Smart. Sharp. Funny. Fearless.

Monday, December 09, 2019 {{ new Date().getDay() }}

Trump’s Choice For Commerce Secretary Leaves Russia Questions Unanswered

IMAGE: Billionaire investor Wilbur Ross, chairman of Invesco Ltd subsidiary WL Ross & Co, departs Trump Tower after a meeting with U.S. President-elect Donald Trump in New York, U.S., November 29, 2016.  REUTERS/Lucas Jackson

Financial Disclosures Obscure Trump’s Foreign Business Interests

IMAGE: An exterior view of the hotel at the Trump Turnberry golf resort in Turnberry, Scotland, Britain June 13, 2016.  REUTERS/Tom Bergin/File Photo

Things To Watch In 2016: Steady Economy Is The New Hot

By Kevin G. Hall, McClatchy Washington Bureau (TNS)

WASHINGTON — After a year free from government shutdowns and other self-inflicted wounds, the U.S. economy in 2016 is expected to power forward at a steady, albeit unspectacular pace.

Given all the global uncertainty, steady is the new strong. A six-year U.S. economic expansion, long by historical standards, rolls on.

Japan remains in the doldrums, China’s growth has slowed precipitously and emerging markets such as Brazil and Mexico are boiling over with internal discontent. Even next door the Canadian dollar is slumping badly against the U.S. greenback.

Here are three things worth watching in the U.S. economy in 2016:

GROWTH’S GEAR SHIFT

Since the economic recovery began in mid-2009, it’s been led by exports and the energy sector. That’s a trend now in reversal.

“The consumption side is picking up. The domestic-driven parts of our economy are strengthening and we’re likely to see an economy that is led less by production and more by consumption,” said Mark Vitner, a senior economist at Wells Fargo Securities in Charlotte, N.C.

Mainstream economists project 2016’s annual growth rate in the ballpark of 2.5 percent, about the same as 2015.

“But beneath the surface, there really is quite a bit of change,” said Vitner.

Here’s why.

Amid the Great Recession, the U.S. dollar weakened against global currencies, making U.S. goods and services cheaper, particularly farm and ranch products. Exports boomed, as did employment in manufacturing and other export sectors.

Now much of the world economy is in slow-growth mode. The U.S. dollar has strengthened against European and Asian currencies. It’s meant a 4.3 percent drop in exports for the first 10 months of this year, according to the Census Bureau.

Similarly, when oil prices were over $100 a barrel in the prior decade it set in motion a massive wave of drilling for oil and natural gas. U.S. production reached record levels in 2014, and the energy sector hired like mad.

The expansion added to a global oil glut and ultimately a collapse in energy prices. Americans now enjoy gasoline priced below $2 a gallon in much of the nation. Since a peak in December 2014, employment in mining — the category under which oil drilling and related services fall — has dropped sharply. The Labor Department estimates more than 123,000 jobs lost in the sector since the peak.

Those two troubling trends, however, are offset by the growth shift.

JOBS, JOBS, JOBS

The economy is in a virtuous cycle, where hiring brings more sales and thus more hiring.

“The improvement in employment conditions … has occurred amid continued expansion in economic activity,” Federal Reserve Chair Janet Yellen said in a Dec. 17 news conference.

The unemployment rate was 5 percent in November, down sixth-tenths of a percentage point since December 2014. It’s projected by Yellen to go even lower next year. Although wage growth has been muted throughout much of the recovery, it has gained steam since summertime.

Two signs to watch in the job market are an easing of the still-elevated number of people reporting involuntary part-time employment, and a return to more typical rates of labor force participation.

HOUSING LIFTOFF

Sales of new and existing homes accelerated in 2015 and are expected to keep growing in 2016.

Surveys of lenders continue to show that credit is becoming more available for homeowners, aided by new jobs for millions more people now working, particularly in robust state economies such as populous California.

“They’re all adding income to families or single individuals, who are now able to go out on their own instead of living in their parents’ basement,” said Lawrence Yun, chief economist for the National Association of Realtors.

©2015 McClatchy Washington Bureau. Distributed by Tribune Content Agency, LLC.

Photo: Philip Taylor via Flickr

 

Brand Experts Doubt Controversy Will Hurt Trump Businesses In The Long Run

By Kevin G. Hall, McClatchy Washington Bureau (TNS)

WASHINGTON — Despite calls to boycott Donald Trump’s businesses, Brand Trump is likely to escape lasting damage, analysts say.

“Trump is Trump. He is completely acting ‘on brand,’ ” said Deb Dib, a brand coach. “And whether you like his brand or don’t like his brand, he is coming across as someone he has always been — someone who doesn’t pander, doesn’t take a back seat.”

It may seem counterintuitive that there would be little long-term consequence for Trump’s June 16 comments that disparaged Mexicans entering the United States illegally. “They’re bringing crime. They’re rapists,” Trump said.

Branding and reputation-building experts said Trump’s case is unique.

“This is exactly what you would expect from him as a brand,” said Jim Joseph, an international branding expert for global communications giant Cohn & Wolfe, noting that backtracking at this point would damage Brand Trump. “People would be commenting on how inauthentic he was. I think he is being very transparent about who he is as a brand. I think he’s incredibly consistent.”

The disparaging comments didn’t hurt Trump within the Republican Party. He’s in second place for the Republican 2016 presidential nomination, according to two recent polls for CNN and Fox.

Trump’s remarks have had some high-profile business consequences.

NBC and the Spanish-language Univision network dropped plans to carry the Miss USA beauty contest, which Trump helps bankroll. Macy’s dropped the Donald Trump clothing line. Acclaimed chef Jose Andres abandoned plans to operate a restaurant in the luxury hotel Trump plans to open in Washington next year.

But the Trump fortune is in commercial real estate, and it appears unlikely that he will lose wealthy buyers who snap up his condos, office space and luxury hotel rooms.

“Whether or not it affects his businesses … probably the jury is out on that. My sense is it will blow over,” Joseph said.

Trump is more than a presidential candidate. He’s a cultural reference, a synonym for over-the-top garishness. There are perhaps a dozen or so individuals instantly recognized by their first name alone. There’s Oprah, the TV and film mogul. Golf has Tiger. In business, there’s The Donald, as famous for his mane as his name.

“He is a great example, love him or not, of clearly defined branding,” said Lida Citroen, whose Lida360 is a Denver-based reputation-management and personal-brand strategy firm. “I don’t think he is batting an eye over any kind of impact.”

Consistency of viewpoint has been a hallmark of Trump for decades, said Citroen, who has not represented Trump or his companies. “I think if you saw him apologizing or backpedaling or soft-pedaling, you might say, ‘That’s not the Donald Trump I know from TV or his businesses.’ ”

Trump’s words may even have been planned for maximum branding impact, she suggested.

“He makes business decisions, so this was obviously well thought out and discussed well before he made any sort of statement,” Citroen said. “In the long term, this more about his legacy than being politically correct.”

Insulting Hispanics and firing up an important demographic group sought by both political parties makes for a high hurdle if Trump wins his party’s nomination and runs in a general election.

“The odd thing about brands is that really, really strong brands are really polarizing,” said Dib, co-author of book Ditch, Dare, Do.

(c)2015 McClatchy Washington Bureau. Distributed by Tribune Content Agency, LLC.

Obama Order Could Mean Refund Checks For Immigrants In U.S. Illegally

By Kevin G. Hall, McClatchy Washington Bureau (TNS)

WASHINGTON — President Barack Obama’s executive order on immigration will allow people who’ve been working in the country without documents to retroactively file tax returns for the past three years and collectively get about $1.7 billion in refundable tax credits over ten years.

It’s a little known consequence of the executive order on immigration announced shortly before Thanksgiving, and whose implementation is presently held up in the courts.

Republican lawmakers are scrambling to pass legislation that would limit the ability of the workers to file tax returns for years before their immigration status changed under the executive order and qualify for a tax refund that on average for other taxpayers has been about $2,300 per person.

Under Obama’s executive order, eligible workers would be given Social Security numbers, and that would allow them to work legally while the order is in effect. They could file a 1040 tax return, or amended returns for three years previous — the statute of limitations for amending a tax return — and potentially qualify for the refundable Earned Income Tax Credit.

“Those who were working illegally in the United States shouldn’t be rewarded for doing so,” Senator Charles Grassley (R-IA) said in a statement to McClatchy. “That would have the effect of allowing retroactive benefits. My proposal would prohibit those granted deferred action from claiming the EITC for any year they were working without authorization in the United States.”

McClatchy obtained an estimate by the congressional Joint Committee on Taxation, done for Grassley and Senate Finance Committee Chairman Orrin Hatch (R-UT). It shows the additional EITC refunds under the program could cost taxpayers $1.7 billion over 10 years, almost all of it in the first five years.

Obama’s immigration order overall is actually expected to bring in almost $20 billion in new revenue over a ten-year period after implementation, according to the nonpartisan Congressional Budget Office. That’s because new immigrants would be paying into Social Security and having taxes withheld from paychecks.

Repealing the order would add to projected deficits. But allowing previously undocumented workers to quickly collect a government check for a time when they weren’t here legally is hardly a good optic for Obama and Democrats.

The Earned Income Tax Credit was created to help move individuals off of welfare rolls and into employment. It provides a tax benefit to low-income earners based on what they actually earn. It is “refundable,” meaning workers who have no federal income tax liabilities get the balance of the credit in a check from the government.

Allowing the new immigrants to apply retroactively for the EITC is similar to green card holders being able to seek the credit when they get a Social Security number, as is the case now.

The Internal Revenue Service recently reviewed guidance dating to 2000 and upheld that the determining factor on getting the Earned Income Tax Credit refund is a Social Security number, not immigration status.

“The rationale is, if you were in the country and there is some process in which you become legal, we want to go ahead and treat you as if you were legal the whole time,” said Elaine Magg, a senior research associate for the nonpartisan Tax Policy Center, jointly run by the centrist Urban Institute and center-left Brookings Institution.

What Republicans blast as “amnesty bonuses” are also akin to what political refugees can now do under tax law — amend previous tax returns once their immigration status has changed.

But Grassley maintains Congress explicitly closed this avenue to undocumented workers in 1996 and argues that this is being ignored by the IRS.

“If we want these folks to be citizens then we give them Social Security numbers, and they are subject to the same tax laws others are subject to, and in some cases that will mean they will get the refundable credit,” said Maag, calling the issue easily fixable if Congress wants to restrict the ability to retroactively claim the tax breaks afforded in Obama’s executive order.

Bills already have been introduced in the House of Representatives and the Senate to do just that.

Undocumented workers presumably have been working off the books or with falsified documents. They will have to present proof that they were paid or were self-employed over the previous three years. If they were using a false taxpayer ID number, they could now amend returns for the past three years and plug in their new Social Security number.

The IRS could audit these returns to guard against fraud, but because the tax returns involve very low income levels, the IRS would not get much bang for the buck with such audits.

The Joint Committee on Taxation estimate is based on a model of expected behavior and not past actions, given that there hasn’t been a similar situation on which to build a best guess. It also does not estimate how many of the undocumented immigrants might have changed to legal status anyway through marriage or other avenues.

Photo: 401(K)2013 via Flickr

Fed Wears A Bull’s-Eye This Year On Capitol Hill

By Kevin G. Hall, McClatchy Washington Bureau (TNS)

WASHINGTON — Detractors from both major political parties are preparing legislation to rein in the powers of the Federal Reserve, moves that would test and potentially restrain its independence.

The proposals include ordering a broad audit of the central bank, including its secret policy making, and giving Congress the power to confirm or reject the president of the New York Federal Reserve Bank, one of the most influential.

“Given that the New York Fed is the one of the most powerful banking regulators in the world and supervises some of the country’s largest and most complex banks, someone at this institution needs to be directly accountable to the American people,” said Chip Unruh, a spokesman for Sen. Jack Reed of Rhode Island, a top Democrat on the Senate Banking Committee.

Reed will soon reintroduce a proposal to subject the nominee to head the New York Fed to Senate confirmation and periodic questioning by the Congress.

Along with its role in errors that led to the 2008 financial crisis, the New York Fed came under scrutiny last year when a former employee claimed she was wrongfully dismissed after alerting higher-ups to conflict of interest at Goldman Sachs. New York Fed President Bill Dudley had been Goldman’s chief economist.

In 2012, congressional investigators suggested the New York Fed knew large global banks were manipulating interest rates in Europe and Great Britain.

The Fed’s Board of Governors in November began a review on how large banks are supervised, and complaints have driven plans pushed by Republicans and liberal Democrats for a complete audit of Fed operations.

The Federal Reserve already is subject to some auditing by the Government Accountability Office under the revamp of financial regulation in 2010 known as the Dodd-Frank Act. The Fed has an independent outside auditor looking at its books, too.

But Fed deliberations over monetary policy, some of its lending to foreign entities as well as its discussions with foreign central bankers are generally off limits to auditors. The Fed views any audit of its decision making as political interference.

“Back in 1978, Congress explicitly passed legislation to ensure that there would be no GAO audits of monetary policy decision-making, namely policy audits,” Fed Chair Janet Yellen said in December.

“I’m very open to looking for ways ourselves to improve our communications and transparency, and working with Congress to do that,” she said. “But I would be very concerned about (legislative) actions.”

Since 1913, the Fed has used closed-door deliberations to conduct monetary policy, raising its benchmark interest rates when the economy gets too hot and inflation is a threat, and cutting them in a bid to spark activity when economic recovery loses steam. It has done so irrespective of whether a Democrat or Republican is in the White House, often to the ire of a sitting president.

Fed Chairman William McChesney Martin, for example, raised interest rates in 1965 despite objections from President Lyndon B. Johnson, who famously summoned him afterward for a browbeating at the presidential ranch.

Chairman Paul Volcker raised rates to double-digit levels to quash inflation in the early 1980s, even as President Ronald Reagan’s popularity sank and House Banking Committee Chairman Henry B. Gonzalez, D-Texas, tried to impeach Volcker.

The independence from political pressures is likely one reason why the U.S. economy has long enjoyed stability in prices when other countries don’t.

“Countries where there is high inflation almost always are places where the monetary authority is not independent,” noted Dean Croushore, an economics professor at the University of Richmond.

The new pressures for more political accountability will test Yellen.

“It will certainly create a bit of challenge,” said Nariman Behravesh, chief economist of forecaster IHS Global Insight. “She will be up in front of Congress a bit more than she had already been.”

The biggest challenge is an audit, which passed the House of Representatives in each of the last two Congresses but was not voted on by the Senate.

Vermont’s independent senator, Bernie Sanders, introduced the Federal Reserve Sunshine Act in 2009, which called for a full audit of the Fed by the GAO. Former Texas Republican Rep. Ron Paul introduced that same year the Federal Reserve Transparency Act, a similar bill. Sanders is now working on a measure to discourage conflicts of interest at the Fed.

Paul’s son Rand, now a Kentucky senator and potential GOP presidential candidate, has sponsored Fed audit legislation in the past, and his staff indicated late last year he will again introduce legislation.

Senate Majority Leader Mitch McConnell (R-KY) has already said he will allow this legislation, expected to be introduced in coming weeks or months, to come up for a floor vote during the 114th Congress.

Even Fed supporters can envision more congressional oversight, perhaps the nomination of whomever the Fed chairman wants to pick to head the influential New York Fed.

“I can’t see any huge harm in that, but in terms of the audit, even some of the more conservative members of the FOMC probably also feel that the Fed needs to maintain its independence,” said Chris Varvares, senior managing director of Macroeconomic Advisers in St. Louis, referring to the rate-setting Federal Open Market Committee.

In a nod to congressional complaints, the Fed announced on Jan. 16 creation of a 15-member Community Advisory Council. Its mission will be to discuss concerns of low- and moderate-income families.

AFL-CIO President Richard Trumka called creation of the council “an encouraging sign,” adding that “Wall Street has dominated the discussion of monetary policy for too long, calling for higher interest rates to choke off wage and job growth when working families are still trying to catch up.”

AFP Photo/Karen Bleier

5 Keys To The U.S. Economy To Watch In 2015

By Kevin G. Hall, McClatchy Washington Bureau (TNS)

WASHINGTON — Ask five economists what they expect for 2015 and you’re likely to get scores of answers. Don’t fret: We’ve narrowed it down to five pivotal issues that will decide just how strong the U.S. economy grows this year.

1. Interest rates

Sometime this year the Fed is likely to raise rates, which will ripple through all sorts of lending.

By the middle of the year, “we expect the unemployment rate will be closing in on 5.5 percent and the inflation rate will be between 1.5 percent and 1.75 percent but on the rise,” said Chris Varvares, senior managing director of Macroeconomic Advisers in St. Louis.

The Fed meets eight times a year, and the most likely time frame for a rate hike is its fourth meeting, set for June, Varvares said, though it could raise rates by a quarter of a percentage point in any or all of the four meetings that will come after. The pace could become faster in 2016. Since long-term loans in part take their cue from this Fed rate, it will become more expensive to borrow to buy a home or car. That might slow economic growth.

“The expansion has seemed to be so tentative, even fragile, that you have to be at least a little concerned about what the response will be to rising rates,” said Varvares. “If the rise in rates were to slow the increase in home prices or knock down the stock market, then it would be a negative for consumer spending. And that’s pretty much the foundation of economic growth.”

2. Oil prices

The drop in oil prices has been akin to a massive and welcome tax break for consumers. The AAA Motor Club estimates Americans spent $14 billion less on fuel last year than they did in 2013.

“It would not be surprising for U.S. consumers to save $50 (billion) to $75 billion on gasoline in 2015 if prices remain low,” said Michael Green, a AAA spokesman.

But there are risks for the economy in the plummeting prices. For one, energy companies are almost certain to cut back their drilling plans, with impacts on hiring and equipment coming quickly.

“I fear the recent plunge in oil prices will prove most damaging to the economy in the near-term as capital spending budgets are scaled back,” said Mark Vitner, a senior economist at Wells Fargo Securities in Charlotte, N.C. “The benefits from lower gasoline prices will take longer to show up.”

That will have a negative effect on the nation’s gross domestic product, he suggested.

That’s because the five largest energy-producing states — Texas, North Dakota, Oklahoma, New Mexico and Colorado — accounted for about 25 percent of the growth in GDP last year. Their outsized contributions to growth will slow; the rise in consumer spending from lower gasoline prices will offset some of that but not all.

“We may see overall growth slow in ways that are still largely unanticipated,” Vitner said. “The energy boom was so big that it carried over into all facets of the economy.”

3. Housing

The U.S. economy is firing again on most cylinders — except housing.

The 5.12 million home sales reported by the National Association of Realtors in November were 3.8 percent below a year earlier, and tight credit makes it difficult for many Americans to get mortgages.

“That’s one of the things that have held back the recovery so far,” said Gus Faucher, senior economist at Pittsburgh-based PNC Financial Services.

Faucher anticipates a gradual increase in the number of single-family home “starts,” signaling an intent to build a new house, in 2015, to about 725,000 for the year, up from the 646,000 starts that had been recorded for 2014 through October (home-building slows sharply in November and December).

“I don’t think we’re going to get a boom in homebuilding,” he said. “But certainly there is room for gradual improvement.”

4. Household formation

One of the aberrations in the recovery is the unusually low rate of household formation. That’s a fancy way of referring to people moving in together, as couples or roommates, and forming new households. After the Great Recession, many young people remained living in their parents’ homes or crowded into apartments together.

“I expect household formation to substantively pick up in 2015 as millennials break away from their parents and strike out on their own,” said Mark Zandi, chief economist for Moody’s Analytics in West Chester, Pa.

An increase in household formations is associated with greater economic activity, especially home sales and apartment rentals. It also implies rising incomes.

“I think that is the single most important development for 2015, that we will finally see acceleration in wage growth. Workers will get real (pay) increases,” Zandi said.

5. Global events

Events in faraway places matter, but they’re unlikely to derail the U.S. recovery. That’s because exports account for only 13 percent of the economy. In fact, slower growth abroad may, in a perverse way, benefit the U.S. economy.

“Yes, it’s a vulnerability, but a limited vulnerability,” said Nariman Behravesh, the chief economist for IHS Global Insight in Cambridge, Mass. “Weakness in the rest of the world can be good news for the U.S. It could lower commodity prices even further, helping to keep inflation and interest rates low.”

While the impact on the U.S. economy is limited, economic deterioration across the globe might be troublesome especially for companies with global operations, such as General Electric, Chrysler or Caterpillar.

“We are worried about growth in Europe, Japan and China,” said Behravesh. “China is a worry. We’re now saying only 6.5 percent growth in China. Could it be lower than that? I think entirely it could.”

AFP Photo/Spencer Platt

Just How Did Big Banks Get That Win In Washington?

By Kevin G. Hall, McClatchy Washington Bureau (TNS)

WASHINGTON — The rollback this week of a key part of Wall Street regulation adopted after the 2008 financial collapse caught much of Washington by surprise, creating an uproar among liberals who called it a payoff to big banks, threatening to derail a bipartisan budget agreement, and almost shutting down the government.

It was indeed the product of lobbying by the banks, which capped their long campaign this week with personal calls to Congress by the CEO of JPMorgan Chase.

But it should have been no surprise. It was in the works for more than a year. And it was supported by many Democrats. A bill doing just what this week’s provision does actually passed the House Financial Services Committee last year with 22 of 28 Democrats voting for it. The bill passed the entire House of Representatives with broad Democratic support.

“It passed the House, dude! With 70 votes from Dems,” said an aide to a key Democratic senator who spoke on condition of anonymity to talk about the party and the origin of the provision.

Yet when the House this week took up a $1.1 trillion budget bill needed to keep the government open when money ran out Thursday night, liberal Democrats rallied against the provision. They said it was sneaked in by Republicans doing Wall Street’s bidding.

Indeed, the nation’s five largest banks — JPMorgan Chase, Goldman Sachs, Citigroup, Bank of America and Morgan Stanley — desperately wanted the change.

Banks had balked ever since the government moved in the wake of the 2008 financial collapse to cordon off the riskiest of bets made in complex instruments called derivatives, the very same products that turned the financial crisis into a near meltdown of global finance.

At issue are swaps, speculative bets between private parties on whether the price of a stock or a commodity such as oil or corn will move up or down. Under the Section 716 of the Dodd-Frank Act, banks had to push the riskiest 5 percent of this trading into separate corporate entities where they would not be covered by taxpayer-provided protections.

The regulation was offered as an amendment by then-Sen. Blanche Lincoln, an Arkansas Democrat fending off a tough 2010 primary contest from a liberal challenger. The so-called Lincoln Amendment was criticized by Wall Street foes for being a political play that covered too little of the swaps market. Lincoln won the primary but lost the general election.

Since then banks big and small have fought first to delay its implementation and then to roll it back.

The rollback passed the full House of Representatives on Oct. 30, 2013, on a 292-122 vote, with 70 Democrats in support. It was not taken up in the Senate.

The measure was added to a House appropriations bill on June 25 to fund financial regulators, offered as a voice-vote amendment by Rep. Kevin Yoder (R-KS). It was in plain sight all along, just a question of whether it would stay in the final compromise spending bill or not.

While big banks stand to gain the most under the change, several congressional and industry sources privately said that what really helped sell the change was lobbying by regional banks such as Georgia’s SunTrust Banks Inc., Pennsylvania’s PNC Financial Services Group and Ohio’s Fifth Third Bancorp. The rules designed to limit big banks affected them, too, they argued.

The heaviest lift came from the American Bankers Association, which represents banks big and small. It has spent about $6.7 million in lobbying overall this year, according to the donor data culled by OpenSecrets.org.

The nation’s most prominent banker, JPMorgan Chase CEO Jamie Dimon, followed up with personal calls to members of Congress during the negotiations.

It wasn’t just lobbying. Old-fashioned Washington horse-trading greased the wheels.

In exchange for allowing the change Republicans sought, Democrats got significantly more funding for Wall Street cops — the Securities and Exchange Commission and the Commodity Futures Trading Commission.

The rollback disappointed Barney Frank, the retired Massachusetts Democrat who spearheaded the 2010 revamp of financial regulation now called the Dodd-Frank Act. With Republicans taking control of both chambers next year, other parts of his financial revamp could be weakened.

“That’s why it’s so important to have this fight now,” Frank told McClatchy, saying the measure “raises the stakes” on preserving broader financial regulation.

Frank insisted lawmakers slipped it into a larger bill because the public would not support legislation on its own to favor big banks that brought the financial crisis.

Photo Credit: AFP/Stan Honda

A Look At Who Loses As Oil Prices Keep Plunging

By Kevin G. Hall, McClatchy Washington Bureau (TNS)

WASHINGTON — The rapid plunge in oil and gasoline prices means huge savings for American consumers, but the steep downward swing may ultimately prove dangerously disruptive to energy-producing countries and companies.

If prices remain low for a protracted period, which seems likely, it’ll send shock waves across the energy sector. For oil-producing countries, that could mean budget shortfalls. For energy companies, the lower profits may force mergers and consolidation that will cost thousands of jobs.

Oil prices have tumbled in recent months from their peak at about $105 a barrel in June to their current lows, below $75 on Wednesday. The Energy Information Administration projected last week that gasoline prices would stay under $3 a gallon throughout next year. A gallon of regular unleaded averages $2.86, the motor club AAA said Wednesday, about 25 cents lower than a month ago.

For American consumers, who used 135.4 billion gallons of gasoline last year, that’s a big savings — nearly $34 billion on an annualized basis.

But for companies and countries that depend on oil prices for their income, it’s a trend that makes them nervous.

Already, the oilfield services giant Halliburton, anticipating lower prices, has announced it will buy rival Baker Hughes in a cash and stock deal worth $34.6 billion.

Venezuela, heavily dependent on oil revenue, is looking for a buyer for its U.S. refining operations that run under the Citgo brand. Global giant BP, whose stock has yet to recover after the disastrous Gulf of Mexico oil spill in 2010, is widely viewed as in play. In fact, veteran energy analyst Fadel Gheit thinks that every private oil company except Exxon Mobil Corp., which is twice as large as its competitors, is now potentially a merger target.

“If oil prices remain sub-$80 for a long period of time, we’re going to see a lot of mergers and acquisitions,” said Gheit, who works for the investment bank Oppenheimer & Co. Inc. When Exxon Corp. and Mobil Corp. merged in 1999, the combined company was able to eliminate 50,000 jobs. “Companies are drawing short lists of targets: plan A, plan B and plan C.”

In the past, when oil was too abundant, producers simply left it in the ground. The curtailed production tightened supplies and drove up prices. That’s going to be tougher to do now, analysts say, which explains why oil ministers from nations that belong to the Organization of the Petroleum Exporting Countries have been deep in consultation before OPEC next meets on Nov. 27.

OPEC’s biggest producer and exporter, Saudi Arabia, doesn’t appear keen to cut production, in part because history has shown that most other OPEC members, who depend on oil to fund their governments, won’t reduce production even after they’ve agreed to.

“For those kinds of countries this is a huge shock, and they’re desperate … but Saudi Arabia has made it pretty clear it doesn’t want to cut back to give market share to Iraq and Iran,” said Daniel Yergin, a noted oil historian. “If prices fall further, you’re going to see panic.”

Among the shakiest of OPEC members is Venezuela, grappling with inflation above 60 percent and its government bonds at six-year lows. It’s sure to suffer financial and political fallout if prices drop another $10 or $20 a barrel.

“They can continue at $75 or $80 … anything much lower I don’t see them able to sustain,” said Risa Grais-Targow, a senior analyst who specializes in Venezuela for the Eurasia Group, a political-risk consultant for global corporations. “They’re working with a pretty narrow margin.”

That’s what pushed the government of President Nicolas Maduro to look for a buyer for Citgo, which operates refineries in Illinois, Louisiana and Texas. The asking price reportedly is $7 billion. “The issue is going to be whether there are interested buyers,” Grais-Targow said.

The lost oil revenue is also likely to sting Africa’s largest producer, Nigeria, which is grappling with the Islamist insurgent group Boko Haram in the northeast.

Nigeria didn’t create a rainy-day fund when prices soared, and now it must reduce government spending by a pledged 6 percent to offset the 30 percent decline in oil prices. But it has national elections on Feb. 14, and many Nigerians question whether the ruling party will really cut spending before the elections, meaning the country’s already messy finances could get messier.

Even countries that better manage their oil revenue will feel the pinch. Colombia’s balanced-budget requirement might trigger higher taxes as oil revenue slumps, Andre Loes, global bank HSBC’s chief economist for Latin America, said in a note to investors.

The projected 4.7 percent growth rate for next year, Loes cautioned, “would be under threat in the case of continued weakness in oil prices.”

Less clear is how neighbors Iraq and Iran will fare with slumping oil revenues.

Iraq’s exports have reached levels not seen since before the invasion led by the United States in 2003, but the country needs higher oil prices to fund its many needs.

More complicated is how the falling prices will affect Iran. A temporary arrangement lifting international sanctions that had cut its oil exports will expire Monday, and it’s not clear whether that relief will continue.

If talks with Iran over its nuclear program fail and sanctions are reimposed, that will take more Iranian oil off the global market, which might help keep prices from falling further. But if the nuclear talks are extended, prices might dip even lower.

“Markets will interpret this as Iran will be able to increase its exports,” said Simon Henderson, an expert on energy and the Middle East for the Washington Institute for Near East Policy, a research center. “That will contribute to a further weakening of prices.”

With the United States producing 9 million barrels a day and no sign that the lower price has affected that production yet, the oil market is finding new financial targets.

“Prices will continue lower, bottom out in the low $50s between the first quarter and second quarter next year,” predicted John Kilduff, a veteran energy analyst at investment manager Again Capital in New York. At that point, he said, there could be unrest in some oil-producing nations and a related drop in production. “That should get prices back up to $70,” he said.

Kilduff’s suggestion of $50-a-barrel oil is striking, considering that just a few years ago energy analysts were debating whether the price might reach $150 a barrel.

“The market is really recalibrating,” said Yergin, who wrote an award-winning history of oil, The Prize.

An abundance of oil isn’t the only factor that’s pushing prices lower. Demand also is flagging. Japan, the world’s third-largest economy, was officially classified this week as in recession. Latin America’s biggest economy, Brazil, was already there. The European Union saw its quarterly growth rate register just a blip — 0.2 percent — from July through September.

That’s likely to subvert what’s been the traditional cycle, in which low oil prices boosted consumer spending, raising demand for oil, leading to higher prices. For now, the dynamic appears likely to keep pushing prices down.

AFP Photo/Karen Bleier

White House Offers Help For Long-Term Jobless

By Kevin G. Hall, McClatchy Washington Bureau

WASHINGTON — The Obama administration on Wednesday will announce the expansion of its efforts to aid the long-term unemployed with grants to help get the jobless back into the workplace.

President Barack Obama in January launched an effort to remove obstacles for the long-term unemployed, getting major corporations to adopt “best practices” in human-resources departments designed to ensure the long-time jobless aren’t screened out of the possibility of face-to-face employment interviews.

On Wednesday, the Labor Department will announce 23 grants given to 20 states and Puerto Rico to attack the problem of long-term unemployed, which numbered 3 million through September, the latest reading. The grants will be used by local organizations and governments to match jobless workers with sectors that need workers.

Vice President Joe Biden and other administration officials will also meet with chief human resources officers of large companies that have worked to bring in the long-term unemployed. Deloitte Consulting and the Rockefeller Foundation will also release a handbook that employers can use to better catch applicants who are among the long-term jobless.

To be considered long-term unemployed, a worker must be jobless and seeking employment for 27 weeks or longer. The current rate of 1.9 percent is more than twice the historical average as a percentage of all workers in the labor force, but has come down from the December 2013 rate of 2.5 percent.

Some economists fear that the stubbornly high rate of long-term joblessness, which characterizes the Great Recession and its aftermath, will leave millions of Americans with insufficient skills to reenter the workforce.

“I categorically reject the notion that the long-term unemployed are unemployable,” Labor Secretary Tom Perez told reporters on a conference call ahead of the announcement.

Critics of the Obama administration allege that the number of long-term jobless has fallen because many have simply exited the workforce.

“The long-term number has fallen because the economy has picked up,” insisted Jeff Zients, director of the president’s National Economic Council.

The unemployment rate fell to 5.9 percent in September, the lowest it has been since June 2008.

Wednesday’s announcements are likely to rekindle debate about the failure of Congress to extend benefits to the long-term jobless. Such extensions had been common throughout the post-recession period but came to an end at the start of the year.

“The president by no means is giving up,” said Perez, adding that he has recently held discussions in the Senate to explore the chances of bringing up the issue again.

AFP Photo/Joshua Lott

Wyden Reaches Out To Republicans On Inversions Measure

By Kevin G. Hall, McClatchy Washington Bureau

WASHINGTON — The head of the Senate’s tax-writing panel issued a statement Tuesday offering Republicans a carrot to join Democrats in blocking the ability of some U.S. corporations to shift headquarters overseas to enjoy huge tax breaks called inversions.

“Following efforts in August, it’s clear there is an opportunity for bipartisan agreement on short-term legislation that will make inversions less attractive,” Senate Finance Committee Chairman Ron Wyden (D-OR) said.

Republicans have insisted that any effort to thwart inversions, which costs the U.S. treasury billions in lost tax revenues, should be done in the context of a broader revamp of the corporate tax system.

That’s a bigger lift, and Wyden is looking for a stopgap measure to block the most egregious examples of corporations moving their headquarters to tax-haven countries.

After meeting with the top Republican on the panel — Sen. Orrin Hatch of Utah — Wyden issued a statement offering to loosely link any effort to halt inversions to the broader, more ambitious desire to overhaul the corporate tax code.

“As we press ahead, we continue to believe that any legislation addressing inversions must bridge to comprehensive tax reform,” Wyden said. “This is not some abstract issue about corporate accounting. Without a bipartisan stopgap measure in place, we run the risk of having our business tax base eroded, leaving mainstream American companies and families holding the bill.”

Inversions have been around for decades, but have grown in number of the past two years, especially for companies in the health care and pharmaceutical sectors.

These cases often involve a U.S. corporation buying a smaller partner in places as diverse as Ireland, Holland, Canada, or Israel and then moving their headquarters there while otherwise retaining their large presence in the United States, the world’s richest and most robust consumer market. What had been headquarters then becomes a U.S. subsidiary of a foreign parent company.

Speaking in Los Angeles in late July, President Barack Obama accused corporations considering or already engaged in inversions — including household names such as Burger King and the Walgreen Co. drugstore chain — of being corporate deserters.

“I don’t care if it is legal. It is wrong,” said Obama.

A number of Democrat lawmakers are preparing bills aimed at arresting the most troubling inversions, which involve what’s called earnings stripping. That’s where a company avoids paying U.S. taxes through an accounting move in which they saddle their U.S. subsidiary with debt, paying an excessive amount of interest to a related party. In the case of inversions, the related party is the newly minted headquarters abroad in a country such as Ireland or Bermuda with lower corporate tax rates.

Conservative Democrats, especially those in close Senate races, have been wary of stand-alone measures to address the inversion problem, siding with Republicans who want a broader rethink of corporate taxes.

The Obama administration insists inversions will result in at least $17 billion in lost tax revenue over the next decade.

Companies that have recently sought inversions include drugmakers Mylan Inc. in Pennsylvania and Chicago’s AbbVie. Minnesota-based medical device manufacturer Medtronic Inc. would be the largest U.S. company do so, and it touched off a firestorm recently with its $42.9 billion acquisition of the Irish firm Covidien PLC.

The controversy surrounding inversions forced drug giant Pfizer Inc. to back off of its plans earlier this year to purchase the British firm AstraZeneca PLC, and Walgreen Co. last month also stepped back from its inversion plans to purchase a smaller Swiss company.

Photo: Center for Strategic & International Studies via Flickr

Interested in U.S. politics? Sign up for our daily email newsletter!

What Happens To U.S. Exports Already Bound For Russia?

By Kevin G. Hall, McClatchy Washington Bureau

WASHINGTON — The U.S. Department of Agriculture and its plant health inspection service has halted all certification of almonds and other commodities bound for Russia “effective immediately.”

The move Thursday, confirmed by California almond growers, followed Russia’s imposition of a one-year ban on a wide range of agriculture products, raw materials, and food coming from the United States, the European Union, Canada, Norway, and Australia.

While Russia has banned most U.S. farm products, it’s not clear what happens to goods that were already in the pipeline.

“At this time, the Almond Board of California is not aware of how consignments already in transit or now arriving in Russia will be handled,” the group said in a statement shared with McClatchy. “Year to date, shipments to Russia represent about 3 percent of total California almond exports.”

Russia imported about 23,500 tons of U.S. almonds last year, most from California, valued at $126 million.

“We look forward to working again with our customers in Russia, once the market is reopened,” said Jenny Nicolau, the board’s senior specialist for industry relations. “The Almond Board will continue to monitor the situation, working closely with U.S. government.”

AFP Photo/Maxim Shipenkov

Interested in world news? Sign up for our daily email newsletter!

Past-Due Debt Prevalent Across U.S., With South The Highest

By Kevin G. Hall, McClatchy Washington Bureau

WASHINGTON — Roughly one in three adult Americans has past-due debt that’s been turned over to a collections agency, according to a novel new study.

Southern states fare worst in the study, with most having four in 10 residents with credit files that show debt in collection. The New England states fared best.

The findings overlap other economic data that together suggest millions of Americans continue struggling to make ends meet in an uneven economic recovery that has benefited the top end far more than the middle and bottom.

“Debt in collection is pervasive, and it threads through nearly all communities,” said Caroline Ratcliffe, the lead researcher on the report entitled Debt in America, published by the centrist think tank Urban Institute. “Every third person you see on the street has debt reported on their credit file.”

McClatchy obtained a copy of the report ahead of its release. Among the findings, based on records shared with researchers by the credit reporting agency TransUnion, are:

— 35 percent of Americans with a credit file have debt in collection reported in these files. Bills more than 180 days overdue are sent to collection agencies.

— The average amount owed on bills in collection is $5,200.

— 5.3 percent of Americans with a credit file have bills reported to a credit bureau between 30 and 180 days past due.

— The average amount owed on past-due debt not yet in collections is $2,258.

_Americans with bills in collection and past-due debt owe a combined average of $9,123.

Future research will focus on a breakdown of debt by category, which will give a better sense of how much is credit card debt versus medical bills or student loans. The latter is likely an important part of the story.

“The big thing that was changing is big increases in student loan debt, which would also be part of this,” said Ratcliffe. “We know that a lot of the recovery happened more at the top than the bottom, people with delinquent debt are those least likely to be (able to) pay down the debt.”

Other existing statistical measures fill in the missing pieces. The Federal Reserve issues a quarterly report on delinquency rates on loans by commercial banks, and the latest, from January through March, shows 2.31 percent of credit card debt is delinquent.

That’s lower than what the Urban Institute study shows, and suggests that credit cards aren’t the whole story. The low levels of credit card delinquency, said experts, reflects both consumer reticence to take on new debt and weaker borrowers who no longer have access to credit.

There are an estimated 222 million credit files, and researchers got access to a random sample of 7 million in the month of September 2013. They then built a model to estimate national, regional and state levels of past-due debt and debt in collections. Another 22 million adults, 9 percent of the adult population, don’t have credit files and fall outside the study.

State-level data proved striking in the Urban Institute report — conducted with the Consumer Credit Research Institute in San Diego. It showed that 13 states and the District of Columbia had more than 40 percent of their citizens with credit files with debt actively in collection, 11 of those states in the South.

Nevada, slammed during the housing crisis that brought the deep national recession, led the pack at 47 percent. Other states over the 40 percent mark included Alabama, Arkansas, Florida, Georgia, Kentucky, Louisiana, Mississippi, New Mexico, North Carolina, South Carolina, Texas and West Virginia.

On the better side were North Dakota, Minnesota and South Dakota. The three states, rich in oil and minerals, had substantially lower percentages of citizens with debt in collection, respectively at 19.2 percent, 19.8 percent and 20.8 percent.

Among metropolitan areas, Southern cities fared poorly in terms of the percentage of their population with credit files that had debt in collections. South Carolina’s cities of Greenville and Charleston came in at 44 percent and 42.8 percent. Charlotte, N.C., was also elevated at 41.8 percent.

Florida, another state hard hit by the housing crisis and recession, had several cities with high percentages in collections. Miami was a hair under 40 percent. Jacksonville, Orlando and Tampa showed 45 percent, 44.8 percent and 41.6 percent. The Lakeland area between Orlando and Tampa had a very elevated 47.3 percent in collections, while North Port on the Gulf of Mexico was at 35 percent.

Despite an energy boom, several Texas cities had high levels of debt in collection. The border city of McAllen had a whopping 51.7 percent in collections, San Antonio 44.5 percent, El Paso 44.4 percent, Dallas 44.3 percent and Houston 43.7 percent.

The West Coast fared slightly better, with California having 33 percent of all its citizens with credit files with debt in collection, while Washington had 31.2 percent. Among major metro areas, the California cities of San Francisco and Sacramento showed 26.7 percent and 31.7 percent, while Fresno was elevated at 43 percent.

In Washington, the Seattle area stood at 31.9 percent while Spokane and its environs were at 30.9 percent. In the middle of the nation, Kansas City saw 35 percent of its credit files in collections, while Wichita and its nearby Kansas communities had 33.4 percent in collections.

The credit-bureau data provides researchers another window into both the behavior of consumers and their precarious financial state.

“Our ambition is to use this as a basis akin to financial epidemiology,” Christopher Trepel, managing director of the Consumer Credit Research Institute, likening the research to that of scientists studying disease. “My hope is that we are about to define a new science of financial distress in a sense.”

CCRI researches the behavior of consumers in financial distress. Its work is funded by Encore Capital Group, a large purchaser of distressed debt.

Photo: Phillip Taylor PT via Flickr

IRS In ‘Bunker Mentality’ As Interest Groups, Media Join Congress In Seeking Information

By Kevin G. Hall, McClatchy Washington Bureau

WASHINGTON — Congress isn’t alone in trying to wrest answers out of the embattled Internal Revenue Service. The courts, public interest groups and the media are all struggling with uneven transparency and cooperation from the agency.

News that the IRS cannot produce long-sought emails is rekindling complaints that the agency has been slow to make public both policy documents regarding the special scrutiny of conservative groups and the emails of IRS decision-makers involved at the time.

Lawmakers are furious that the IRS failed to publicly disclose earlier that the woman at the center of the scandal, Lois Lerner, lost emails when her computer hard drive crashed in 2009.

That was news, too, for those involved in a lawsuit to force the release of Lerner’s emails. A federal judge Thursday will hear from the IRS as to why the U.S. District Court for the District of Columbia was not immediately informed about potentially missing emails.

The conservative organization Judicial Watch sued the IRS in May 2013 for access to Lerner’s emails, but it only learned of the missing emails after IRS Commissioner John Koskinen appeared before Congress last month.

“They’ve never once communicated to the court that that’s the case,” said Chris Farrell, research director for the group. “You have an ongoing lawsuit and no notification, that’s not generally how it’s done.”

The IRS has been ham-handed at best ever since the scandal erupted in May 2013. Anticipating an inspector general’s report, Lerner took a planted question at a legal conference so she could admit the agency had inappropriately targeted conservatives. Later, before Congress, she refused to answer any questions from lawmakers, citing her constitutional protection against self-incrimination.

As Congress more aggressively sought answers, the IRS simply stopped responding to media questions and information requests from public interest groups.

“I think they are in a greater bunker mentality as this (scandal) progresses,” said Anne Weismann, chief counsel for Citizens for Responsibility and Ethics in Washington. “I don’t see the ‘new broom sweeping it clean’ … approach. I see just the opposite.”

She added that “all too often we have to file lawsuits in order to get anything in response to our requests.”

Judicial Watch’s suit against the IRS was filed under the Freedom of Information Act. Under the law, public interest groups and the media can seek non-public information from the government.

On his first day in office in 2009, President Barack Obama called on federal agencies to “adopt a presumption in favor of disclosure” when dealing with FOIA requests. But at the IRS and elsewhere in government, little has changed.

In fact, analysts say, it’s become harder to get information as agencies such as the IRS hide behind a widening array of exemptions written into the Freedom of Information Act.

“This has nothing to do with party politics. This is a systemic trend that’s been happening in this country for 30 or 40 years,” said David Cuillien, interim director of the School of Journalism at the University of Arizona. “It’s the professionalization of PR and message control. It’s infiltrated the bureaucracy and the president can’t stop it.”

Photo via Wikimedia Commons

Happy Days Here Again? Jobs Surge, Stocks Hit Record High

By Kevin G. Hall, McClatchy Washington Bureau

WASHINGTON — Job growth surged in June, capping the best first half since 1999, driving blue chip stocks to a record high, and leading analysts to say the economy is shifting to higher gear.
Employers added a sizzling 288,000 jobs last month, the Labor Department said, pushing the unemployment rate down two-tenths of a percentage point to 6.1 percent, where it last was in September 2008.

Buoyed by the jobs report, blue chips raced past the 17,000 threshold at the open of trading and stayed there all day. Financial markets closed early for the Independence Day holiday, and the Dow Jones industrial index, composed of 30 major corporations, finished up 92.02 points to a record of 17,068.26.

The S&P 500 rose 10.82 points to 1985.44, itself approaching a record. The tech-heavy Nasdaq closed the day up 28.19 points to 4485.93.

The new jobs exceeded widespread expectations that the economy would add about 200,000 jobs last month. Statisticians also increased May’s already strong preliminary jobs number by 7,000 to 224,000, and April’s number by 22,000 to 304,000.

“Businesses are finally getting their groove back and hiring more. This signals that the expansion is moving into a stronger phase,” said Mark Zandi, the chief economist for forecaster Moody’s Analytics. “The job market has kicked into a higher gear. This month’s strong job gain overstates the case, but job growth is now double the pace necessary to reduce unemployment.”

Over the past 12 months, the unemployment rate has fallen by 1.4 percentage points and there are 2.3 million fewer unemployed people. The rate peaked at 10 percent in March 2009.

“Unemployment will soon blow through 6 percent, which will prompt a pickup in wage growth,” predicted Zandi. “Most people have jobs, and care most about how fast their pay is increasing. As wages improve, so too will consumer confidence and spending.”

Getting the jobless rate below 6 percent would cross an important psychological threshold. Unemployment was 4.7 percent to 6 percent for much of 2007 and early 2008, when the economy was humming right before the crisis.

The sharply falling unemployment rate puts the Federal Reserve in a bind. It keeps the Fed on pace to end its controversial purchases of government and mortgage bonds by year’s end, removing a stimulus.

But because the economy is heating up, it might force the Fed to choose between higher inflation and higher lending rates. The Fed has held its benchmark lending rate near zero since December 2008. But as the economy improves, inflation should pick up, and raising interest rates is how the Fed clamps down.

AFP Photo / Scott Olson

Interested in economic news? Sign up for our daily email newsletter!

IRS Chief Refuses To Apologize For Lost Emails

By Kevin G. Hall, McClatchy Washington Bureau

WASHINGTON — The head of the Internal Revenue Service refused to apologize Friday for lost emails in the scandal over the improper screening of conservative groups and denied more widespread computer failures.

House Ways and Means Committee Chairman Dave Camp (R-Mich.), grilled IRS Commissioner John Koskinen about why Congress wasn’t informed earlier that a computer hard drive failure had compromised Lois Lerner’s email records. She headed the exempt organizations division that acknowledged last year inappropriate scrutiny of Tea Party groups.

“I have never seen an IRS so broken,” Camp said in his opening statement, adding that average Americans find it hard to believe that the never-popular tax-collecting agency can just lose records. “How far would the excuse of, ‘I lost it,’ get with the IRS?”

Camp asked for an apology for being kept in the dark about the hard drive failure.

“I don’t think an apology is owed,” snapped Koskinen, a management turnaround specialist tapped by three presidents to fix troubles in government.

At times, the contentious hearing lost all decorum.

“I don’t believe you. That’s your problem, no one believes you,” Rep. Paul Ryan (R-Wis.), told Koskinen.

Rep. Kevin Brady (R-Texas), called the agency Koskinen leads “the most corrupt and deceitful IRS in its history.”

Koskinen, sworn in two days from Christmas last year, was taken aback.

No one has ever questioned his integrity, he countered, noting the agency has a long history. That was a not-so-veiled reference to President Richard Nixon, whose misuse of the IRS against opponents became one of the articles of impeachment that forced Nixon to resign.

Republicans argue that’s not far off from the unfair treatment of applications by conservative organizations for tax-exempt status. The IRS maintains the scrutiny was to ensure the groups in question were educational organizations, not political ones funneling money into campaigns.

The central focus Friday was when Koskinen knew about missing emails and when he decided to tell Congress about them. Camp and other top Republicans argue that the Treasury Department and the White House were aware of the hard drive failure in April, yet the IRS told Congress on June 13.

Koskinen tried to explain that in fact this information already had been provided to Congress, that lawmakers were told back in March that the date sequence of emails suggested something was awry.

Koskinen said he was unaware of communication between his legal department and other branches of the federal government. In any event, he insisted, it didn’t affect anything the IRS was doing.

As to lost emails, Koskinen disputed the term, saying about 24,000 have been recovered from accounts to which Lerner had emailed. By the end of the month, 67,000 Lerner emails will have been provided to Congress.

“A hard drive crash does not mean the emails are lost forever,” the IRS chief said.

It was Lerner, he added, who pushed her information technology department to try to recover lost emails in April 2011. The effort was eventually pushed up to the criminal division of the IRS, which has high-level forensic specialists trained in recovering lost data. They could not recover any data.

A backup tape designed to store IRS emails only does so for six months — industry practice — and the missing emails from a period between 2009 and 2011 disappeared from IRS computer servers. It wasn’t clear whether the email of IRS executives is stored differently than that of the roughly 90,000 rank-and-file IRS employees.

Taking responsibility for the decision to delay the release of information to Congress, Koskinen said the delay was meant to provide more complete information to lawmakers.

“If we provide incomplete information, people sometimes tend to leap to a conclusion,” he said.

Asked if he supported a special prosecutor, Koskinen said there are six government investigations now underway and a special prosecutor would be a “monumental waste of taxpayer money.”

Next week isn’t likely to be much friendlier for Koskinen. He’s been called to testimony in a rare Monday night hearing of the House Committee on Oversight and Government Reform.

Photo via WikiCommons

Interested in U.S. politics? Sign up for our daily newsletter!

What Happens In Iraq Doesn’t Matter To U.S. Economy

By Kevin G. Hall, McClatchy Washington Bureau

WASHINGTON — The unraveling of Iraq is of little consequence to the United States in economic terms.

More than a decade after the U.S.-led invasion, Iraq’s economy remains in shambles and two-way trade outside the oil sector remains minimal.

So disappointing is Iraq’s economy that the Heritage Foundation, the conservative research center that rates countries on its Index of Economic Freedom, is still unable to rank it. Heritage cites “political and security challenges,” and notes on its website that Iraq was last ranked in 2002, when Saddam Hussein was in power.

A few marquee signs of American-style capitalism do exist in Iraq. They include a smattering of fast-food joints: McDonald’s, Pizza Hut, and the like.

Citibank announced last year that it would open a branch office in Iraq. And that most iconic of American products, Coca-Cola, purchased a wholly owned subsidiary in 2011 to manufacture soft drinks in Irbil, the capital of the Kurdish-controlled northern region.

But a close look at trade data shows just how little commercial activity there is outside of Iraq’s vast oil and natural gas deposits.

Because of its oil exports, Iraq enjoys a large trade surplus with the United States. Crude oil accounted for almost $13.29 billion of Iraq’s $13.3 billion in exports to the United States last year. That’s up from $8.35 billion in 2004 out of $8.51 billion in total exports to the United States.

After oil, the next largest category is artwork and antiquities. A booming rug trade has taken exports of carpets from $3,000 in 2004 to $389,000 last year. But that’s chump change in the bustling world of international trade.

U.S. exports to Iraq have grown from $856.4 million in 2004 to $2.03 billion in 2013. Military aircraft make up the largest part of that, at almost $173.5 million last year, closely followed by industrial engines at $163.8 million and aircraft engines and parts at $119.9 million.

American ranchers have done better, exporting $115.7 billion in meat and poultry products to Iraq from $15.9 million in 2004.

By comparison, U.S. exports to Saudi Arabia totaled $18.98 billion last year.

But that’s dwarfed by exports to Brazil, another emerging economy, which last year imported more than $44 billion in U.S. goods. Exports to China exceeded $122 billion in 2013.

“The United States is not a large trading partner, outside of oil, with Iraq,” said Raj Desai, a senior fellow who’s studying the global economy for the Brookings Institution, a center-left research center.

When the United States invaded Iraq in 2003, the Bush administration envisioned the country as a model economy for the region. It sought to reverse dictator Saddam’s reasonably robust state-owned manufacturing sector and state-controlled economy. In its place would be a competitive private sector that embraced the free market.

It hasn’t quite turned out that way.

The International Monetary Fund has criticized Iraq for failing to establish a strong stabilization fund that ensures oil revenues will be put to specific social and economic uses. Recent Iraqi governments have left themselves enormous discretion on how this money is used. Critics say it’s led to cronyism and corruption.

The sectarian violence that’s prevalent in Iraq today makes it unlikely the nation will attract much in the way of new foreign investment.

“It’s not clear there’s going to be an Iraqi state that survives the current conflict,” said J. Daniel O’Flaherty, vice president of the National Foreign Trade Council, a trade group for multinational corporations that advocates for clear global rules for trade and investment. “It’s not clear that there’s going to be a single state.”

Photo: Mohammed Sawaf via AFP

Interested in world news? Sign up for our daily newsletter!