Obama’s tax, jobs bill strikes out in Senate

President Barack Obama: Is the magic gone? (AP)

A Democratic bill to extend jobless benefits and raise taxes on investment fund managers failed a key vote in the Senate on Thursday, dealing a blow to President Barack Obama’s push to boost the economy.

The bill would have extended popular business tax breaks, stopped a 21 percent Medicare pay cut for doctors treating elderly patients and extended extra Medicaid money to cash-strapped states. Democratic leaders failed to muster the 60 votes needed to overcome solid Republican opposition to the bill, which would have added about $55 billion to the deficit over 10 years. The Senate voted 56-40 against the measure.

The defeat sent Democratic leaders back to the negotiating table to try to win support from a few moderate Republicans.

“We’re not going to give up,” said Democratic Leader Harry Reid. It was unclear when the Senate would take up the measure again.

Senate Finance Committee Chairman Max Baucus said that “everything would be on the table” in an effort to try to win support from at least a few Republicans.

Republican opponents argued that the bill would add billions to an already bloated $1.4 trillion budget deficit. Democratic leaders had scaled back the bill from a version that failed a test vote earlier this week. That version would have added about $80 billion to the deficit over 10 years.

The Senate earlier in the day had rejected a Republican alternative that would have been paid for by across-the-board spending cuts for non-defense programs and freezing pay for federal workers.

“Americans are frustrated with the amount of spending and borrowing that we’re doing around here,” said Senate Republican Leader Mitch McConnell.

The deficit and $13 trillion national debt are becoming major issues in the November midterm congressional elections in which Republicans hope to gain control of Congress. Obama over the weekend had urged lawmakers in a letter to move swiftly to approve new measures to “spur job creation and build momentum toward recovery.”

The House of Representatives passed its version of the tax bill last month. On Thursday the House also approved a $30 billion plan to boost capital at independent community banks to encourage them to lend money to small businesses, which account for a large portion of jobs growth in the United States.

REVISIONS IN THE SENATE

Democratic leaders had scaled back their earlier bill in order to overcome growing concerns about its impact on the deficit. They removed a $25 a week unemployment insurance benefit increase that had been added in last year’s economic stimulus plan.

In the midst of the devastating oil spill in the Gulf of Mexico, the bill also raised the oil spill liability trust fund tax to 49 cents a barrel from 8 cents a barrel.

Democrats had also modified the investment fund managers’ tax, called carried interest, to address concerns voiced by some Senators. The provision would tax 75 percent of investment fund managers income at ordinary tax rates, with an exception for assets held at least 5 years, of which only 50 percent would be taxed at ordinary income rates.

Fund managers currently pay low 15 percent capital gains taxes on much of their earnings.

Democrats had also revised a measure dealing with small business taxes in hopes of winning support from Senator Olympia Snowe. But Snowe joined her fellow Republicans in voting against the bill.

Copyright © 2010 Reuters Ltd.

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Obama’s push on energy bill falls on deaf Capitol Hill ears

Obama exits stage right (Reuters)

President Barack Obama’s muted call for comprehensive energy legislation failed to sway a hesitant Congress on Wednesday, with hopes for approval before November elections fading fast.

In his first national address from the Oval Office, Obama said on Tuesday the Gulf of Mexico oil spill provided a chance to break the U.S. dependence on fossil fuels and find new ways to power factories, automobiles and electric utilities so they emit fewer global-warming pollutants.

But he offered no specifics, and the lack of guidance frustrated some supporters and lent little urgency to an issue that has fallen down a crowded list of congressional priorities less than five months before the congressional election.

“Some say you’ve got to bring climate change to the floor of the Senate right now. I don’t think there’s 60 votes for a climate change bill,” said Senator Byron Dorgan, a member of the Democratic leadership, referring to the number of votes needed to overcome Senate procedural hurdles.

Dorgan instead favors quick passage of a less ambitious bill approved by the Senate Energy Committee last year encouraging broader use of alternative energy.

In an effort to whip up support in Congress for an energy bill, Obama will meet leading Republican and Democratic senators next week. Democrat Joe Lieberman, Senate co-sponsor of a comprehensive energy approach, said Obama’s involvement would make it easier to get something through the Senate.

“I think the president is really focused on this now, and he can make all the difference,” he told reporters.

But Obama’s failure to specifically push for a comprehensive strategy in his speech was a missed opportunity, said Bill Galston of the Brookings Institution, a former adviser to President Bill Clinton.

“The president’s speech tacitly sounded the death-knell for the inclusion of serious climate change provisions in any energy bill that Congress might enact this year,” he said.

After long and contentious debates on a healthcare overhaul and financial regulatory reform, Congress has little appetite for another major political battle that forces lawmakers to take difficult votes shortly before voters render verdicts on their work.

The legislative agenda for Congress is already jammed, as lawmakers try to complete work on the overhaul of financial regulations, confirm a new Supreme Court nominee, bolster job growth and consider possible action on immigration and taxes.

SENATE DEMOCRATS TO CONSIDER APPROACH

Senate Democrats will meet on Thursday to discuss their approach on energy and the environment, with Senate Democratic leader Harry Reid and House of Representatives Speaker Nancy Pelosi hoping to decide how to proceed by July 4.

Obama’s fellow Democrats are battling to retain control of Congress in November, when they face heavy election losses amid a broad wave of voter unhappiness over high unemployment and the stumbling economy.

Democratic Senator Mary Landrieu of Louisiana said it would be hard to pass a comprehensive energy bill this year, but the oil spill could help galvanize support.

“It’s going to be very difficult, but I don’t think it’s impossible,” she said. “Big events like this move people, move the public and when the public moves, their leaders move.”

Republican Senator Lamar Alexander said an energy bill would take weeks of floor debate in a Senate that is already experiencing heavy fallout from the yearlong battle over the healthcare overhaul passed in March.

“It’d be hard to get all that done,” he said. “I think we should take steps toward clean energy rather than try to do anything comprehensive.”

Signs of election-year paralysis are already evident in Congress, where neither the Senate nor House has approved a budget blueprint this year and it appears unlikely they will.

“A Congress that can’t pass a budget is going to pass the most expansive environmental legislation in decades within months of an election — what are the odds of that?” asked Steven Schier, a political analyst at Carleton College in Minnesota.

The focus in Congress will be on the Senate, where global warming legislation has languished since the House narrowly passed a bill a year ago. So far, the 60 votes needed for any legislation have not clearly emerged.

The Senate has a few options. One likely outcome is that senators package a bill that gets tough on offshore drilling and also encourages more alternative energy sources.

A less likely outcome is that those elements of a bill are coupled with the comprehensive climate change legislation senators Lieberman and John Kerry are pushing to reduce U.S. carbon dioxide pollution by 17 percent by 2020, from 2005 levels.

“The president now needs to lay out the specifics. What exactly are the steps we know we can take now? What kind of sacrifices can be made? How can every American help?” said Michael Brune, executive director of the Sierra Club.

Copyright © 2010 Reuters LTD

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BP execs face grilling on Capitol Hill

(Reuters)

BP Plc’s U.S. chief faces accusations in Congress on Tuesday that the energy giant caused the worst oil spill in U.S. history with a calculated strategy to cut costs, hours before President Barack Obama uses a televised address to defend his handling of the disaster.

A day after BP shares fell 9 percent in London and New York and the company hired investment bankers for undisclosed reasons, U.S. lawmakers will ask Lamar McKay why BP made repeated choices that appeared to favor cost savings over safety before its rig blew up in the Gulf of Mexico.

BP shares steadied in early London trading on Tuesday, dropping by more than 2 percent early on before recovering to stand just 0.4 percent lower at 356.75 pence at 0825 GMT — indicating a modest recovery in U.S. trade later.

McKay, the head of BP America, will be surrounded at the congressional hearings by executives from Exxon Mobil, Chevron, ConocoPhillips and Royal Dutch Shell seeking to stave off repercussions for the industry.

McKay’s rivals are likely to hang him out to dry in a rush to prove their companies would never take such risks or face such failures as the spill that has poured millions of gallons of oil into the Gulf of Mexico.

“This incident represents a dramatic departure from the industry norm in deepwater drilling,” Exxon Mobil Chairman and Chief Executive Rex Tillerson said in prepared testimony obtained by Reuters.

The April 20 explosion on an offshore rig killed 11 workers and ruptured BP’s well. The spill has fouled 120 miles of U.S. coastline, imperiled multibillion-dollar fishing and tourism industries and killed birds, sea turtles and dolphins.

In a pivotal week in the crisis, Obama wraps up a two-day trip to the Gulf on Tuesday before returning to Washington to give a televised speech aimed at seizing political momentum that has slipped away as the oil flows unabated.

Some Gulf residents are angry at the commander-in-chief.

“This is ridiculous. This is America. They’re letting BP control this country? Or any other oil company? What’s going on in this world?” said oyster dock manager Terry Alexis in Empire, Louisiana.

Obama said he would press BP executives to deal “justly, fairly and promptly” with damage claims when he meets them at the White House on Wednesday.

The spill has overshadowed Obama’s political agenda of job creation and Wall Street reform — both key issues in November congressional elections in which his fellow Democrats are expected to face tough fights to hold on to their majorities.

GRILLING IN CONGRESS

BP has lost more than 40 percent of its market value since the crisis began and faced a barrage of criticism over its handling of the cleanup. Last week, it was confronted with a White House threat to widen its liabilities for the disaster.

Two Democratic lawmakers said British-based BP chose faster and cheaper drilling options in the Gulf of Mexico that “increased the danger of a catastrophic well failure.”

“It appears that BP repeatedly chose risky procedures in order to reduce costs and save time and made minimal efforts to contain the added risk,” Henry Waxman and Bart Stupak, the top Democrats on the House of Representatives Energy and Commerce Committee, said in a letter ahead of Tuesday’s hearing.

They quoted e-mails sent before the explosion by BP drilling engineers who called the project a “nightmare well” and said a team leader who opted not to use extra equipment to reduce the potential for gas flows into the well was “right on the risk/reward equation.”

BP Chief Executive Tony Hayward is expected to face harsh questioning at a congressional hearing on Thursday. A BP spokesman declined to comment on testimony before the hearings, which many investors see as political theater.

“The BP hearings will be a prime opportunity for members of Congress to show off their populist credentials,” said Michael Block, chief equities strategist at broker Phoenix Partners Group, declining to make a call on BP stock.

U.S. politicians have been calling on BP to scrap its quarterly dividend to ensure it has enough money on hand to pay the compensation claims and clean up the spill.

BP has hired investment banks Blackstone Group, Goldman Sachs Group and Credit Suisse Group as advisers, a source familiar with the matter said, without identifying the purpose of the advice.

“The biggest thing he (Obama) can do is make sure that this doesn’t happen down the line,” National Wildlife Federation naturalist David Mizejewski said in a boat off Louisiana’s tiny Queen Bess island. “We need to get serious about passing clean energy and climate legislation now.”

The smell of crude oil and dispersants filled the air and oily brown pelicans teemed on the island.

But stopping drilling is a double-edged sword for many on the Gulf of Mexico, who count on oil rigs to keep their states economically afloat.

BP’s McKay will argue that cutting back drilling operations will hurt American workers and increase risks of a spill, POLITICO reported, citing testimony provided to the Energy and Commerce Committee in advance of Tuesday’s hearing.

“America’s economy, security and standard of living today significantly depend upon domestic oil and gas production. Reducing our energy production, absent a concurrent reduction in consumption, would shift additional jobs and dollars off-shore and place millions of additional barrels per day into tanker ships that must traverse the world’s oceans,” McKay is scheduled to say.

Moody’s Investors Service warned in a report on Monday that it could be up to two years before oil production reaches pre-spill levels and that a six-month moratorium on deepwater drilling by the Obama administration posed many uncertainties.

Copyright © 2010 Reuters LTD

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Clapper considered top choice for White House intel post

James Clapper (AP)

Senior Pentagon official James Clapper has emerged as a leading candidate to replace Dennis Blair as director of national intelligence, but other candidates have not been ruled out, two U.S. officials said on Friday.

Clapper, undersecretary of defense for intelligence, has the support of Defense Secretary Robert Gates, who has considerable sway with President Barack Obama, the officials said on condition of anonymity.

The White House declined to comment on Clapper or other potential candidates to replace Blair, who was pushed out after a tumultuous 16 months in the job.

Blair’s deputy, David Gompert, will fill in temporarily after Blair formally leaves next Friday. Blair’s departure, announced Thursday, was the first major shake-up of Obama’s national security team.

White House spokesman Robert Gibbs said Obama had determined it was time for a change.

“The president decided to make a change. I’ll let that speak for itself,” he said, when asked whether Obama had lost confidence in Blair.

Obama began interviewing candidates to replace Blair before his resignation was announced.

“The president has talked to a number of well-qualified candidates, and we’ll make an announcement on who the next permanent DNI will be soon,” Gibbs told his daily news briefing.

Obama is unlikely to leave the DNI job vacant for long at a time of heightened domestic security concerns following a failed Christmas Day attempt to blow up a U.S. airliner and a botched May 1 car-bombing in New York’s Time Square.

Blair’s tenure has been marked by infighting within the CIA and sharp criticism over the intelligence community’s failure to prevent the Christmas Day plot.

“My guess is there is probably no harder job in Washington besides being president than being director of national intelligence,” Gibbs said. He said the job was newly created and that Blair had to address a range of issues, notably coordination among the many U.S. intelligence agencies.

“There’s no doubt that we continue to have, as a result — and we saw this — that the president identified on the attempted Christmas Day bombing — that there are still coordination issues that we have to work through,” Gibbs said.

Gates, a former director of the CIA, and Clapper have worked closely together on intelligence matters for decades.

Clapper was one of Gates’s first major hires when he became defense secretary under then-President George W. Bush, and one of the few appointees invited to stay on with Gates at the Pentagon after Obama took office.

Associates describe Clapper as a low-key career intelligence officer who is comfortable working behind the scenes.

Although Gates would make a formidable ally, some congressional aides questioned how Clapper, as a relative outsider, would fare in any bureaucratic skirmishes within Obama’s tight-knit White House.

Other possible candidates include John Hamre, who served as undersecretary of defense from 1993 to 1997, and National Counterterrorism Center Director Michael Leiter, officials said.

Copyright © 2010 Reuters Ltd.

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Parties find some hope in primary results

Kentucky winner Rand Paul (Reuters)

Both Democrats and Republicans found glimmers of hope for November’s midterm elections amid the political rubble on Wednesday, the day after an anti-establishment wave crashed over the two parties.

In Senate primary elections, disgruntled voters dumped one Democratic senator, Arlen Specter in Pennsylvania, and forced another, Blanche Lincoln, to a run-off in Arkansas in races that Republicans said showed broad anger with President Barack Obama and the Democrats’ policies.

But Democrats touted their win in a special U.S. House of Representatives election in Pennsylvania and took solace in the rout of the Republican establishment choice in favor of a conservative “Tea Party” candidate in Kentucky.

“It was a good news-bad news night for both parties,” said Jennifer Duffy, an analyst with the nonpartisan Cook Political Report. “Voters clearly said to both parties they are not happy with the status quo.”

The House race was the only contest that mirrored November’s elections by pitting the two parties head-to-head — and Democrat Mark Critz beat Republican Tim Burns by 8 percentage points in a blue-collar Democratic district that backed Republican presidential candidate John McCain in 2008.

It was the kind of swing district both parties must win in November, and the Republican loss raised questions about their ability to benefit from a sour voter mood and gain the 41 Democratic seats they need to claim control of the House.

“It demonstrates that Democrats can compete and win in conservative districts,” Democratic Party chief Tim Kaine said at the National Press Club. “It represented exactly the type of seat Republicans must win this fall if they are to be successful.”

But Republicans noted the Democrat won after distancing himself from Obama and House Speaker Nancy Pelosi and opposing parts of Obama’s agenda. They said the entire Democratic Party would be unable to do that in November, when all 435 House seats, 36 Senate seats and 37 governorships are at stake.

‘AN EARLY PREVIEW’

“This hard-fought race gave us an early preview of what Democrats will attempt to do in the fall in order to survive,” said Representative Pete Sessions, chairman of the House Republican campaign committee.

“They will steer clear of publicly campaigning with President Obama and Speaker Pelosi, distance themselves from the Democratic agenda, and attempt to co-opt Republican positions on the issues,” he said.

The loss by the six-term veteran Specter was a setback for Obama, who visited Pennsylvania on his behalf last September. A Specter television ad used his quote from that visit: “I love Arlen Specter.”

Republicans said they could take advantage in November of Obama’s unpopularity in conservative areas. Rand Paul, the conservative “Tea Party” favorite who beat a handpicked Republican establishment candidate in a Kentucky Senate primary, practically taunted Obama after his win.

“Please bring President Obama to Kentucky, bring him to campaign as much and as often as they can because he’s incredibly unpopular here,” Paul told Fox News Channel. “Bring it on.”

Paul rode to victory on the anger of grass-roots Tea Party activists who oppose runaway government spending and favor more limited government. Democrats hoped his win could open the door for their more moderate candidate, state Attorney General Jack Conway.

Kaine said the win by Paul — and the recent defeat of Utah Republican Senator Bob Bennett by Tea Party activists — was a sign of a Republican civil war that could have long-term benefits for Democrats.

“In order to satisfy Tea Party activists, Republicans are running to the right. As moderates are eliminated, the Republican Party will become less and less appealing to independents and other swing voters,” he said.

Wall Street analysts expressed concern the anti-Washington mood would lead both parties to pick more extreme candidates, raising the risk of gridlock on Capitol Hill when policymakers say unified action is needed to tackle the budget deficit.

“It seems to be the more extreme wings of either party who are winning and are not necessarily going to be fiscally responsible,” said John Canally, an investment strategist and economist for LPL Financial in Boston.

While the primaries are about appealing to the extremes, the November election would focus on winning the broad middle, said Stephen Wayne, a political analyst at Georgetown University.

“Voters who turn out in general elections are less ideological as a whole than in the primaries,” he said. “You see polarization in primaries — you won’t see it as much in the general election.”

The next political showdown comes on Saturday in another special House election in a Democratic district in Hawaii.

Copyright © 2010 Reuters LTD

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