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Posted on April 15, 2011
Congress passed a bill cutting nearly $40 billion from the 2011 budget after months of political haggling, taking only a small bite out of the burgeoning federal deficit but hitting a milestone in Republican efforts to slow the growth of government spending. The vote on the bill, the biggest fiscal measure to pass since voters elected a politically divided government last year, saw 81 Democrats join 179 Republicans in support, and 59 Republicans join 108 Democrats in opposition. Partly behind the GOP resistance were critics who say too many of the cuts come from one-time trims or from funds that were unlikely to be spent anyway. A report from the nonpartisan Congressional Budget Office found that the reduction in “outlays,” the amount of money actually going out the door this year, would be $352 million. Next order of business: a deficit-reduction framework to clear the way for raising the limit on how much the federal government can borrow.
Graphic: An Economy Divided
Obama asked Congress to adopt a mix of revenue increases and spending cuts to tame the nation’s longer-term budget deficits, in a combative speech that portrayed Republicans as backing “tax cuts for millionaires and billionaires” while demanding sacrifice from the nation’s seniors, poor and the middle class. It was the president’s most dramatic step yet into the debate over the nation’s fiscal future, an issue that both parties say is a matter of national security and which is likely to dominate the 2012 elections. He called for Congress to cut deficits by $4 trillion over 12 years and commit to automatic, across-the-board spending cuts and tax increases if an initial target isn’t met by 2014. On Friday, House Republicans voted to adopt a budget blueprint that would cut federal spending by $5.8 trillion over the next decade and fundamentally change the popular Medicare program for people under 55. The measure is likely to die in the Democrat-controlled Senate but will strengthen Speaker Boehner’s hand in negotiations.
Americans continued to abandon the nation’s heartland over the past decade, moving into metropolitan areas that have grown more ethnically diverse and less segregated, while about 46% of rural counties lost population, the 2010 Census showed. Hispanics, who have become the nation’s demographic driving force, accounted for 56% of population growth, an explosion that will remake the electoral map and could present Republicans with a challenge. A Brookings demographer estimates that by 2041, whites of European ancestry will make up less than 50% of the populace.
The nation’s top air-traffic control official quit under pressure as the head of the FAA moved to centralize control over an agency buffeted by budget problems, technological challenges and an outcry over controllers nodding off on duty.
Scientists funded by Microsoft co-founder Paul Allen unveiled a $55 million computerized atlas of the human brain, offering the first interactive research guide to the anatomy and genes that animate the mind and, with it, possibly new clues to the nature of conditions such as Alzheimer’s disease and autism and mental-health disorders like depression. It was quite a week for the human brain, as a separate study suggested the world’s 6,000 or so modern languages may have all descended from a single ancestral tongue spoken by early African humans between 50,000 and 70,000 years ago.
FBI agents ventured into Somalia in a first for U.S. antipiracy efforts and arrested the man who allegedly oversaw ransom negotiations for four Americans held hostage and later killed by pirates.
A federal jury found home run king Barry Bonds guilty of obstructing justice for giving evasive answers to a grand jury in 2003 but couldn’t reach a verdict on whether he lied about using steroids.
NATO’s military commander said the alliance needs eight sophisticated ground-attack fighter jets to carry out its Libya mission, saying at a Berlin summit that the warplanes are needed to cope with new tactics being used by forces loyal to Gadhafi, such as hiding tanks and other heavy military equipment in populated areas. Those forces have stepped up attacks on the western city of Misrata, while explosions rocked Tripoli after NATO aircraft were seen over the capital. Calls to arm Libya’s rebels and ramp up airstrikes have put the Obama administration on the defensive, after the U.S. dialed back its role. Earlier, rebels rejected a cease-fire proposal drawn up by African leaders and backed by Gadhafi, insisting any deal include the ouster of the leader and his sons from power.
Egypt’s ousted president Mubarak was put under detention, pending investigations into corruption charges and acts of violence. Clinton pressed Arab leaders to accelerate economic and political reforms but refrained from calling for rulers to step down in Yemen, Bahrain and Syria, where Assad formed a new government to appease protesters. Iran is secretly helping Assad put down pro-democracy demonstrations, U.S. officials say. At the same time, communications intercepted by U.S. spy agencies show Tehran is actively exploring ways to aid Shiite hard-liners in Bahrain and Yemen and destabilize longstanding U.S. allies there.
Japanese officials said they would put greater emphasis on protecting the Fukushima Daiichi nuclear plant from earthquakes and tsunamis, after a series of aftershocks showed the facility’s vulnerability. The government raised its assessment of the nuclear crisis to a severity ranking matched only by the 1986 Chernobyl incident in Ukraine.
Ivory Coast strongman Gbagbo was arrested after a lengthy standoff at his residence, ending a saga that began in November when he refused to acknowledge the results of a runoff he lost.
Leaders from Brazil, Russia, India, China and South Africa issued a new call for reform of the dollar-dominated international monetary system and for greater supervision of commodity markets and capital flows, as the so-called Brics nations seek to boost their influence in debates about the global economy. Europe’s struggling periphery is bracing for a blow to its already grim economic growth prospects from the soaring euro, which touched a 15-month high against the dollar.
Bank of America chief Moynihan abruptly shook up his management team and accelerated the planned exit of CFO Chuck Noski. The company, which has failed to stem nagging problems dating from the financial crisis, announced a 36% drop in first-quarter earnings, reinforcing its status as a laggard among major U.S. banks.
Number of the Week: 5.2%
Annualized growth in the price of Chinese imports to the U.S.
Beware the “China price.”
During much of the past decade, American companies’ efforts to shift their production to low-cost locales such as China and Southeast Asia helped keep a lid on inflation in the U.S. That benefit may now be reversing itself.
In the three months through March, the average price of goods imported from China rose at an annualized rate of 5.2%, according to the Labor Department. That’s the fastest pace since August 2008, and reflects both the rising value of the Chinese yuan and the rapid increase in Chinese workers’ wages.
For consumers in the U.S., it’s likely to mean higher prices on shoes, TVs and all the other goods for which they now depend largely on China.
BP’s chairman backed embattled Chief Executive Bob Dudley as shareholders at the company’s annual meeting slammed his handling of BP’s proposed Arctic-exploration deal with Russia’s state oil company and questioned the U.K. oil giant’s safety record in the wake of the Deepwater Horizon catastrophe. Mr. Dudley said BP, in a bid to smooth its proposed alliance with Russian state oil company Rosneft, had offered to buy out its billionaire partners in its existing Russian joint venture, who oppose the Rosneft deal.
France’s Schneider Electric made a preliminary bid of about $30 billion for Tyco International, hoping to draw the Swiss-based conglomerate to the negotiating table. There are antitrust risks to putting together Schneider and Tyco, two of the largest players in security systems.
Johnson & Johnson is in talks to buy U.S.-Swiss medical equipment maker Synthes in a deal that could be valued at about $20 billion.
Google reported an 18% profit increase and a 27% jump in revenue, as money continued to flow into Internet advertising. But what stood out was the Internet search giant’s surging costs as the company seeks to stay ahead in an increasingly competitive and fast-changing Silicon Valley scene.
Patrick Pélata resigned as Renault’s chief operating officer, as the French car maker attempted to close the book on an embarrassing episode in which it falsely accused and wrongfully fired three senior managers for alleged corporate espionage.
The Winklevoss twins must live with the settlement they struck with Facebook, a U.S. appeals court ruled. In a 2008 settlement, dramatized by the film “The Social Network,” Cameron and Tyler Winklevoss got $20 million in cash and $45 million in Facebook stock to drop their suit claiming that Facebook co-founder Zuckerberg stole their idea and that they were duped about the valuation of Facebook.
The New York Stock Exchange fought to defend its pending merger with Deutsche Borse, telling shareholders it is considering paying a special dividend as it sought support for the transaction. A competing bid from Nasdaq OMX and InterContinentalExchange, rejected by Big Board parent NYSE Euronext, offers about 15% more for the NYSE.
Glencore International said it would sell its shares to the public next month in London and Hong Kong. At the midpoint of its pricing, the commodities-trading giant would be valued at $57 billion.
U.S. investigators are examining whether some of the world’s biggest banks colluded to manipulate Libor, a key interest rate, affecting trillions of dollars in loans and derivatives. Meanwhile, U.S. securities regulators are in talks with several major Wall Street banks to settle fraud allegations related to mortgage-bond deals that helped spur the financial crisis.