal advisor
to Mrs. Thatcher’s government on issues related to the Soviet Union, and was
the first to convince Thatcher of the growing stature of then Agriculture Minister
Mikhail Gorbachev. As a partial result of Brown’s advocacy, Thatcher famously
pronounced that Gorbachev was a man the West “could do business with.” A graduate
of the Royal Military Academy Sandhurst, Britain’s version of West Point and
retired British army major, John served as a pilot, parachutist, and communications
specialist in the elite Grenadiers of the Royal Guard.

In addition to careers in British politics and the military,
John has a significant background, spanning some 37 years, in finance and business.
After graduating from the Harvard Business School, John joined the New York
firm of Morgan Stanley & Co as an investment banker. He has also worked
with such firms as Barclays Bank and Citigroup. During his career he has served
on the boards of numerous banks and international corporations, with a special
interest in venture capital. He is a frequent guest on CNBC’s Kudlow & Co.
and the former editor of NewsMax Media’s Financial Intelligence Report and
Moneynews.com. He holds FINRA series 7 & 63 licenses.

Copyright © 2008-2017 Euro Pacific
Capital, Inc.

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Published at Thu, 30 Mar 2017 09:16:16 +0000

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Investors yank $8.9 billion from U.S. stocks, most in 9 months

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Growing concern over handling of GOP bill
Growing concern over handling of GOP bill

  @mattmegan5

Doubts about the future of President Trump’s agenda have put Wall Street on the defensive.

Investors have yanked $8.9 billion from U.S. stock funds during the week that ended March 22, according to research firm EPFR Global. That’s the biggest retreat since last June.

Some of the hardest-hit stocks were the ones that soared after the election. Investors pulled money from banks, manufacturers and small-cap stocks, which have the most exposure to the fluctuations of the American economy.

At the same time, the Dow has backed away from all-time highs, losing 250 points this week. The index is on track for its worst weekly performance since the week before Trump’s victory.

Analysts point the finger at Republicans’ struggles to pass a bill repeal and replace Obamacare. Investors fear that a failure on health care could delay or even derail Trump’s promise of “massive” tax cuts — a pledge that has underpinned the rally on Wall Street.

“The Trump trade was always going to have a ‘where’s the beef’ moment,” Bank of America Merrill Lynch strategists wrote in a report to clients.

BofA said failure to pass the health care bill is “unlikely to cause a ‘TARP moment,'” referring to the 9% crash in the S&P 500 after Congress initially rejected the Wall Street bailout package in September 2008.da

Still, BofA said health care failure could cause a “credibility hit” that “temporarily” pushes stocks and Treasury yields lower.

EPFR said the exodus from U.S. stocks is a sign that investors have taken a “turn towards the defensive” as they question whether the Trump administration “has the necessary focus and political skills to get its economic agenda through Congress.”

For instance, investors yanked $1.1 billion from small-cap stocks last week, the most in six months, according to EPFR. Small-cap stocks are typically based in the United States, and investors had hoped Trump’s America First agenda and promise of 4% economic growth would juice profits. But the Russell 2000, which measures small-cap stocks, has started to struggle and lost 2% of its value this week.

Likewise, industrial stocks, a group expected to benefit from Trump’s focus on trade, suffered their biggest outflows since mid-January.

Banks were another big winner after the election amid hopes of higher interest rates, which allow banks to make more money, and less regulation. But investors withdrew $600 million from financial stocks in the last week.

So where are investors putting their money instead?

Emerging markets and bonds benefited from the U.S. uncertainty, with both enjoying significant inflows in the past week.

Gold, which tends to do well during times of investor fear, is also going back into style. Investors poured $1.1 billion into gold funds in the last week.

Looking ahead, the key for Wall Street will be whether it looks like Trump and Republican leaders can quickly pivot from health care to tax reform.

Treasury Secretary Steven Mnuchin on Friday promised that Trump’s new tax reform plan is coming “very soon.” He expressed confidence that tax reform will happen this year, if not by August as he originally predicted then definitely by the fall.

But tax reform won’t be an easy deal, either.

The Trump rally is “dependent upon the delivery of tax reform,” David Kotok, chairman and chief investment officer of Cumberland Advisors, wrote in a note to clients.

“The longer that process takes and the more questionable the outcome, the higher the risk to stock prices,” Kotok wrote.
Published at Fri, 24 Mar 2017 18:20:44 +0000

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If healthcare vote fails, would jeopardize ‘Trump trades’: Gundlach

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If healthcare vote fails, would jeopardize ‘Trump trades’: Gundlach

By Jennifer Ablan| NEW YORK

If the U.S. healthcare legislation overhaul is not passed, or is postponed, it will put “a lot of doubt” on the “Trump trades,” which include higher U.S. equities and bond yields, DoubleLine Capital Chief Executive Jeffrey Gundlach said on Wednesday.

“Surveys show that people believe the (Obamacare) repeal is the most likely part of Trump’s agenda to be passed,” Gundlach, who oversees more than $101 billion in assets at DoubleLine, told Reuters. “So if you can’t pass the repeal, everything else is in doubt for sure.”

Investors have been bracing for Thursday’s floor vote scheduled in the U.S. House of Representatives, with safe-haven securities including Treasuries and gold seeing price gains on Wednesday. Trump and Republican congressional leaders appeared on Wednesday to be losing the battle to get enough support to pass the Obamacare rollback bill.

Gundlach repeated his recommendation that investors would do better selling U.S. equities into any kind of stock rally and diversifying into emerging markets. He noted that the iShares MSCI Emerging Markets ETF (EEM.P) has outperformed the Standard & Poor’s Index by over 4 percentage points since early March.

Gundlach, who is known on Wall Street as the Bond King, said Tuesday’s stock-market slump illustrated how “investors are questioning whether the pro-growth U.S. policies are really going to happen.”

In early March, Gundlach said on his investor webcast that he expected a minor yield high on Treasuries, and then a rally. The benchmark 10-year U.S. Treasury note US10YT=RR currently trades around 2.40 percent, down from 2.60 percent in mid-March.

(Reporting by Jennifer Ablan; Editing by James Dalgleish
Published at Wed, 22 Mar 2017 20:33:44 +0000

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Donald Trump’s Real Net Worth: $3.5 billion

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Donald Trump’s Real Net Worth: $3.5 billion

By Aaron Hankin | Updated March 14, 2017 — 10:01 PM EDT

The net worth of President-elect Donald J. Trump was a popular story in last year’s presidential election. He has said on multiple occasions that his net worth is around $10 billion. But, if you take the average of the three best outside estimates, Donald Trump’s net worth is actually $3.5 billion.

What we did just learn from David Cay Johnston’s DCReport.org article on Trump’s 2005 Form 1040 is that, in that year, Trump and his new wife, Melanija Knavs, earned $153 million. They paid $36.6 million in federal taxes that year, a tax rate of 24%. In a statement, the White House confirmed that the document, which appeared in Johnston’s mailbox and was shared with the White House, is real.

This glimpse of the Trumps’ returns are a snapshot of one year. They do not reveal his entire net worth.

Here’s what we do know about that worth and how it breaks down:

In May, Trump released his Personal Financial Disclosure (PFD) forms with the Federal Election Commission (FEC). In true Trump fashion, he was quick to let everyone know. “I filed my PFD, which I am proud to say is the largest in the history of the FEC,” Trump said.

The PFD revealed Trump had:

  • At least $1.4 billion in assets, which includes 40 Wall St, the Trump Tower, golf course resorts in Florida, NY, NJ and Scotland and an aircraft, all which are valued at over $50 million.
  • Over $300 million in income from the golf courses and resorts.
  • Over $100 million in rental income and sales from his property.
  • At least $25 million in Blackrock’s Obsidian fund.
  • Liabilities, which include debt of $50 million or more on each of the following; the Trump Tower, 40 Wall Street, Trump National Doral, Trump International Hotel and Trump Old Post Office.

Forbes recently reduced its estimate of Donald Trump’s net worth to $3.7 billion, down from $4.5 billion earlier this year. Forbes said the softening of the high end retail and commercial property market in New York City is to blame for the $800 million reduction. In their reassessment, Forbes looked at 28 assets of which they said 18 had declined in value since the last estimate.

Fortune magazine say Trump is worth $3.9 billion, up from $3.7 billion in 2015. Fortune states the revenue he discloses in the PFD does not fit someone with a net worth of $10 billion. However, they believe the Presidential campaign is having a positive effect on his worth. “Rather than damaging his brand, Trump’s notoriety appears to be boosting his business, and making him even wealthier. By our best calculations, Trump’s net worth has indeed grown over the 10 months since the last filing,” Fortune said.

The Bloomberg Billionaires Index estimated Trump to be worth $3 billion, up from $2.9 billion in 2015. Bloomberg notes the toughest calculation is his brand. While Trump estimates his brand to be worth $3.3 billion, Bloomberg valued it at just $35 million.

Whether it’s $3 billion or $10 billion, as he claims, it’s safe to assume he is a billionaire, so the exact amount doesn’t really matter. However, Trump campaigned for the presidency on the size of his wealth. “I’m really rich. I’ll show you in a second. I’m not saying that in a bragging way,” Trump said when announcing his Presidential bid in 2015.

Any concrete estimates of his wealth would require a detailed look at his tax returns, which he continues to withhold. Two pages of his 2005 Form 1040 are just a quick look at one year.
Published at Wed, 15 Mar 2017 02:01:00 +0000

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CBO: 14M to Lose Healthcare by 2018 Under GOP Plan

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CBO: 14M to Lose Healthcare by 2018 Under GOP Plan

By David Floyd | Updated March 14, 2017 — 1:07 PM EDT

On Monday the Congressional Budget Office (CBO), the nonpartisan research arm of Congress, released an analysis of the Obamacare​ replacement proposed by Republican Speaker of the House Paul Ryan. According to the document, 14 million fewer Americans would have health insurance by 2018 under the plan, and that figure would rise to 24 million by 2026.

Health and Human Services secretary Tom Price told reporters following the analysis’ release, “we strenuously disagree” with the findings.

Altogether, 52 million people would lack health insurance in 2024, compared to a projection of 28 million under current law. Much of that increase would come as a result of the repeal of the individual mandate, which penalizes those who do not purchase health insurance. Many currently insured people, the CBO writes, “chose to be covered by insurance under current law only to avoid paying the penalties, and some people would forgo insurance in response to higher premiums.” (See also, Obamacare Costs Up for 2017.)

The CBO estimates that the Republican plan would reduce federal outlays by $1.2 trillion from 2017 to 2026 and receipts by $0.9 trillion over the same period. As a result, the deficit would fall by $337 billion. Most of the reduction would come from a reduction in Medicare spending and subsidies for non-group health insurance.

The CBO’s analysis forecasts a temporary rise in health premiums under the proposed replacement. Relative to projections under current law, premiums would be higher in 2018 and 2019, though they would be lower after 2020. Eliminating the individual mandate would lessen the incentives for healthy people to sign up for insurance, raising premiums by 15% to 20% relative to current law. By 2026, however, premiums would be around 10% lower than projections under current law.

The CBO does not foresee the bill destabilizing health insurance markets; it also states that markets would remain stable under current law. Critics of both Obamacare and its potential repeal have warned of a “death spiral,” in which healthy customers opt out of insurance markets, causing costs per head and thus premiums to rise, and driving more healthy people out of the market. (See also, Is the Affordable Care Act Failing?)

Republicans strongly opposed the passage of the Affordable Care Act – now known universally as Obamacare – in 2010, and President Donald Trump campaigned on a promise to repeal and replace the law, which he called a “disaster.” Ryan proposed the bill under consideration by the CBO on March 7, but its reception among Republicans was mixed. Trump endorsed the proposal the day it was unveiled, though he tweeted a promise that “phase 2 & 3” would allow insurance to be sold across state lines. He promised to introduce such a reform repeatedly during the campaign, but it does not appear in the House bill. “Don’t worry,” Trump wrote, adding that a plan to reduce drug prices was also forthcoming. (See also, The Beginning of the End of Obamacare.)

Other Republicans were even less enthusiastic. Representative Jim Jordan of Ohio called it “Obamacare in a different form,” summing up many hardliners’ dissatisfaction. Moderate Republicans such as Maine Senator Susan Collins worried that too many patients would lose coverage. A number of groups representing hospitals and physicians came out against the plan. (See also, 7 Industries Benfiting From Obamacare.)

The American Health Care Act, as the new bill is known, would eliminate the penalties associated with the individual mandate. As a substitute, it would add a 30% surcharge to premiums for patients who have gone without insurance for 63 days within the past year. Beginning in 2020, it would reduce the federal matching rate for adults made eligible for Medicare by Obamacare. It would limit spending on Medicare beneficiaries based on the medical consumer price index beginning in 2020. (See also, Why a Repeal of Obamacare Could Be a Boon for Wealthy Investors.)

It would eliminate Obamacare’s subsidies beginning in 2020 and replace them with tax credits. It would provide Medicare funding through block grants to states and allow insurers to charge older patients five times as much as younger ones, rather than the current ratio of three times. Beginning in 2020, it would eliminate the requirement that insurers cover at least 60% of the costs of covered benefits. (See also, 6 Things Obamacare Plans Won’t Cover.)

Perhaps anticipating the tenor of the analysis, White House press secretary Sean Spicer sowed doubt regarding the CBO’s competence on March 8, saying, “If you’re looking at the CBO for accuracy, you’re looking in the wrong place.” In 2010 the CBO significantly overestimated the number of people who would be insured under Obamacare in 2016, forecasting that 30 million fewer people would be uninsured than if the law had not been passed. In 2016, following a Supreme Court ruling and other developments, it revised that estimate down to 22 million.
Published at Mon, 13 Mar 2017 22:16:00 +0000

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White House jumps the gun with tweets on the jobs report

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The danger to economic data in the age of Trump
The danger to economic data in the age of Trump

At 8:30 a.m., the Labor Department reported that the U.S. economy added a healthy 235,000 jobs in February. Just 22 minutes later, Press Secretary Sean Spicer fired off a celebratory tweet.

“Great news for American workers: economy added 235,000 new jobs, unemployment rate drops to 4.7% in first report for @POTUS Trump,” Spicer posted from his official account.

Spicer’s boss beat him to it. Trump had already retweeted conservative website Drudge Report: “GREAT AGAIN: +235,000.” And White House Chief of Staff Reince Priebus followed with his own congratulatory tweet.

It turns out there’s a federal rule — which far predates Twitter — that says executive branch employees are not supposed to comment on major economic reports until an hour after they are released.

“Except for members of the staff of the agency issuing the principal economic indicator … employees of the Executive Branch shall not comment publicly on the data until at least one hour after the official release time,” a 1985 directive issued by the Office of Management and Budget reads.

The OMB, in issuing the rule, highlighted the need to “preserve the distinction between the policy-neutral release of data by statistical agencies and their interpretation by policy officials.”

Spicer defended the tweets at Friday’s White House press briefing, noting that the jobs figures were reported online and on television right away.

“I apologize if we were a little excited, and we were so glad to see so many fellow Americans back to work,” he said.

The rule, Spicer said, aims to stem market fluctuations. The White House’s tweets wouldn’t wind investors up.

“I don’t think that’s exactly a market disruption,” Spicer said.

Just another day on Twitter for an administration that uses social media as one of the primary ways it communicates with the public.

“We didn’t have anything like Twitter to worry about,” said Glenn Hubbard, head of the U.S. Council of Economic Advisers under President George W. Bush from 2001 to 2003.

Published at Fri, 10 Mar 2017 23:06:28 +0000

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Prosecutor fired by Trump leaves legacy as Wall Street crime-buster

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preet bharara fired 2
Preet Bharara was named as chief federal prosecutor in the Southern District of New York by President Obama in 2009. The office has a rich history policing banks.

On Friday, Bharara was one of 46 U.S. attorneys asked to resign by President Trump. That was a standard move for a new president. But Trump, during his transition, had asked Bharara to stay on. After Bharara refused to resign, he was fired by Trump on Saturday.

Bharara, 48 and born in Punjab, India, was appointed as U.S. attorney for the Southern District of New York by former President Obama. His parents immigrated to the United States in 1970, and Bharara got degrees from Harvard and Columbia University School of Law. He started work as Democratic Senator Charles Schumer’s chief counsel in 2006.

Then, during the depths of the financial crisis in 2009, Bharara got the coveted prosecutor’s job in New York. Because it oversees federal crime in Manhattan, the U.S. attorney’s office in the Southern District has a rich history prosecuting cases involving Wall Street and banks.

And Bharara prosecuted scores of financiers, some of whom are now behind bars.

One of his most high-profile cases was that of Raj Rajaratnam, a former hedge fund manager, who was sentenced to 11 years in prison and fined $93 million in 2011 on insider trading charges brought by Bharara.

The man who leaked information to Rajartnam, former Goldman Sachs board member Rajat Gupta, received a two-year prison sentence in 2012.

“He’s had a very, very significant impact,” said John Coffee, the director of the Center on Corporate Governance at Columbia Law School. “There were other [U.S. attorneys ] that prosecuted insider trading, but none as rigorously and systematically.”

Bharara’s most prized target was hedge-fund billionaire Steve Cohen. He never made a criminal case against Cohen but he went after several employees of Cohen’s SAC Capital, and the company was fined $1.8 billion in 2013.

More recently, Bharara prosecuted two executives from Valeant Pharmaceuticals who were arrested in November last year and charged with concocting a massive fraud scheme.

The Civil Frauds Unit that Bharara created landed nearly $500 million in settlements. That includes multi-million dollar deals with CitiMortgage and Deutsche Bank for engaging in the type of reckless lending practices that led to the financial crisis.

But Bharara was criticized by some who thought he didn’t do enough to push criminal charges against financial fraudsters. A column in the Guardian was headlined: “Why is Preet Bharara, the ‘scourge of Wall Street’, taking a friendly tone towards mortgage bankers?”

Bharara defended his office against those claims. He cited a lack of evidence as a reason for his restraint. At a National Press Club event in 2014, Bharara said the lack of criminal cases “has not been as a result of a lack of effort,” the Atlantic reported.

He’ll also leave behind a legacy of aggressively prosecuting political corruption. Bharara extensively investigated officials in Albany, the New York state capital, and secured “convictions against multiple elected officials and other corrupt public servants,” according to his office.

Bharara’s exploits taking on hedge funds inspired the Showtime series “Billions,” in which Paul Giamatti plays a cutthroat federal prosecutor.

Brian Koppelman, the co-creator of Billions, said on Twitter on Saturday that he’s not surprised by how Bharara’s departure played out.

 
Published at Sat, 11 Mar 2017 21:16:31 +0000

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Why a trade deficit isn’t like losing money

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NAFTA explained
NAFTA explained

Under President Trump’s description of a trade deficit, America is losing money to Mexico, China, Germany and Japan.

America had a trade deficit with all those countries in 2016. But that’s not the same as losing money.

A trade deficit means the U.S. bought more goods and services from each of those countries than they bought from America.

These normally mundane trade stats, which were released Tuesday, have come under fire from Trump. He frequently cites trade deficits as a reason to renegotiate or even withdraw from deals with other countries.

The big 4 trade deficits

The U.S. had a $61 billion trade deficit in goods and services with Mexico in 2016.

The U.S. trade deficit was significantly larger with China: $309 billion.

Trump lambasted China on the campaign trail. But his criticism of China over trade has not been as frequent as his criticism of Mexico since he arrived at the White House.

America’s trade deficit with Germany was $67 billion, and with Japan it was $56 billion last year.

Peter Navarro, director of the White House National Trade Council, criticized Japan and Germany for manipulating their currencies to make their exports cheaper and more competitive against the U.S. (Germany uses the euro, not its own currency, but its economy has a heavy influence on the euro).

However, Trump has had very little criticism about either nation’s trade ties to the United States.

 

Trade deficits – good or bad?

Navarro and Trump both like to say that a trade deficit is a negative factor when officials calculate U.S. economic growth. That’s true.

But the U.S. trade deficit has grown for decades, including during periods of strong economic growth. A report from Trump’s U.S. Trade Representative acknowledged that fact last week.

“Of course, a rising trade deficit may be consistent with a stronger economy,” the USTR noted last week.

For example, in the late 1990s, the U.S. economy grew at 4% annually, while the trade deficit got bigger. And during the Great Recession, between 2007 and 2009, the trade deficit got smaller.

How could the U.S. grow if the trade deficit got bigger?

Because America is a consumer economy. About 66% of U.S. economic activity consists of consumer spending. Cheaper products from Mexico, China and elsewhere make it easier for Americans to spend. And all that spending is the main engine of growth behind the U.S. economy.

Published at Tue, 07 Mar 2017 18:52:38 +0000

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Trump adviser is betting against the Trump stock rally

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Trump speech sends Dow above 21,000
Trump speech sends Dow above 21,000

Carl Icahn is such a fan of President Trump that on election night he literally left the victory party early to buy stocks that were crashing in the overnight markets.

Icahn was one of Trump’s earliest backers on Wall Street and the billionaire investor even agreed to serve as the president’s special adviser on regulatory reform.

Despite all that Trump enthusiasm, Icahn’s hedge fund seems to be positioning for the end of the Trump party.

Icahn Enterprises(IEP), which Icahn controls and serves as chairman of, quietly disclosed last week that it had a net short position in its investment portfolio of 128% as of the end of last year. That’s a fivefold increase from the end of 2015.

The net short position means Icahn’s firm is betting against 1.3 shares for every one share it’s betting on. In other words, Icahn’s investment portfolio will generally gain value when prices decline, and vice versa.

“I am concerned at this point that the market has run ahead of itself,” Icahn told CNNMoney in a phone interview on Tuesday.

Icahn said one “worrisome thing is that so much money has run into ETFs.” Icahn voiced concern that the flood of retail money into passive investments like ETFs will create a stampede when markets turn south.

However, Icahn explained that his firm isn’t as negative as suggested by the net short figure, which only covers its investment segment and not its various other holdings.

He noted that Icahn Enterprises has a lot of control positions that are not counted in the investment segment. For instance, Icahn Enterprises owns Pep Boys and manufacturer Federal-Mogul.

But Icahn Enterprises’ top executives sounded very cautious during last week’s conference call.

“We continue to have a fairly bearish view,” Icahn Enterprises CEO Keith Cozza said during the call.

“The market does seem to be priced for perfection,” he said.

Besides the short position, Icahn’s firm is also taking some defensive maneuvers. In December, it sold American Railcar Leasing for up to $3.4 billion and last week it unloaded the shuttered Trump Taj Mahal casino in Atlantic City to the company behind the Hard Rock Café for an undisclosed sum.

The investment company also refinanced $1.2 billion of debt and raised $600 million in cash through a stock offering. The firm’s balance sheet has slashed its total debt to the lowest level in nearly three years.

“It’s not the greatest time for large, long investments,” Icahn’s CEO said during the call.

Icahn executives voiced concern about “very high market multiples.”

The S&P 500 is trading at 17.9 times forward earnings, the highest P/E ratio since 2004, according to FactSet.

Valuation levels have climbed to high levels because the big Trump rally — the S&P 500 is up 11% since November 8 — has been fueled by expectations of tax cuts and other stimulus, not fundamental improvement in corporate profits.

Icahn Enterprises declined to explain which specific industries the firm is betting against. However, Cozza seemed worried about Trump’s trade plans, saying that “certain industries” are “especially susceptible to potential border adjusted tax plans.”

House Republicans have proposed a border adjustment tax that aims to encourage more companies to make things in the U.S. by imposing a tax on imported goods. Retailers are strongly opposed to a BAT because it could make the imported goods they sell a lot more expensive.

Icahn’s cautious positioning stands in contrast to his opportunistic stance back in early November. As global markets panicked over Trump’s victory, Icahn literally left the victory party in Manhattan early to buy “a lot of stock” in overnight markets.

“I’m sad I didn’t buy a lot more,” Icahn told CNN’s Poppy Harlow in early December.

But Icahn also signaled uneasiness over the rally in that interview, which was conducted as the Dow was fast approaching the 20,000 milestone. The billionaire said the rally had “gone too far.”

Of course, the markets have only gotten higher since then. Last week, the Dow zoomed past the 21,000 level following Trump’s well-received speech to Congress. CNNMoney’s Fear and Greed Index is flashing “greed” and last week it even tipped over into “extreme greed” mode.

This is hardly the first time Icahn has gone negative on the market. He emerged as a vocal bear in 2015, warning of a “catastrophe” in a September 2015 video dubbed “Danger Ahead.”

Icahn’s firm was 149% net short as of last June amid worries about a bubble in risky junk bonds.

But the numbers put out last week show that Icahn’s firm remains very cautious despite Trump’s victory.

Published at Tue, 07 Mar 2017 17:14:49 +0000

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Arizona Challenges the Fed’s Money Monopoly

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A police officer keeps watch in front of the U.S. Federal Reserve building in Washington, DC, U.S. on October 12, 2016. REUTERS/Kevin Lamarque/File Photo

Arizona Challenges the Fed’s Money Monopoly

By: Ron Paul | Sun, Mar 5, 2017


History shows that, if individuals have the freedom to choose what to use
as money, they will likely opt for gold or silver.

Of course, modern politicians and their Keynesian enablers despise the gold
or silver standard. This is because linking a currency to a precious metal
limits the ability of central banks to finance the growth of the welfare-warfare
state via the inflation tax. This forces politicians to finance big government
much more with direct means of taxation.

Despite the hostility toward gold from modern politicians, gold played a role
in US monetary policy for sixty years after the creation of the Federal Reserve.
Then, in 1971, as concerns over the US government’s increasing deficits led
many foreign governments to convert their holdings of US dollars to gold, President
Nixon closed the gold window, creating America’s first purely fiat currency.

America’s 46-year experiment in fiat currency has gone exactly as followers
of the Austrian school predicted: a continuing decline in the dollar’s purchasing
power accompanied by a decline in the standard of living of middle- and working-class
Americans, a series of Federal Reserve-created booms followed by increasingly
severe busts, and an explosive growth in government spending. Federal Reserve
policies are also behind much of the increase in income inequality.

Since the 2008 Fed-created economic meltdown, more Americans have become aware
of the Federal Reserve’s responsibility for America’s economic problems. This
growing anti-Fed sentiment is one of the key factors behind the liberty movement’s
growth and represents the most serious challenge to the Fed’s legitimacy in
its history. This movement has made “Audit the Fed” into a major national issue
that is now closer than ever to being signed into law.

Audit the Fed is not the only focus of the growing anti-Fed movement. For
example, this Wednesday the Arizona Senate Finance and Rules Committees will
consider legislation (HB 2014) officially defining gold, silver, and other
precious metals as legal tender. The bill also exempts transactions in precious
metals from state capital gains taxes, thus ensuring that people are not punished
by the taxman for rejecting Federal Reserve notes in favor of gold or silver.
Since inflation increases the value of precious metals, these taxes give the
government one more way to profit from the Federal Reserve’s currency debasement.

HB 2014 is a very important and timely piece of legislation. The Federal Reserve’s
failure to reignite the economy with record-low interest rates since the last
crash is a sign that we may soon see the dollar’s collapse. It is therefore
imperative that the law protect people’s right to use alternatives to what
may soon be virtually worthless Federal Reserve notes.

Passage of HB 2014 would also send a message to Congress and the Trump administration
that the anti-Fed movement is growing in influence. Thus, passage of this bill
will not just strengthen movements in other states to pass similar legislation;
it will also help build support for the Audit the Fed bill and legislation
repealing federal legal tender laws.

This Wednesday I will be in Arizona to help rally support for HB 2014, speaking
on behalf of the bill before the Arizona Senate Finance Committee at 9:00 a.m.
I will also be speaking at a rally at noon at the Arizona state capitol. I
hope every supporter of sound money in the Phoenix area joins me to show their
support for ending the Fed’s money monopoly.


Buy Ron Paul’s latest book, Swords into Plowshares, here.


Ron Paul

Dr. Ron Paul
The Foundation for Rational Economics & Education

Ron Paul

Congressman Ron Paul of Texas enjoys a national reputation as the premier
advocate for liberty in politics today. Dr. Paul is the leading spokesman
in Washington for limited constitutional government, low taxes, free markets,
and a return to sound monetary policies based on commodity-backed currency.
He is known among both his colleagues in Congress and his constituents for
his consistent voting record in the House of Representatives: Dr. Paul never
votes for legislation unless the proposed measure is expressly authorized
by the Constitution. In the words of former Treasury Secretary William Simon,
Dr. Paul is the “one exception to the Gang of 535” on Capitol Hill.

Copyright © 2006-2017 Dr. Ron Paul

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Published at Sun, 05 Mar 2017 15:11:10 +0000

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What Wall Street wants to hear from Trump

What Wall Street wants to hear from Trump

  @mattmegan5

 President Trump’s pro-business promises have helped lift the Dow an incredible 2,500 points since the election.

Now Wall Street wants him to deliver.

Investors will be watching very closely when Trump addresses Congress on Tuesday night. They crave details about the timing and specifics of Trump’s plans to slash taxes, rip up regulations and unleash infrastructure spending.

On the other hand, signs that the Trump platform is being delayed or scaled back could leave Wall Street bummed.

The stock market has made the stakes clear: The Dow has closed at a record high 12 days in a row and is going for a 13th on Tuesday, a feat that has never happened before.

“Expectations are phenomenally high,” Peter Boockvar, chief market analyst at The Lindsey Group, wrote in a note to investors.

Here’s a guide to what investors want to hear from Trump.

Taxes, taxes, taxes, taxes…

A CNNMoney survey of economists on Monday found that what they want most is details on Trump’s tax plan: When will it happen? How big will it be?

Hopes for big tax cuts have been at the heart of the post-election rally. Wall Street is betting that enormous tax savings will translate to juicier profits.

“Unfortunately I’m going to have to torture myself and watch Tuesday night in search of some comments on tax reform,” Boockvar said, adding that he normally skips these types of speeches.

Border adjustment tax?

A big key will be whether Trump throws his weight behind an idea from House Republicans called the border adjustment tax as a way to bring jobs back to the United States.

The complex proposal would give tax breaks to American companies that ship products to other countries and strip tax breaks from American companies that import goods.

“What I hope to hear from Trump is some well-reasoned policy proposals, and not just more … babble about ‘winning’ or making ‘better deals,'” said Bernard Baumohl, chief global economist at The Economic Outlook Group.

dow trump rally election

 

Obamacare timing

The overhaul of the health care system is extremely important to many Americans, but investors are paying particular attention because of its implications for the rest of the Trump agenda.

Trump has said repealing and replacing the Affordable Care Act must come before taxes.

“This is a giant obstacle blocking the path to the rest of the president’s agenda,” Jaret Seiberg, analyst at Cowen & Co., wrote in a research report.

Fair trade, not trade wars

Economists and market strategists surveyed by CNNMoney say their biggest fear is that Trump will erect barriers to trade.

The new president has already withdrawn the United States from the Trans-Pacific Partnership and started renegotiating the NAFTA trade deal with Mexico and Canada. Economists’ concern is that Trumps will impose high tariffs that slow the economy and provoke a tit-for-tat response from trading partners.

“Wall Street is not opposed to reviewing trade deals, but Wall Street doesn’t want to see that turn into a trade war,” said David Joy, chief market strategist at Ameriprise Financial.

What happened to infrastructure spending?

Since he took office, Trump hasn’t focused much on his promise to spend $1 trillion on infrastructure. Investors hope Trump will follow through by releasing a plan to build or rebuild roads, bridges and airports. Infrastructure stocks like U.S. Steel(X) and U.S. Concrete(USCR) have soared since the election.

Will Trump give clues about the timing and structure of an infrastructure plan and how it can be paid for without blowing up the U.S. deficit?

Ripping up bank regulation

Big bank stocks like Goldman Sachs(GS) have skyrocketed, partly because of Trump’s promise to “do a big number” on the Wall Street reforms known as Dodd-Frank. But few specifics are known here, either.

Seiberg, the Cowen analyst, said one risk is that Trump will repeat a call for a 21st century version of the Glass-Steagall Act, which would force a separation between commercial banking and trading. That could be a signal that Trump wants to break up big banks.

Investors would probably react better if Trump said his focus is on allowing banks to lend more — even though they are already lending a ton.

What Wall Street doesn’t want to hear

Markets took a brief tumble in late January as investors grew concerned that controversy over Trump’s immigration order could derail the rest of his agenda.

Look for a similar reaction if Trump’s speech veers off course.

“If he focuses on the evil press or some other nonsense, markets may get impatient,” Michael Block, chief market strategist at Rhino Trading, wrote in a research note.

–CNNMoney’s Heather Long contributed to this report.
Published at Tue, 28 Feb 2017 18:44:48 +0000

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Trump seeks ‘historic’ U.S. military spending boost, domestic cuts

Trump seeks ‘historic’ U.S. military spending boost, domestic cuts

By Steve Holland | WASHINGTON

President Donald Trump is seeking what he called a “historic” increase in defense spending, but ran into immediate opposition from Republicans in Congress who must approve his plan and said it was not enough to meet the military’s needs.

The proposed rise in the Pentagon budget to $603 billion comes as the United States has wound down major wars in Iraq and Afghanistan and remains the world’s strongest military power.

The plan came under fire from Democratic lawmakers, who said cuts being proposed to pay for the additional military spending would cripple important domestic programs such as environmental protection and education.

A White House budget official, who outlined the plan on a conference call with reporters, said the administration would propose “increasing defense by $54 billion or 10 percent.” That represents the magnitude of the increase over budget caps Congress put in place in 2011.

But Mick Mulvaney, the White House budget director, said the plan would bring the Pentagon’s budget to $603 billion in total, just 3 percent more than the $584 billion the agency spent in the most recent fiscal year, which ended on Sept. 30, 2016.

The rise would be slightly higher than the country’s current 2.5 percent rate of inflation.

“President Trump intends to submit a defense budget that is a mere 3 percent above President (Barack) Obama’s defense budget, which has left our military underfunded, undersized, and unready to confront threats to our national security,” John McCain, the Republican chairman of the Senate Armed Services Committee, said in a statement.

The defense boost would be balanced by slashing the same amount from non-defense spending, including a large reduction in foreign aid, the White House budget official said.

Trump does not have the final say on federal spending. His plan for the military is part of a budget proposal to Congress, which, although it is controlled by his fellow Republicans, will not necessarily follow his plans. Budget negotiations with lawmakers can take months.

McCain told reporters he would not vote for a budget with the slight military increase and thought it would face opposition in the Senate.

Trump told state governors at the White House his budget plan included a “historic increase in defense spending to rebuild the depleted military of the United States of America.”

He said his proposal was a “landmark event” and would send a message of “American strength, security and resolve” to other countries.

BIG CUTS TO STATE DEPARTMENT

Officials familiar with Trump’s budget blueprint said the plan would call for cuts to agencies including the State Department and the Environmental Protection Agency.

One official familiar with discussions over State’s budget said the agency could see spending cut by as much as 30 percent, which would force a major department restructuring and elimination of programs.

The United States spends about $50 billion annually on the State Department and foreign assistance.

More than 120 retired U.S. generals and admirals urged Congress on Monday to fully fund U.S. diplomacy and foreign aid, saying such programs “are critical to keeping America safe.”

Trump has vowed to spare middle-class social programs such as Social Security and Medicare from any cuts.

Nancy Pelosi, the top Democrat in the House of Representatives, said Trump’s plan to slash funding for federal agencies to free up money for the Pentagon showed he was not putting American working families first.

“A $54 billion cut will do far-reaching and long-lasting damage to our ability to meet the needs of the American people and win the jobs of the future,” Pelosi said. “The president is surrendering America’s leadership in innovation, education, science and clean energy.”

SHORING UP ‘CHOKE POINTS’

An official familiar with the proposal said Trump’s request for the Pentagon included more money for shipbuilding, military aircraft and establishing “a more robust presence in key international waterways and choke points” such as the Strait of Hormuz and South China Sea.

That could put Washington at odds with Iran and China. The United States already has the world’s most powerful fighting force and it spends far more than any other country on defense.

About one-sixth of the federal budget goes to military spending.

Trump has said previously he would expand the Army to 540,000 active-duty troops from its current 480,000, increase the Marine Corps to 36 battalions from 23 – or as many as 10,000 more Marines – boost the Navy to 350 ships and submarines from 276, and raise the number of Air Force tactical aircraft to 1,200 from 1,100.

He has not said where he would place the extra hardware and forces or made clear what they would be used for. The United States has been shutting some of its military bases in recent years.

Trump has also said he would bolster the development of missile defenses and cyber capabilities. Last week, he told Reuters the United States had “fallen behind on nuclear weapon capacity.” He pledged to ensure that “we’re going to be at the top of the pack.”

(Additional reporting by Tim Ahmann, Doina Chiacu, Andy Sullivan, Idrees Ali, David Alexander, and Patricia Zengerle; Writing by Alistair Bell and Lisa Lambert; Editing by Nick Tattersall and Peter Cooney)

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Trump budget plan boosts Pentagon, trims State Dept, EPA: officials

U.S. President Donald Trump makes a toast during the Governor’s Dinner in the State Dinning Room at the White House in Washington, U.S., February 26, 2017. REUTERS/Joshua Roberts

Trump budget plan boosts Pentagon, trims State Dept, EPA: officials

The White House will send federal departments a budget proposal on Monday containing the defense spending increase President Donald Trump promised, financed partly by cuts to the U.S. State Department, Environmental Protection Agency and other non-defense programs, two officials familiar with the proposal said.

One of the officials said Trump’s request for the Pentagon included more money for shipbuilding, military aircraft and establishing “a more robust presence in key international waterways and chokepoints” such as the Strait of Hormuz and South China Sea.

A second official said the State Department’s budget could be cut by as much as 30 percent, which would force a major restructuring of the department and elimination of programs.

The officials requested anonymity because the draft budget had not been made public yet.

Trump, in a speech to conservative activists on Friday, promised “one of the greatest military buildups in American history.”

Some defense experts have questioned the need for a large increase in U.S. military spending, which already stands at roughly $600 billion annually. By contrast, the United States spends about $50 billion annually on the State Department and foreign assistance.

The amounts that Trump is proposing to add to the Pentagon budget and trim elsewhere are not yet publicly known.

John Czwartacki, a spokesman for the White House’s Office of Management and Budget, said the budget blueprint would be released in mid-March.

“It would be premature for us to comment – or anyone to report – on the specifics of this internal discussion before its publication,” he said in a statement.

The budget plans that the White House is expected to send to departments and agencies on Monday are just one stage in a lengthy process.

The agencies can argue for more funding, and final spending plans must be approved by the U.S. Congress.

Trump’s budget assumes annual economic growth of 2.4 percent, the second official said. While campaigning for the presidency last year, Trump called for a “national goal” of 4 percent economic growth.

Treasury Secretary Steven Mnuchin, speaking on Fox News earlier on Sunday, said Trump’s budget would not seek cuts in federal social programs such as Social Security and Medicare.

(Reporting by Washington Newsroom; Additional reporting by Roberta Rampton.; Writing by Warren Strobel; Editing by Peter Cooney and Paul Tait)

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Trump wants to make sure U.S. nuclear arsenal at ‘top of the pack’

Trump wants to make sure U.S. nuclear arsenal at ‘top of the pack’

By Steve Holland | WASHINGTON

President Donald Trump said on Thursday he wants to ensure the U.S. nuclear arsenal is at the “top of the pack,” saying the United States has fallen behind in its weapons capacity.

In a Reuters interview, Trump also said China could solve the national security challenge posed by North Korea “very easily if they want to,” ratcheting up pressure on Beijing to exert more influence to rein in Pyongyang’s increasingly bellicose actions.

Trump also expressed support for the European Union as a governing body, saying “I’m totally in favor of it,” and for the first time as president expressed a preference for a two-state solution to the Israeli-Palestinian conflict, but said he would be satisfied with whatever makes the two sides happy.

Trump also predicted his efforts to pressure NATO allies to pay more for their own defense and ease the burden on the U.S. budget would reap dividends. “They owe a lot of money,” he said.

In his first comments about the U.S. nuclear arsenal since taking office on Jan. 20, Trump was asked about a December tweet in which he said the United States must greatly strengthen and expand its nuclear capacity “until such time as the world comes to its senses regarding nukes.”

Trump said in the interview he would like to see a world with no nuclear weapons but expressed concern that the United States has “fallen behind on nuclear weapon capacity.”

“I am the first one that would like to see … nobody have nukes, but we’re never going to fall behind any country even if it’s a friendly country, we’re never going to fall behind on nuclear power.

“It would be wonderful, a dream would be that no country would have nukes, but if countries are going to have nukes, we’re going to be at the top of the pack,” Trump said.

Russia has 7,000 warheads and the United States, 6,800, according to the Ploughshares Fund, an anti-nuclear group.

“Russia and the United States have far more weapons than is necessary to deter nuclear attack by the other or by another nuclear-armed country,” said Daryl Kimball, executive director of the independent Arms Control Association non-profit group.

The new strategic arms limitation treaty, known as New START, between the United States and Russia requires that by February 5, 2018, both countries must limit their arsenals of strategic nuclear weapons to equal levels for 10 years.

The treaty permits both countries to have no more than 800 deployed and non-deployed land-based intercontinental and submarine-launched ballistic missile launchers and heavy bombers equipped to carry nuclear weapons, and contains equal limits on other nuclear weapons.

Analysts have questioned whether Trump wants to abrogate New START or would begin deploying other warheads.

In the interview, Trump called New START “a one-sided deal.”

“Just another bad deal that the country made, whether it’s START, whether it’s the Iran deal … We’re going to start making good deals,” he said.

“WE’RE VERY ANGRY”

The United States is in the midst of a $1 trillion, 30-year modernization of its aging ballistic missile submarines, bombers and land-based missiles.

Trump also complained that the Russian deployment of a ground-based cruise missile is in violation of a 1987 treaty that bans land-based American and Russian intermediate-range missiles.

“To me it’s a big deal,” said Trump, who has held out the possibility of warmer U.S. relations with Russia.

Asked if he would raise the issue with Putin, Trump said he would do so “if and when we meet.” He said he had no meetings scheduled as of yet with Putin.

Speaking from behind his desk in the Oval Office, Trump expressed concern about North Korea’s ballistic missile tests and said accelerating a missile defense system for U.S. allies Japan and South Korea was among many options available.

“There’s talks of a lot more than that,” Trump said, when asked about the missile defense system. “We’ll see what happens. But it’s a very dangerous situation, and China can end it very quickly in my opinion.”

China has made clear that it opposes North Korea’s nuclear and missile programs and has repeatedly called for denuclearization of the Korean peninsula and a return to negotiations between Pyongyang and world powers.

But efforts to change Pyongyang’s behavior through sanctions have historically failed, largely because of China’s fear that severe measures could trigger a collapse of the North Korean state and send refugees streaming across their border.

Trump’s meeting with Japanese Prime Minister Shinzo Abe earlier this month in Florida was interrupted by a ballistic missile launch by North Korea.

Trump did not completely rule out possibly meeting North Korean leader Kim Jong Un at some point in the future under certain circumstances but suggested it might be too late.

“It’s very late. We’re very angry at what he’s done, and frankly this should have been taken care of during the Obama administration,” he said.

According to Japanese news reports, the Japanese government plans to start debate over the deployment of a U.S. missile defense system known as the Terminal High Altitude Area Defense, or THAAD, and the land-based Aegis Ashore missile defense system to improve its capability to counter North Korean ballistic missiles.

The strength of Trump’s remarks in favor of the EU took some Brussels officials by surprise after his support for Britain’s vote last summer to exit from the EU.

“I’m totally in favor of it,” Trump said of the EU. “I think it’s wonderful. If they’re happy, I’m in favor of it.”

Statements by him and others in his administration have suggested to Europeans that he sees little value in the Union as such, which Trump last month called a “vehicle for Germany.”

(Additional reporting by Jeff Mason, Roberta Rampton, Emily Stephenson, John Walcott, Matt Spetalnick, Arshad Mohammed and David Brunnstrom in Washington and Alastair Macdonald in Brussels; editing by Ross Colvin)

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There’s one thing going right for Trump

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President Trump lashes out at media in press conference
President Trump lashes out at media in press conference

  @byHeatherLong

President Trump is probably saying: “TGIF.”

Headlines claim the White House is in “chaos” after an extremely turbulent week. But there’s one big thing going right for Trump right now: The U.S. economy.

A slew of economic data came out this week. Almost all of it was positive. Americans are still going to stores and spending big (retail sales came in better than expected for January). They’re also buying houses. And cars. And using their credit cards.

On top of that, small and medium-sized business owners are giddy. The NFIB Small Business Optimism Index is at its highest level since 2004.

Heck, even manufacturing has made a pretty big turnaround and looks almost healthy again. The Philly Fed Index, a survey on how well manufacturers are doing, just hit its highest level since 1984. And anyone with money in the market likely noticed the U.S. stock market set even more records this week. In fact, American stocks are on their best winning streak in 25 years.

There’s still a belief on Wall Street — and many parts of Main Street that CNNMoney has recently visited — that Trump is going to get the economy surging again. Yes, there are some red flags — household debt is back at 2008 levels and prices are rising. But overall, things look good.

“The economy is better than you think,” says Chris Rupkey, chief financial economist at MUFG Union Bank in New York. “President Trump inherited the best economy since President Bush, so let’s hope things continue to run smoothly.”

The bullish scenario: Trump gets back on track

But the reason consumers and CEOs are so excited is because they expect Trump to get going on his “pro-growth agenda.” Business leaders — big and small — want tax cuts, not lengthy press conferences hammering the press and his former rival Hillary Clinton.

As a Trump supporter in Kentucky told CNNMoney recently, “He already won the election. Just shut up about the votes.”

Business CEOs have been clear: They want lower taxes, infrastructure spending and some regulations scaled back (or just not as strictly enforced).

Trump voters have also been clear: They want jobs, jobs, jobs that pay more than minimum wage.

The question is whether Trump can get back on track to focus on these issues with Congress. If he does that, a lot of the “chaos” of his first weeks in office will likely fade.

“The bullish scenario is that Trump comes to realize quickly that he must use most of his political capital to fast-track tax cuts, tax reform, repatriated earnings, and deregulation,” wrote economist Ed Yardeni of Yardeni Research in a note this week.

Yardeni went on to say, “If that path lifts economic growth, as it should, the strength of the economy should boost Trump’s political capital and strength — both at home and abroad.”

Even one of Trump’s biggest critics — billionaire mogul Mark Cuban — tweeted some praise Friday of the president’s economic plans: “Trump is trying to do some things right. Taxes, lobbyists, bureaucracy, FCC, SEC. If he can get the changes passed, they are positives.”

Trump’s ‘Game of Thrones’ could hurt economy

But the biggest threat to this bullish scenario unfolding is probably Trump himself. He has turned Washington into a “Game of Thrones” right now, argues Yardeni.

One Republican lawmaker put it even more bluntly to CNN Thursday after listening to Trump’s wild 75-minute press conference: “We’re just trying to manage this s***.”

The more time Trump spends fighting with the media or having to stabilize his cabinet, especially the role of National Security Adviser, the less time he is spending on the economy.

At some point, stocks will do a big U-turn if Wall Street doesn’t think Trump and Congress will come through on his economic agenda. Optimism can also reverse quickly, stalling spending and growth.

If the president fails to deliver a better economy, it may be the biggest let down of all to many of his supporters.
Published at Fri, 17 Feb 2017 17:47:10 +0000

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States’ rights? Not so much, when it comes to retirement savings

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By Mark Miller| CHICAGO

So much for states’ rights.

The Republican-controlled Congress took aim this week at states that are creating retirement saving programs for workers who do not already have 401(k)s through their jobs. Seven states – including populous California, Illinois and Maryland – are implementing government-sponsored auto-IRA plans, and another 30 are considering their own, according to AARP, which has been supporting and tracking the initiatives.

Saving for retirement should not be all that controversial, but state plan opponents in the business community object to an expansive government role and the mandatory features of some of the state plans.

The House of Representatives approved a resolution on Wednesday that would invalidate an important rule handed down last year by the U.S. Department of Labor (DoL) in support of the state plans. The measure now goes to the Senate. The rule exempts state plans from the Employee Retirement Income Security Act of 1974 (ERISA) if they meet certain conditions. That provides important reassurance to employers participating in the plan, who worry about compliance cost and legal liability under ERISA.

The House resolution is an especially aggressive reach into the business of states – and one rich in irony, considering Republicans’ frequent worship at the altar of states’ rights. But the auto-IRA programs have powerful opponents in the financial services industry who do not want to see a lower-cost government-sponsored “public option” to the retirement products they sell.

“This is a payoff to the financial services industry,” said Joshua Gotbaum, a guest scholar at the Brookings Institution who is serving as chairman of the Maryland auto-IRA program.

“They are afraid of competition that would come from a huge program like this that forces them to cut their own fees,” said Gotbaum, who is a former director of the Pension Benefit Guaranty Corporation, the federally sponsored agency that insures private sector pensions.

The resolution adds the auto-IRA to an anti-consumer hit list that already includes the DoL fiduciary rule governing advice to retirement savers. (reut.rs/2lP6l1v).

Repeal would not stop the states that have already enacted programs, Gotbaum said. But it will create uncertainty. “It might mean that states will need to get opinions from lawyers or the courts on whether the plans are subject to ERISA or not.” And repeal could well slow down the momentum among states still considering the idea.

The state initiatives started after the Obama administration’s proposal for a national auto-IRA program was shot down by the Republican Congress.

And support for the idea across the country has been strong. Just last week, a telephone poll of 800 Americans by the National Institute on Retirement Security found a 75 percent public approval rating for state plans.

 

LESS GOVERNMENT?

Opponents’ objections – summarized in a letter to lawmakers this week from a business coalition led by the U.S. Chamber of Commerce – include opposition to the mandatory participation feature of some state plans, although the mandate is to simply require employers to enable payroll deductions (but not contributions) for uncovered workers. They also worry about the administrative burden of managing plans with differing standards in multiple states.

The Chamber letter also argues that states cannot be trusted to run these programs in light of underfunding of public-worker pension funds in some states. That argument does not hold water, since pooled pension plans funded by taxes and worker contributions bear no resemblance whatever to the auto-IRA plans, which envision individual accounts held by a third party custodian.

So this really is an ideological attack on the idea that government should take steps to help people save more money. “Our nation faces difficult retirement challenges, but more government isn’t the solution,” said U.S. Representative Tim Walberg, a Michigan Republican who co-sponsored the House resolution.

Never mind that the private sector has failed to deliver on coverage: 401(k)s have existed since the 1980s, yet only half of U.S. private-sector workers participate in a retirement plan at any given time, according to the Center for Retirement Research at Boston College.

Republicans are coalescing around a different approach to expanded retirement plan coverage. The Retirement Enhancement and Savings Act (RESA), approved by the Senate Finance Committee last year, aims to expand saving through enhanced tax credits for small employers who start workplace plans. The bill also would make it easier for businesses to create shared retirement plans – sometimes called Multiple-Employer Plans (MEPs) – as a way to cut costs and administrative burden.

MEPs have enjoyed bipartisan support, but they would be voluntary. Few experts think they would have as much impact on coverage levels as the mandatory state IRA plans. “There is a lot of skepticism that if these plans don’t have a required participation feature of some sort, it won’t be enough to shift the tide,” said Shai Akabas, director of fiscal policy at the Bipartisan Policy Center. “There needs to be more of a gentle nudge in that direction.”

AARP, which has been a major lobbying force in favor of state plans, agrees that these plans may not be the perfect solution – and it does not object to the Republican MEP initiative. But it holds that some action is better than none.

“We do have a preference for things like auto-enrollment and payroll deduction, because behavioral economics tell us that these things work,” said Cristina Martin Firvida, AARP’s director of financial security. “But letting the perfect be the enemy of the good doesn’t expand coverage for anyone. We don’t want to keep waiting for the perfect solution to come along.”

 

(Editing by Matthew Lewis)
Published at Thu, 16 Feb 2017 12:10:00 +0000

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Goldman Sachs rises to 1st record since crisis

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Trump fills top spots with Goldman Sachs employees
Trump fills top spots with Goldman Sachs employees

Goldman Sachs rises to 1st record since crisis

  @mattmegan5

Goldman Sachs has finally recovered from the 2008 financial crisis. Ironically, the main catalyst is President Trump’s promises to undo safeguards put in place to prevent another meltdown.

Goldman Sachs stock closed on Tuesday at a new all-time high, taking out the prior record that was set in October 2007.

Virtually all bank stocks have been on fire since Trump’s victory in anticipating of lighter regulation, higher interest rates and faster growth. But Goldman Sachs(GS) has been particularly hot, surging an incredible 37% since the election. That’s quadruple the S&P 500’s post-election advance.

Clearly, Goldman Sachs has already emerged as a big winner of Trump’s pledge to “do a big number” on Dodd-Frank, the 2010 Wall Street reform law.

“If you really think deregulation is coming and banks are going to be cut loose, who’s going to win? It’s going to be them. We’ve seen that time and again,” said Michael Block, chief market strategist at Rhino Trading.

Goldman’s market value surged by $4 billion on the day that Trump signed an executive order beginning the process of rolling back Dodd-Frank.

goldman sachs stock record high

The irony is that Trump slammed Wall Street and Goldman Sachs during the campaign. He even used an image of Goldman Sachs CEO Lloyd Blankfein during his closing campaign ad while condemning the “global power structure.”

But Trump has gone from criticizing Wall Street and Goldman Sachs to hiring Goldman veterans to help him govern. Trump’s two biggest economic hires are Treasury Secretary Steven Mnuchin, a former Goldman Sachs partner, and top economic adviser Gary Cohn, who stepped down in December as chief operating officer of Goldman Sachs.

Analysts say those hires may actually be helping Goldman stock.

“With so many Goldman Sachs alums in the administration, maybe some think that policies will skew in the bank’s favor,” said Michael Wong, a Morningstar analyst who covers Goldman Sachs.

Wong cautioned that he doesn’t think “anyone should make an investment thesis based on that.”

Mnuchin, who was confirmed on Monday as treasury secretary, is in favor of reforming the Volcker Rule, which prevents big banks like Goldman Sachs from making risky bets with their own money.

Goldman’s post-election surge can’t really be explained by higher interest rates. Higher rates provide a bigger boost to the profits of consumer-focused lenders like Bank of America and Wells Fargo(WFC) than investment banks like Goldman.

“Higher interest rates is not playing that much into Goldman Sachs’ valuation,” said Wong.

But Goldman Sachs would benefit from faster growth and increased CEO confidence that could spark a wave of lucrative M&A and IPO deals.

Goldman shares have made a remarkable rebound from the 2008 crisis when many investors feared the complete collapse of the financial system. Goldman is up 380% since its low of $52 in November 2008.

While JPMorgan Chase returned to its pre-crisis high in 2013, it wasn’t until now for Goldman stock. Other big banks like Bank of America(BAC), Citigroup(C) and Morgan Stanley(MS) are nowhere near their all-time highs.

But is the Goldman rally overdone?

After all, not even Trump is talking about completely repealing Dodd-Frank and efforts to water regulation down are running into resistance, including from Federal Reserve chief Janet Yellen.

Yellen: U.S. banks are lending and globally competitive
Yellen: U.S. banks are lending and globally competitive

Wong thinks Goldman shares are “slightly overvalued” at this point.

“They’re pricing in a lot of perfection in terms of deregulation and the ability to take advantage of that,” Block said.
Published at Tue, 14 Feb 2017 21:40:53 +0000

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Carl Icahn poses ‘unacceptable risk’ of conflicts

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Icahn: I'm against the stupidity of some regulations
Icahn: I’m against the stupidity of some regulations

  @mattmegan5

President Trump has tapped Carl Icahn to help him get rid of “strangling regulations” that are hurting the American economy.

Of course, gutting some of those federal rules will also mean big profits for Icahn.

Icahn’s new role as Trump’s special adviser on regulatory reform may already be boosting his vast fortune. Shares of CVR Energy, the oil refiner Icahn controls, spiked 10% the day after Trump announced his appointment.

Icahn has been a vocal critic of EPA rules that require refiners like CVR(CVI) to either blend their oil with renewable fuels or buy credits. Icahn told CNN in December the EPA’s renewable fuel standard rules are “natural stupidity.”

Icahn’s new role as Trump’s regulation-buster has given him a powerful platform to push for getting rid of this EPA rule. The legendary investor has said he was even consulted on Trump’s selection of Scott Pruitt as the new head of the EPA.

Now, Senate Democrats including Elizabeth Warren and Al Franken are flagging concerns over just how closely Icahn’s business interests align with his role in the Trump administration.

The CVR episode suggest a “conflict of interest between Mr. Icahn and advice he gave President Trump on the nomination of Mr. Pruitt,” the senators wrote in a letter on Monday to White House Counsel Donald McGahn II.

Icahn’s “sprawling business empire and potentially unlimited portfolio in the administration” present an “unacceptable risk” of “real or potential conflicts of interest,” the lawmakers said.

Five other Democratic senators signed the letter: Sheldon Whitehouse, Sherrod Brown, Tammy Baldwin, Amy Klobuchar and Debbie Stabenow.

The lawmakers note that his firm, Icahn Enterprises, invests in a broad range of industries regulated by the federal government, including auto, railcars, and mining.

The letter asked the White House to respond to a series of questions before Wednesday on Icahn’s role, including whether he is a federal employee, if he’s been barred from providing advice on any specific regulations and whether he’ll be required to divest any of his holdings.

The senators also want to know whether Icahn has recused himself from any matters and if any steps have been taken to “prevent his access to non-public, confidential or otherwise privileged information.”

The White House didn’t respond to a request for comment.

Before he was elected, Trump suggested Icahn would be his choice as treasury secretary. Ultimately, Trump selected Icahn to help him overhaul federal regulations — one of the president’s major priorities to unleash the U.S. economy.

“He is not only a brilliant negotiator, but also someone who is innately able to predict the future especially having to do with finances and economies,” Trump said when he announced Icahn’s new role.

But even Icahn couldn’t have predicted how his 2012 purchase of CVR stock would turn into a controversy in a Trump White House. Icahn’s firm Icahn Enterprises owns an 82% stake in the oil refiner, making it one of his biggest positions.

Icahn has warned that the EPA’s renewable fuel standard rule will cost CVR $200 million this year. CVR has even filed a lawsuit against the EPA over the law, according to press reports.

Pruitt, Trump’s pick to lead the EPA, has been critical of the rule, calling it “unworkable” in its current form during his Senate confirmation hearing.

Wall Street is betting CVR will emerge as a big winner of Trump’s deregulation push. Shares of CVR have surged 68% since Trump’s victory.

CVR’s success has helped lift Icahn Enterprises(IEP) too. Shares of Icahn’s firm have soared 18% since Trump’s victory.
Published at Mon, 13 Feb 2017 20:14:45 +0000

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Auto CEOs want Trump to order review of 2025 fuel rules

FILE PHOTO – The GM logo is seen in Warren, Michigan, U.S. on October 26, 2015. REUTERS/Rebecca Cook/File Photo

 

Auto CEOs want Trump to order review of 2025 fuel rules

By David Shepardson| WASHINGTON

The chief executives of 18 major automakers and their U.S. units urged President Donald Trump to revisit a decision by the Obama administration to lock in vehicle fuel efficiency rules through 2025.

In a letter sent late Friday and viewed by Reuters, the chief executives of General Motors Co (GM.N), Ford Motor Co, Fiat Chrysler Automobiles NV, along with the top North American executives at Toyota Motor Corp (7203.T), Volkswagen AG (VOWG_p.DE), Honda Motor Co (7267.T), Hyundai Motor Co (005380.KS), Nissan Motor Co (7201.T) and others urged Trump to reverse the decision, warning thousands of jobs could be at risk.

On Jan. 13, the head of the U.S. Environmental Protection Agency finalized a determination that the landmark fuel efficiency rules instituted by then President Barack Obama should be locked in through 2025, a bid to maintain a key part of his administration’s climate legacy.

As part of a 2012 regulation, EPA had to decide by April 2018 whether to modify the 2022-2025 model year vehicle emission rules requiring average fleet-wide efficiency of more than 50 miles per gallon through a “midterm review.” The agency in November moved up the timetable for proposing automakers could meet the 2025 standards.

The auto CEO letter asked Trump to reopen the midterm review “without prejudging the outcome” and praised Trump’s “personal focus on steps to strengthen the economy in the United States and your commitment to jobs in our sector.”

Days after Trump was elected, automakers quickly appealed to Trump to review the rules, saying they impose significant costs and are out of step with consumer preferences.

Gloria Bergquist, a spokeswoman for the Alliance of Automobile Manufacturers, said Sunday, automakers are “seeking a restoration of the process — that’s all. This is a reset.”

The chief executives of Ford, GM and Fiat Chrysler also raised the issue in a White House meeting with Trump last month.

The letter warned the rules could “threaten future production levels, putting hundreds of thousands and perhaps as many as a million jobs at risk.”

Environmentalists say the rules are working, saving drivers thousands in fuel costs and shouldn’t be changed. Luke Tonachel of the Natural Resources Defense Council, said lowering the standards would “cost consumers more, increase our dependence on oil and put Americans at greater risk from a changing climate.”

Trump EPA nominee Scott Pruitt told a Senate panel he will review the Obama administration’s decision.

In 2011, Obama announced an agreement with automakers to raise fuel efficiency standards to 54.5 miles per gallon. This, the administration said, would save motorists $1.7 trillion in fuel costs over the life of the vehicles, but cost the auto industry about $200 billion over 13 years.

The EPA said in July that because Americans were buying fewer cars and more SUVs and trucks, it estimated the fleet will average 50.8 mpg to 52.6 mpg in 2025.

 

(Reporting by David Shepardson; Editing by Andrea Ricci)
Published at Sun, 12 Feb 2017 16:53:37 +0000

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