2010 Election: Who's Spending The Most To Buy Influence? Unions

The American Federation of State, County and Municipal Employees is now the biggest outside spender of the 2010 elections, thanks to an 11th-hour effort to boost Democrats that has vaulted the public-sector union ahead of the U.S. Chamber of Commerce, the AFL-CIO and a flock of new Republican groups in campaign spending.

The 1.6 million-member AFSCME is spending a total of $87.5 million on the elections after tapping into a $16 million emergency account to help fortify the Democrats' hold on Congress. Last week, AFSCME dug deeper, taking out a $2 million loan to fund its push. The group is spending money on television advertisements, phone calls, campaign mailings and other political efforts, helped by a Supreme Court decision that loosened restrictions on campaign spending.

"We're the big dog," said Larry Scanlon, the head of AFSCME's political operations. "But we don't like to brag."

The 2010 election could be pivotal for public-sector unions, whose clout helped shield members from the worst of the economic downturn. In the 2009 stimulus and other legislation, Democratic lawmakers sent more than $160 billion in federal cash to states, aimed in large part at preventing public-sector layoffs. If Republicans running under the banner of limited government win in November, they aren't likely to support extending such aid to states.

Newly elected conservatives will also likely push to clip the political power of public-sector unions. For years, conservatives have argued such unions have an outsize influence in picking the elected officials who are, in effect, their bosses, putting them in a strong position to push for more jobs, and thus more political clout.

Some critics say public-sector unions are funded by what is essentially taxpayer cash, since member salaries, and therefore union dues, come directly from state budgets.

"Public-sector unions have a guaranteed source of revenue—you and me as taxpayers," said Glenn Spencer, executive director of the Workforce Freedom Initiative at the Chamber of Commerce.

Gregory King, a spokesman for AFSCME, said conservatives make too much of the issue, especially the link to taxpayers. Based on their logic, "the government is funding the movie industry every time AFSCME members go out to the movies," he said.

The union is spending heavily this year because "a lot of people are attacking public-sector workers as the problem," said AFSCME President Gerald McEntee. "We're spending big. And we're damn happy it's big. And our members are damn happy it's big—it's their money," he said.

Spending totals are still in flux, and another group could overtake AFSCME in the race's remaining days.

Campaign spending by outside groups is increasing rapidly but is still smaller than spending by the Democratic and Republican parties, which combined have already doled out nearly $1 billion in this election cycle, according to the nonpartisan Center for Responsive Politics.

AFSCME's campaign push accounts for an estimated 30% of what pro-Democratic groups, including unions, plan to spend on independent campaigns to elect Democrats. It was made possible in part by a 2010 Supreme Court decision that permitted companies and unions to use their own funds to pay for certain political ads. That unleashed a flood of contributions and spawned an array of new outside political organizations, most of which were set up to help elect Republicans.

The political debate over spending by outside groups has focused largely on advertising buys by those Republican-oriented groups. Unions have mostly escaped attention in that debate, in part because they traditionally have spent much of their cash on other kinds of political activities, including get-out-the-vote efforts.

Previously, most labor-sponsored campaign ads had to be funded by volunteer donations. Now, however, AFSCME can pay for ads using annual dues from members, which amount to about $390 per person. AFSCME said it will tap membership dues to pay for $17 million of ads backing Democrats this election.

President Barack Obama has criticized the Supreme Court decision that opened the door to more spending by corporations and unions. When asked about AFSCME's ramped up campaign efforts following the court's decision, the White House focused on largely anonymous campaign spending by what it termed "special interests."

"The president has been crystal clear that third-party groups which spend tens of millions of dollars from anonymous sources are a threat to our democracy—regardless of which candidates they support," said White House spokesman Josh Earnest. He said these groups are disproportionately backing Republican candidates.

Public-sector employees are bracing for the most severe budget crunch yet in fiscal 2012, which for many states starts in mid-2011. Federal stimulus aid will run out in a few months and Republicans oppose providing more. Tax revenues remain well below pre-recession levels and state lawmakers who raised taxes at record rates in 2010 are reluctant to go further.

Republican takeovers in Congress and statehouses could breathe life into efforts to restrict how public-sector unions collect and spend members' dues. Republican Gov. Chris Christie has proposed including public-employee unions under New Jersey's pay-to-play rules, which generally limit political contributions by affected groups and individuals. Other Republican governors are likely to pursue similar measures.

One group, the National Right to Work Legal Defense Foundation, one of the main conservative union critics, advocates turning public-sector unions into voluntary organizations. That would deprive unions of the ability to use the government payroll system to collect dues and contributions. It would also allow state and local employees to organize and bargain in other ways.

Mr. Scanlon, who has run elections for AFSCME for nearly 15 years, acknowledged the connection between the number of government jobs and the union's political clout. "The more members coming in, the more dues coming in, the more money we have for politics," Mr. Scanlon said. AFSCME's membership has grown 25% in the past decade.

AFSCME began the year with a $70 million budget to campaign for Democrats who supported its priorities in Washington. It wasn't planning to help those who opposed issues including health-care legislation and extending unemployment benefits.

But with a Republican takeover of the House in the offing, AFSCME reversed itself and began supporting Democrats it once opposed, following what it calls the "218 Strategy," after the number of seats needed for a House majority.

In eastern Ohio, AFSCME is campaigning hard for Rep. Zack Space, even though the second-term Democrat has been abandoned by other unions and Democratic interest groups after he voted against health-care legislation. "We know he has been bad on the issues, but the point is, if you don't elect the Zack Spaces of the world then you end up with Speaker Boehner," said Mr. Scanlon, referring to Rep. John Boehner of Ohio, who is a leading candidate to become Speaker of the House if the Republicans take the majority.

"We may not be happy with him, but let's get people re-elected and work to change their votes. It's not a perfect world."

Because the union no longer needs to use volunteer donations to pay for attack ads, it has more money left in its political action committee to donate directly to candidates. AFSCME has donated a total $2.2 million directly to Democratic candidates in this election cycle, including nearly $100,000 this week to the re-election campaigns of 57 House and Senate candidates.

The union has also donated a total of $5 million to the Democratic Governors Association and Democratic Legislative Campaign Committee, making it the top donor to the Democrats' efforts to win gubernatorial and state-legislative races. It's also the top donor to Patriot Majority, a leading Democratic outside group that is running ads to help Senate Majority Leader Harry Reid of Nevada and other congressional Democrats.

News Corp., publisher of The Wall Street Journal, is one of the larger corporate donors on the other side of the ledger, and has donated $1.25 million to the Republican Governors Association and $1 million to the Chamber of Commerce. (source)

The Tea Party: A Movement, Not A Party (How The GOP Was Rescued By Its Base)

Two central facts give shape to the historic 2010 election. The first is not understood by Republicans, and the second not admitted by Democrats.

The first: the tea party is not a "threat" to the Republican Party, the tea party saved the Republican Party. In a broad sense, the tea party rescued it from being the fat, unhappy, querulous creature it had become, a party that didn't remember anymore why it existed, or what its historical purpose was. The tea party, with its energy and earnestness, restored the GOP to itself.

In a practical sense, the tea party saved the Republican Party in this cycle by not going third-party. It could have. The broadly based, locally autonomous movement seems to have made a rolling decision, group by group, to take part in Republican primaries and back Republican hopefuls. (According to the Center for the Study of the American Electorate, four million more Republicans voted in primaries this year than Democrats, the GOP's highest such turnout since 1970. I wonder who those people were?)

Because of this, because they did not go third-party, Nov. 2 is not going to be a disaster for the Republicans, but a triumph.

The tea party did something the Republican establishment was incapable of doing: It got the party out from under George W. Bush. The tea party rejected his administration's spending, overreach and immigration proposals, among other items, and has become only too willing to say so. In doing this, the tea party allowed the Republican establishment itself to get out from under Mr. Bush: "We had to, boss, it was a political necessity!" They released the GOP establishment from its shame cringe.

And they not only freed the Washington establishment, they woke it up. That establishment, composed largely of 50- to 75-year-olds who came to Washington during the Reagan era in a great rush of idealism, in many cases stayed on, as they say, not to do good but to do well. They populated a conservative infrastructure that barely existed when Reagan was coming up: the think tanks and PR groups, the media outlets and governmental organizations. They did not do what conservatives are supposed to do, which is finish their patriotic work and go home, taking the knowledge and sophistication derived from Washington and applying it to local problems. (This accounts in part for the esteem in which former Bush budget chief and current Indiana Gov. Mitch Daniels is held. He went home.)

The GOP establishment stayed, and one way or another lived off government, breathed in its ways and came to know—learned all too well!—the limits of what is possible and passable. Part of the social and cultural reality behind the tea party-GOP establishment split has been the sheer fact that tea partiers live in non-D.C. America. The establishment came from America, but hasn't lived there in a long time.

I know and respect some of the establishmentarians, but after dinner, on the third glass of wine, when they get misty-eyed about Reagan and the old days, they are not, I think, weeping for him and what he did but for themselves and who they were. Back when they were new and believed in something.

Finally, the tea party stiffened the GOP's spine by forcing it to recognize what it had not actually noticed, that we are a nation in crisis. The tea party famously has no party chiefs and no conventions but it does have a theme—stop the spending, stop the sloth, incompetence and unneeded regulation—and has lent it to the GOP.

Actually, Maureen "Moe" Tucker, former drummer of the Velvet Underground, has done the best job ever of explaining where the tea party stands and why it stands there. She also suggests the breadth and variety of the movement. In an interview this week in St. Louis's Riverfront Times, Ms. Tucker said she'd never been particularly political but grew alarmed by the direction the country was taking. In the summer of 2009, she went to a tea-party rally in southern Georgia. A chance man-on-the-street interview became a YouTube sensation. No one on the left could believe this intelligent rally-goer was the former drummer of the 1960s breakthrough band; no one on the left understood that an artist could be a tea partier. Because that's so not cool, and the Velvet Underground was cool.

Ms. Tucker, in the interview, ran through the misconceptions people have about tea partiers: "that they're all racists, they're all religious nuts, they're all uninformed, they're all stupid, they want no taxes at all and no regulations whatsoever." These stereotypes, she observed, are encouraged by Democrats to keep their base "on their side." But she is not a stereotype: "Anyone who thinks I'm crazy about Sarah Palin, Bush, etc., has made quite the presumption. I have voted Democrat all my life, until I started listening to what Obama was promising and started wondering how the hell will this utopian dream be paid for?"

There is also this week a striking essay by Fareed Zakaria, no tea partier he, in Time magazine. He unknowingly touched on part of the reason for the tea party. Mr. Zakaria, born and raised in India, got his first sense of America's vitality, outsized ways, glamour and crazy high-spiritedness as a young boy in the late 1970s watching bootlegged videotapes of "Dallas." What a country! His own land, in comparison, seemed sleepy, hidebound. Now when he travels to India, "it's as if the world has been turned upside down. Indians are brimming with hope and faith in the future. After centuries of stagnation, their economy is on the move, fueling animal spirits and ambition. The whole country feels as if it has been unlocked." Meanwhile the mood in the U.S. seems glum, dispirited. "The middle class, in particular, feels under assault." Sixty-three percent of Americans say they do not think they will be able to maintain their current standard of living. "The can-do country is convinced that it can't."

All true. And yet. We may be witnessing a new political dynamism. The Tea Party's rise reflects anything but fatalism, and maybe even a new high-spiritedness. After all, they're only two years old and they just saved a political party and woke up an elephant.

The second fact of 2010 is understood by Republicans but not admitted by Democrats. It is that this is a fully nationalized election, and at its center it is about one thing: Barack Obama.

It is not, broadly, about the strengths or weaknesses of various local candidates, about constituent services or seniority, although these elements will be at play in some outcomes, Barney Frank's race likely being one. But it is significant that this year Mr. Frank is in the race of his life, and this week on TV he did not portray the finger-drumming smugness and impatience with your foolishness he usually displays on talk shows. He looked pale and mildly concussed, like someone who just found out that liberals die, too.

This election is about one man, Barack Obama, who fairly or not represents the following: the status quo, Washington, leftism, Nancy Pelosi, Fannie and Freddie, and deficits in trillions, not billions.

Everyone who votes is going to be pretty much voting yay or nay on all of that. And nothing can change that story line now. (source)

Google Donates Huge Sums To Obama Campaign And Is Allowed To Cheat On Their Taxes

The Dublin subsidiary, which employs almost 2,000 people and sells advertising across Europe, the Middle East and Africa, has more than tripled its workforce since 2006 and is credited with almost 90 percent of Google’s overseas sales, which totaled $12.5 billion in 2008.

Google 2.4% Rate Shows How $60 Billion Lost to Tax Loopholes

Google Inc. cut its taxes by $3.1 billion in the last three years using a technique that moves most of its foreign profits through Ireland and the Netherlands to Bermuda.

Google’s income shifting -- involving strategies known to lawyers as the “Double Irish” and the “Dutch Sandwich” -- helped reduce its overseas tax rate to 2.4 percent, the lowest of the top five U.S. technology companies by market capitalization, according to regulatory filings in six countries.

“It’s remarkable that Google’s effective rate is that low,” said Martin A. Sullivan, a tax economist who formerly worked for the U.S. Treasury Department. “We know this company operates throughout the world mostly in high-tax countries where the average corporate rate is well over 20 percent.”

The U.S. corporate income-tax rate is 35 percent. In the U.K., Google’s second-biggest market by revenue, it’s 28 percent.

Google, the owner of the world’s most popular search engine, uses a strategy that has gained favor among such companies as Facebook Inc. and Microsoft Corp. The method takes advantage of Irish tax law to legally shuttle profits into and out of subsidiaries there, largely escaping the country’s 12.5 percent income tax. (See an interactive graphic on Google’s tax strategy here.)

The earnings wind up in island havens that levy no corporate income taxes at all. Companies that use the Double Irish arrangement avoid taxes at home and abroad as the U.S. government struggles to close a projected $1.4 trillion budget gap and European Union countries face a collective projected deficit of 868 billion euros.

Countless Companies

Google, the third-largest U.S. technology company by market capitalization, hasn’t been accused of breaking tax laws. “Google’s practices are very similar to those at countless other global companies operating across a wide range of industries,” said Jane Penner, a spokeswoman for the Mountain View, California-based company. Penner declined to address the particulars of its tax strategies.

Facebook, the world’s biggest social network, is preparing a structure similar to Google’s that will send earnings from Ireland to the Cayman Islands, according to the company’s filings in Ireland and the Caymans and to a person familiar with its plans. A spokesman for the Palo Alto, California-based company declined to comment.

Transfer Pricing

The tactics of Google and Facebook depend on “transfer pricing,” paper transactions among corporate subsidiaries that allow for allocating income to tax havens while attributing expenses to higher-tax countries. Such income shifting costs the U.S. government as much as $60 billion in annual revenue, according to Kimberly A. Clausing, an economics professor at Reed College in Portland, Oregon.

U.S. Representative Dave Camp of Michigan, the ranking Republican on the House Ways and Means Committee, and other politicians say the 35 percent U.S. statutory rate is too high relative to foreign countries. International income-shifting, which helped cut Google’s overall effective tax rate to 22.2 percent last year, shows one way that loopholes undermine that top U.S. rate.

Two thousand U.S. companies paid a median effective cash rate of 28.3 percent in federal, state and foreign income taxes in a 2005 study by academics at the University of Michigan and the University of North Carolina. The combined national-local statutory rate is 34.4 percent in France, 30.2 percent in Germany and 39.5 percent in Japan, according to the Paris-based Organization for Economic Cooperation and Development.

The Double Irish

As a strategy for limiting taxes, the Double Irish method is “very common at the moment, particularly with companies with intellectual property,” said Richard Murphy, director of U.K.- based Tax Research LLP. Murphy, who has worked on similar transactions, estimates that hundreds of multinationals use some version of the method.

The high corporate tax rate in the U.S. motivates companies to move activities and related income to lower-tax countries, said Irving H. Plotkin, a senior managing director at PricewaterhouseCoopers LLP’s national tax practice in Boston. He delivered a presentation in Washington, D.C. this year titled “Transfer Pricing is Not a Four Letter Word.”

“A company’s obligation to its shareholders is to try to minimize its taxes and all costs, but to do so legally,” Plotkin said in an interview.

Boosting Earnings

Google’s transfer pricing contributed to international tax benefits that boosted its earnings by 26 percent last year, company filings show. Based on a rough analysis, if the company paid taxes at the 35 percent rate on all its earnings, its share price might be reduced by about $100, said Clayton Moran, an analyst at Benchmark Co. in Boca Raton, Florida. He recommends buying Google stock, which closed yesterday at $607.98.

The company, which tells employees “don’t be evil” in its code of conduct, has cut its effective tax rate abroad more than its peers in the technology sector: Apple Inc., the maker of the iPhone; Microsoft, the largest software company; International Business Machines Corp., the biggest computer-services provider; and Oracle Corp., the second-biggest software company. Those companies reported rates that ranged between 4.5 percent and 25.8 percent for 2007 through 2009.

Google is “flying a banner of doing no evil, and then they’re perpetrating evil under our noses,” said Abraham J. Briloff, a professor emeritus of accounting at Baruch College in New York who has examined Google’s tax disclosures.

“Who is it that paid for the underlying concept on which they built these billions of dollars of revenues?” Briloff said. “It was paid for by the United States citizenry.”

Taxpayer Funding

The U.S. National Science Foundation funded the mid-1990s research at Stanford University that helped lead to Google’s creation. Taxpayers also paid for a scholarship for the company’s cofounder, Sergey Brin, while he worked on that research. Google now has a stock market value of $194.2 billion.

Google’s annual reports from 2007 to 2009 ascribe a cumulative $3.1 billion tax savings to the “foreign rate differential.” Such entries typically describe how much tax U.S. companies save from profits earned overseas.

In February, the Obama administration proposed measures to curb shifting profits offshore, part of a package intended to raise $12 billion a year over the coming decade. While the key proposals largely haven’t advanced in Congress, the IRS said in April it would devote additional agents and lawyers to focus on five large transfer pricing arrangements.

Arm’s Length

Income shifting commonly begins when companies like Google sell or license the foreign rights to intellectual property developed in the U.S. to a subsidiary in a low-tax country. That means foreign profits based on the technology get attributed to the offshore unit, not the parent. Under U.S. tax rules, subsidiaries must pay “arm’s length” prices for the rights -- or the amount an unrelated company would.

Because the payments contribute to taxable income, the parent company has an incentive to set them as low as possible. Cutting the foreign subsidiary’s expenses effectively shifts profits overseas.

After three years of negotiations, Google received approval from the IRS in 2006 for its transfer pricing arrangement, according to filings with the Securities and Exchange Commission.

The IRS gave its consent in a secret pact known as an advanced pricing agreement. Google wouldn’t discuss the price set under the arrangement, which licensed the rights to its search and advertising technology and other intangible property for Europe, the Middle East and Africa to a unit called Google Ireland Holdings, according to a person familiar with the matter.

Dublin Office

That licensee in turn owns Google Ireland Limited, which employs almost 2,000 people in a silvery glass office building in central Dublin, a block from the city’s Grand Canal. The Dublin subsidiary sells advertising globally and was credited by Google with 88 percent of its $12.5 billion in non-U.S. sales in 2009.

Allocating the revenue to Ireland helps Google avoid income taxes in the U.S., where most of its technology was developed. The arrangement also reduces the company’s liabilities in relatively high-tax European countries where many of its customers are located.

The profits don’t stay with the Dublin subsidiary, which reported pretax income of less than 1 percent of sales in 2008, according to Irish records. That’s largely because it paid $5.4 billion in royalties to Google Ireland Holdings, which has its “effective centre of management” in Bermuda, according to company filings.

Law Firm Directors

This Bermuda-managed entity is owned by a pair of Google subsidiaries that list as their directors two attorneys and a manager at Conyers Dill & Pearman, a Hamilton, Bermuda law firm.

Tax planners call such an arrangement a Double Irish because it relies on two Irish companies. One pays royalties to use intellectual property, generating expenses that reduce Irish taxable income. The second collects the royalties in a tax haven like Bermuda, avoiding Irish taxes.

To steer clear of an Irish withholding tax, payments from Google’s Dublin unit don’t go directly to Bermuda. A brief detour to the Netherlands avoids that liability, because Irish tax law exempts certain royalties to companies in other EU- member nations. The fees first go to a Dutch unit, Google Netherlands Holdings B.V., which pays out about 99.8 percent of what it collects to the Bermuda entity, company filings show. The Amsterdam-based subsidiary lists no employees.

The Dutch Sandwich

Inserting the Netherlands stopover between two other units gives rise to the “Dutch Sandwich” nickname.

“The sandwich leaves no tax behind to taste,” said Murphy of Tax Research LLP.

Microsoft, based in Redmond, Washington, has also used a Double Irish structure, according to company filings overseas. Forest Laboratories Inc., maker of the antidepressant Lexapro, does as well, Bloomberg News reported in May. The New York-based drug manufacturer claims that most of its profits are earned overseas even though its sales are almost entirely in the U.S. Forest later disclosed that its transfer pricing was being audited by the IRS.

Since the 1960s, Ireland has pursued a strategy of offering tax incentives to attract multinationals. A lesser-appreciated aspect of Ireland’s appeal is that it allows companies to shift income out of the country with minimal tax consequences, said Jim Stewart, a senior lecturer in finance at Trinity College’s school of business in Dublin.

Getting Profits Out

“You accumulate profits within Ireland, but then you get them out of the country relatively easily,” Stewart said. “And you do it by using Bermuda.”

Eoin Dorgan, a spokesman for the Irish Department of Finance, declined to comment on Google’s strategies specifically. “Ireland always seeks to ensure that the profits charged in Ireland fully reflect the functions, assets and risks located here by multinational groups,” he said.

Once Google’s non-U.S. profits hit Bermuda, they become difficult to track. The subsidiary managed there changed its legal form of organization in 2006 to become a so-called unlimited liability company. Under Irish rules, that means it’s not required to disclose such financial information as income statements or balance sheets.

“Sticking an unlimited company in the group structure has become more common in Ireland, largely to prevent disclosure,” Stewart said.

Deferred Indefinitely

Technically, multinationals that shift profits overseas are deferring U.S. income taxes, not avoiding them permanently. The deferral lasts until companies decide to bring the earnings back to the U.S. In practice, they rarely repatriate significant portions, thus avoiding the taxes indefinitely, said Michelle Hanlon, an accounting professor at the Massachusetts Institute of Technology.

U.S. policy makers, meanwhile, have taken halting steps to address concerns about transfer pricing. In 2009, the Treasury Department proposed levying taxes on certain payments between U.S. companies’ foreign subsidiaries.

Treasury officials, who estimated the policy change would raise $86.5 billion in new revenue over the next decade, dropped it after Congress and Treasury were lobbied by companies, including manufacturing and media conglomerate General Electric Co., health-product maker Johnson & Johnson and coffee giant Starbucks Corp., according to federal disclosures compiled by the non-profit Center for Responsive Politics.

Administration Concerned

While the administration “remains concerned” about potential abuses, officials decided “to defer consideration of how to reform those rules until they can be studied more broadly,” said Sandra Salstrom, a Treasury spokeswoman. The White House still proposes to tax excessive profits of offshore subsidiaries as a curb on income shifting, she said.

The rules for transfer pricing should be replaced with a system that allocates profits among countries the way most U.S. states with a corporate income tax do -- based on such aspects as sales or number of employees in each jurisdiction, said Reuven S. Avi-Yonah, director of the international tax program at the University of Michigan Law School.

“The system is broken and I think it needs to be scrapped,” said Avi-Yonah, also a special counsel at law firm Steptoe & Johnson LLP in Washington D.C. “Companies are getting away with murder.” (source)

Hope And Change Diary: Unemployment At 10% After Two Years Of Obama (How's That Hope And Change Working For You?)

PRINCETON, NJ -- Unemployment, as measured by Gallup without seasonal adjustment, is at 10.0% in mid-October -- essentially the same as the 10.1% at the end of September but up sharply from 9.4% in mid-September and 9.3% at the end of August. This mid-month measurement confirms the late September surge in joblessness that should be reflected in the government's Nov. 5 unemployment report.

Certain groups continue to fare worse than the national average. For example, 14.2% of Americans aged 18 to 29 and 13.8% of those with no college education were unemployed in mid-October.

Fewer Working Part Time Looking for Full-Time Employment

The percentage of part-time workers who want full-time work is at 8.6% of the workforce, not much different from the 8.7% at the end of September, but well below the 9.2% reading in the middle of last month.

Underemployment Is Declining

The decline in part-time workers wanting full-time work has led to a situation in which underemployment is declining even as unemployment is increasing. The 18.6% mid-October underemployment figure (the sum of the 10.0% unemployed and the 8.6% employed part time but wanting full-time work) is down slightly from 18.8% at the end of September and is the same as the reading in the middle of last month.

U.S. Unemployment Rate Should Increase on Nov. 5

Gallup's unemployment measure showed a sharp increase to double digits at the end of September, before seasonal adjustment. The mid-October measurement suggests the resulting double-digit unemployment rate has been maintained during the first half of the current month. In turn, this suggests that the government will report an increase in the U.S. unemployment rate for October.

In this regard, Gallup modeling suggests the government's unemployment rate report for October will be in the 9.7% to 9.9% range when it is released Nov. 5. The government's last report showed the U.S. unemployment rate at 9.6% in September on a seasonally adjusted basis, as Gallup anticipated. In addition to seasonal adjustments, the official unemployment rate is likely to be held down by a continued exodus of people from the workforce. It is easy for potential workers to become discouraged when the unemployment rate is expected to remain above 9% through the end of 2011.

In this regard, the lack of increase in Gallup's underemployment measure when the unemployment rate is increasing would normally be a good sign for jobs and the economy. However, the current decline in the percentage of workers employed part time but looking for full-time work is not necessarily positive. It might be that some workers who are employed part time are losing their jobs -- becoming unemployed or dropping out of the workforce -- and are not being replaced, while new part-time workers are not being hired.

Regardless, Gallup's employment data continue to reveal little good news for consumer spending, retailers, or the unemployed as the holidays approach.

Gallup.com reports results from these indexes in daily, weekly, and monthly averages and in Gallup.com stories. Complete trend data are always available to view and export in the following charts:

Daily: Employment, Economic Confidence and Job Creation, Consumer Spending
Weekly: Employment, Economic Confidence, Job Creation, Consumer Spending

Read more about Gallup's economic measures.

Survey Methods
Gallup classifies American workers as underemployed if they are either unemployed or working part time but wanting full-time work. The findings reflect more than 18,000 phone interviews with U.S. adults aged 18 and older in the workforce, collected over a 30-day period. Gallup's results are not seasonally adjusted and tend to be a precursor of government reports by approximately two weeks.

Results are based on telephone interviews conducted as part of Gallup Daily tracking Sept.16-Oct. 15, 2010, with a random sample of 18,218 adults, aged 18 and older, living in all 50 U.S. states and the District of Columbia, selected using random-digit-dial sampling.

For results based on the total sample of national adults, one can say with 95% confidence that the maximum margin of sampling error is ±1 percentage point.

Interviews are conducted with respondents on landline telephones and cellular phones, with interviews conducted in Spanish for respondents who are primarily Spanish-speaking. Each daily sample includes a minimum quota of 150 cell phone respondents and 850 landline respondents, with additional minimum quotas among landline respondents for gender within region. Landline respondents are chosen at random within each household on the basis of which member had the most recent birthday.

Samples are weighted by gender, age, race, Hispanic ethnicity, education, region, adults in the household, cell phone-only status, cell phone-mostly status, and phone lines. Demographic weighting targets are based on the March 2009 Current Population Survey figures for the aged 18 and older non-institutionalized population living in U.S. telephone households. All reported margins of sampling error include the computed design effects for weighting and sample design.

In addition to sampling error, question wording and practical difficulties in conducting surveys can introduce error or bias into the findings of public opinion polls.

For more details on Gallup's polling methodology, visit www.gallup.com. (Source)

Barry As President: How To Deal With Our Trade Deficit With China--Run Away From The Fight

(Reuters) - The Obama administration backed away on Friday from a showdown with Beijing over the value of China's currency that would have caused new frictions between the world's only superpower and its largest creditor.

The Treasury Department delayed a much-anticipated decision on whether to label China as a currency manipulator until after the U.S. congressional elections on November 2 and a Group of 20 leaders summit in South Korea on November 11.

Washington and the European Union accuse China -- set to become the world's second-largest economy after the United States this year -- of keeping the yuan artificially low to boost exports, undermining jobs and competitiveness in Western economies.

Fears are growing of a global "currency war" as major trading powers, such as the United States and Japan, seek to weaken their currencies while emerging economies such as Brazil and South Korea raise or threaten tougher controls to limit capital flows.

The decision to delay the Treasury's semi-annual currency report reflects a desire by the Obama administration to pursue diplomacy to resolve the dispute with China rather than provoke a confrontation that could potentially lead to a trade war and affect long-term interest rates.

In July, China held $847 billion in U.S. government debt.

In its statement, the Treasury seemed to be encouraged by China's recent action to allow its currency to rise by roughly 3 percent against the dollar since June 19.

"Since September 2, 2010, the pace of appreciation has accelerated to a rate of more than 1 percent per month," it said. "If sustained over time, this would help correct what the IMF (International Monetary Fund) has concluded is a significantly undervalued currency."

China argues that moving too quickly with currency reforms could devastate its export-driven economy.

It blames the United States for sluggish growth, high debts and an easy monetary policy that has flooded the market with newly printed dollars, weakening the U.S. currency and putting pressure on emerging countries to keep their currencies low.

But Washington argues that Beijing could relieve that pressure by letting the yuan strengthen.

"YUAN SHOULD NOT BE A SCAPEGOAT"

The Treasury said the G20 gathering in Seoul would give world leaders an opportunity to look at how best to rebalance the global economy. This was not just the responsibility of China and the United States, it stressed.

In another important summit, leaders of the Asia Pacific Economic Cooperation forum will meet on November 13-14.

"The Treasury will delay the publication of the report on international economic and exchange rate policies in order to take advantage of the opportunity provided by these important meetings," it said.

China left little doubt about the rancor that would ensue if it is branded as a currency manipulator -- a largely symbolic move by the United States that would mandate more consultations with Beijing but no immediate penalties.

"The Chinese yuan should not be a scapegoat for the United States' domestic economic problems," Commerce Ministry spokesman Yao Jian said on Friday.

The decision to delay the Treasury report appears to have been taken at the last minute. Industry sources had been primed to expect it by 1 p.m. EDT (1700 GMT) on Friday.

The Obama administration, seeming to anticipate criticism from U.S. lawmakers who are pushing for stronger action against China, brought forward an announcement of an investigation into whether Chinese support for its clean energy sector violates international trade rules.

But that was not enough to appease Democratic Senator Charles Schumer, who has sponsored legislation to get tough with China over its currency practices.

"The Obama administration is treating the symptom but not the disease," he said. "An investigation into China's illegal subsidies for its clean energy industry is overdue but it's no substitute for dealing with China's currency manipulation."

CONGRESS EYES DUTIES ON CHINA

The Treasury's decision may raise pressure on the Senate to approve a bill passed by the House of Representatives that would allow the United States to slap duties on imports from countries with fundamentally undervalued currencies.

"Democrats and Republicans alike in Congress are prepared to move legislation confronting China's currency manipulation this year," Schumer said. "We hope to have the administration's support but will go forward without it if necessary."

There had been speculation Obama might be tempted to label China as a currency manipulator for the first time in 16 years to look tough before the elections in which his Democrats risk big losses over discontent with his handling of the economy.

But there are concerns about angering China, whose support is needed on issues such as rebalancing the global economy, climate change and the nuclear programs of Iran and North Korea.

In an article published on Friday, Chinese central bank governor Zhou Xiaochuan pledged a continuation of yuan reform but only on Beijing's gradual terms. (source)

Barry As President: Immigration Cases Solved--Dismissing All Cases

In the month after Homeland Security officials started a review of Houston's immigration court docket, immigration judges dismissed more than 200 cases, an increase of more than 700 percent from the prior month, new data shows.

The number of dismissals in Houston courts reached 217 in August — up from just 27 in July, according to data from the Executive Office for Immigration Review, which administers the nation's immigration court system.

In September, judges dismissed 174 pending cases — the vast majority involving immigrants who already were out on bond and had cases pending on Houston's crowded downtown court docket, where hearings are now being scheduled into 2012.

Roughly 45 percent of the 350 cases decided in that court in September resulted in dismissals, the records show.

The EOIR data offer the first glimpse into Homeland Security's largely secretive review of pending cases on the local immigration court docket.

In early August, federal attorneys in Houston started filing unsolicited motions to dismiss cases involving suspected illegal immigrants who have lived in the country for years without committing serious crimes.

News of the dismissals, first reported in the Houston Chronicle in late August, caused a national controversy amid allegations that the Obama administration was implementing a kind of "backdoor amnesty" — a charge officials strongly denied.

In recent weeks, some immigration attorneys reported the dismissals have slowed somewhat, while others reported they now have to ask ICE trial attorneys to exercise prosecutorial discretion in order to have their cases dismissed. Others, however, said they are still being approached by government attorneys seeking to file joint motions for case dismissal.

"They're still doing it," said immigration attorney Steve Villarreal. "They're just doing it quietly."

Immigration and Customs Enforcement officials declined this week to discuss specifics of the docket reviews and dismissals, which are also going on in several other cities, including Dallas and Miami.

In response to the Houston EOIR data, ICE spokeswoman Gillian Brigham noted that immigration judges can terminate cases for other than prosecutorial discretion, such as when ICE does not meet its burden of proof. The Houston immigration courts averaged about 38 case terminations each month in the 10 months prior to the DHS review.

Broad set of criteria

ICE has tried to downplay the docket reviews, suggesting in some media accounts that they were limited to cases involving illegal immigrants with pending petitions filed by U.S. citizen relatives.

However, EOIR's liaison with the American Immigration Lawyers Association, Raed Gonzalez, said he was briefed on the guidelines in August directly by DHS' deputy chief counsel in Houston and described a broader set of internal criteria.

Government attorneys in Houston were instructed to exercise prosecutorial discretion on a case-by-case basis for illegal immigrants who have lived in the U.S. for at least two years and have no serious criminal history, Gonzalez said.

To qualify for dismissal, defendants also must have no felony record or any misdemeanor convictions involving DWI, sex crimes or domestic violence, he said.

Several dismissed cases examined by the Chronicle involved defendants without U.S. citizen relatives but with arguments for dismissal on humanitarian grounds, such as illegal immigrants brought to the U.S. as children who have stayed out of trouble and are enrolled in college.

Supporters of the review called it a necessary, common-sense step to reduce the system's staggering backlog, which hit an all-time high this year. In June, the number of pending immigration cases nationally reached 247,922, including 7,444 in Houston.

By moving to dismiss cases for people who have stayed out of trouble, the agency will be better able to use its limited resources to more rapidly deport those with serious criminal records, supporters said.

"It makes all of the sense in the world," John Nechman, a Houston immigration attorney, said of the review, which has led the dismissals of cases for several of his clients.

Dismissed, but still illegal

The dismissals essentially mean that officials are no longer actively trying to remove defendants through the immigration court system, though they can refile such charges at a later date.
The dismissals do not convey any kind of legal status, so recipients remain illegal immigrants and cannot work legally in the U.S.

But critics still charge that the dismissals show the government is not enforcing the law.

"When you have this kind of mass dismissal, it sends a very clear message to illegal immigrants, and to society at large, that the government is not serious about enforcing the laws," said Mark Krikorian, executive director of the Center for Immigration Studies, an organization that advocates for stricter border controls.

"This type of action muddles the message so both the public at large as well as illegal immigrants don't know what to think." (source)

Hope And Change Diary: Stimulus Bill Witness In Obama's White House Is Laid Off (How's That Hope And Change Thing Working For You Now?)

Toledo Public Schools teacher Amanda VanNess, second from right, is on hand as President Obama signs the stimulus bill.

TPS teacher who watched Obama sign bill is laid off

Board not using $7.6M share to rehire workers

As Toledo Public Schools teacher Amanda VanNess stood in the Oval Office and watched President Obama sign an education stimulus bill, she already knew she'd lost her teaching job back home to budget cuts and low seniority.

The $26 billion stimulus bill, designed to save 160,000 teacher and other government jobs across the nation, couldn't save her position at Pickett Elementary.

In fact, Ms. VanNess has been laid off twice from TPS this year.

TPS hasn't spent a dollar of the $7.6 million in teacher rehire money it received from the Aug. 10 bill, opting instead to save it for next school year to rehire or retain a myriad school employees - probably not teachers.

The legislation allows the one-time money to be spent that way over the two school years.

The hard-fought federal legislation was sold as a way for school districts to call back laid-off teachers or to save others from losing jobs. But as of Nov. 15, Ms. VanNess will be without a teaching assignment, according to TPS' human resources department.

Ms. VanNess, 25, couldn't be reached for this story, but the irony of her situation was featured in the Wall Street Journal last week and on television and talk radio.

The stimulus measure gave governors $10 billion in education aid to hire and retain certain local school district workers and about $16 billion to help cover increased costs for Medicaid, the state-level health-care program for the nation's poor. More people access Medicaid in hard economic times.

The bill was stalled in Congress, and House Speaker Nancy Pelosi (D., Calif.) called members back from a break in August to push it through. The legislation has become a powerful symbol in the rhetorical battle over the wisdom of stimulus spending and debate over government's proper size.

And Ms. VanNess' job loss has become political foil for the anti-Obama right as midterm elections approach.

To set up the bill signing in the Oval Office, the American Federation of Teachers contacted local union President Fran Lawrence and asked if she knew of a Toledo teacher who could come to Washington to stand with the President.

Ms. Lawrence thought of Ms. VanNess because she had been notified about her job loss. Ms. Lawrence said she doesn't feel the situation is ironic because Ms. VanNess was already laid off when the stimulus bill was signed.

The young teacher had received a letter in early July with an effective layoff date of Aug. 25.

Ms. VanNess traveled to Washington Aug. 10, but her plane was late and she missed attending a morning press conference when the President discussed the bill, Ms. Lawrence said.

But Ms. VanNess arrived in time to watch congressional debate about the bill, which passed on a party-line vote. Later, as she and the other visiting teachers with their guides approached the Oval Office, the door opened unexpectedly. The President emerged, reached out his hand, and said, "You must be Amanda, you were MIA this morning," said Ms. Lawrence, recounting what Ms. VanNess told her.

Ms. VanNess, the other teachers, and Education Secretary Arne Duncan stood behind the President as he signed the bill.

Ms. VanNess was officially laid off the day before school started, Aug. 25, about two weeks after her Washington trip.

She fell prey to budget cuts designed to close a $39 million deficit last school year. About 400 employees, including 237 teachers, received pink slips.

Student services were cut and bus service curtailed affecting about 5,000 students, and elimination of middle school and freshman sports.

About 24,350 students are enrolled in TPS.

Ms. VanNess was quickly reassigned as a second-grade permanent substitute at Reynolds Elementary School because a position opened up unexpectedly.
But Oct. 1, she was notified again. With falling enrollment, 14 more teachers were let go, effective Nov. 15. According to the union contract, the district must continue to employ the teachers for 45 days after they are notified.

"It's terrible," Ms. Lawrence said. "I wish they would have used some of that money not to lay off those 14 teachers because that disrupted those classrooms."

TPS released its head count for this school year in mid-September, down more than 5 percent. Many parents pulled their children because of cuts to services.

TPS Superintendent Jerome Pecko said the district expects a $44 million deficit next school year. He said he's scoured the wording of the federal legislation for permissible uses beyond rehiring teachers.

As enrollment falls, the district doesn't need as many teachers, and Mr. Pecko said he must balance all needs for students. He said the district might use the money to hire its own crossing guards, instead of using an outside company, and to hire more bus drivers to restore service to where it was before last year's budget cuts. (source)

After Years Of Attempts, Obama's Half Brother In Kenya Says He Married Teen

NAIROBI, Kenya – President Barack Obama's polygamist half brother in Kenya has married a woman who is more than 30 years younger than him.

The 19-year-old's mother told The Associated Press on Friday she is furious that her daughter quit high school and married the 52-year-old.

Mary Aoko Ouma says her daughter tried to marry Malik Obama two years ago, but the mother says she wouldn't give permission.

Malik Obama, who is Muslim, has two other wives. Polygamy is legal in Kenya if it falls under religious or cultural traditions.

In an interview broadcast by Kenya's NTV that was filmed without his knowledge, Malik Obama says he married the 19-year-old but didn't say when. (source)

Ft Hood Gunman Screams "Allahu Akbar" While On His Jihad Mission Of Shooting Unarmed US Soldiers

FORT HOOD, Texas – As dozens of soldiers lay dead or bleeding in a Fort Hood processing center last year, a gunman went outside and continued firing as others ran to nearby buildings, hid behind cars or carried wounded comrades to safety, witnesses told a military court Friday.

Chief Warrant Officer II Christopher Royal said he ran out of the center where soldiers were preparing to deploy after he heard gunshots and saw the shooter, but then decided to go back and try to stop the rampage, because "I told myself I could not let him get away with it."

Royal testified Friday during an Article 32 hearing that will determine whether Maj. Nidal Hasan should stand trial in the Nov. 5 shootings on the Texas Army post. The 40-year-old American-born Muslim has been charged with 13 counts of premeditated murder and 32 counts of attempted premeditated murder. The hearing is to resume Monday.

Crouching behind a car while deciding how to take the gunman "by surprise," the unarmed Royal saw a soldier run out of the back door and then fall face-down in the grass after the man chased and shot him, he testified. The shooter later started firing at Royal, who then ran to a nearby building to warn others to stay inside — and then realized he had been shot in the back, Royal said.

Sgt. Lamar Nixon testified Friday that after he escaped and ran into a nearby building, he and another soldier "bolted back out" and picked up a wounded comrade even though they still heard gunfire.

Nixon said he recognized Hasan as the gunman. Nixon, who worked in the building where soldiers must get vaccines and other routine medical tests before deployment, said Hasan had been there two or three times, including the morning of Nov. 5. Hasan had been at the center earlier to get vaccines because he was to be deployed the following month, but he did not respond when Nixon greeted him, the soldier testified.

Nixon said he remembered Hasan because of "his stature and just how he composed himself — stoic." The next time Nixon saw Hasan, it was after lunch when the psychiatrist stood from behind a front counter and began shooting after yelling "Allahu Akbar!" — "God is great!" in Arabic, Nixon testified.

Twenty-nine witnesses over three days have appeared in the courtroom or by video link. They have given similar accounts of how the rampage began, saying Hasan fired into a crowded waiting area and then walked around the building, shooting people as they hid under chairs and tables, pausing only to reload.

Some witnesses testified that Michael Grant Cahill, a civilian physician assistant, and Capt. John Gaffaney, a psychiatric nurse preparing to deploy to Iraq, each were fatally shot after picking up chairs to try to stop Hasan.

Only one witness has testified he saw two weapons. Others have said they saw one weapon, but descriptions about the gun have varied.

Addressing the court via video link from Afghanistan Friday, Spc. Megan Martin said the gunman was "shooting everything that moved." She was part of the 467th Medical Detachment, the combat stress unit Hasan was supposed to deploy with.

Immediately after the shootings, reports emerged that Hasan had been trying to get out of his pending deployment because he opposed the wars in Iraq and Afghanistan. He had been saying goodbye to friends and neighbors, and had given away his Quran and other belongings.

Hasan's lead attorney John Galligan asked Martin on Friday if the tragedy could have prevented her from deploying to a combat zone.

"I wanted to carry on with the mission, sir, as my fallen soldiers would want me to," she said.

Earlier Friday under cross examination, Pfc. Lance Aviles said he used his cell phone to record the rampage inside the processing center but was ordered by an officer to delete both videos later the same day. Aviles was not asked if he knew why the officer ordered the videos destroyed.

It's unclear exactly what the footage showed, although it could have been used as evidence in the case. Prosecutors have not said whether they'll seek the death penalty if the case goes to trial.

Hasan, who was paralyzed after Fort Hood police shot him that day, remains jailed in the Bell County Jail, which houses suspects for nearby Fort Hood. The military justice system does not have bail for defendants.(source)

Democrat Congress Further Endangers US Solvency By Passing 1.3 Trilion Dollar Budget

WASHINGTON – The Obama administration said Friday the federal deficit hit a near-record $1.3 trillion for the just-completed budget year.

That means the government had to borrow 37 cents out of every dollar it spent as tax revenues continued to lag while spending on food stamps and unemployment benefits went up as joblessness neared double-digit levels in a struggling economy.

While expected, the eye-popping deficit numbers provide Republican critics of President Barack Obama's fiscal stewardship with fresh ammunition less than three weeks ahead of the midterm congressional elections. The deficit was $122 billion less than last year, a modest improvement.

Voter anger over deficits and spending are a big problem for Democrats this election year. Republicans are slamming Democrats — who face big losses in November — for votes on Obama's $814 billion economic stimulus last year and on former President George W. Bush's $700 billion bailout of Wall Street.

Democrats say the recession would have been worse if the government hadn't stepped in with those programs to prop up the economy. They also note that most of the bailout, which began during the previous administration and was supported by many Republicans in Congress, has been repaid.

Outside of the bailout, the federal budget went up by 9 percent in the 2010 budget year to $3.5 trillion, the Congressional Budget Office reported last week. Food stamp payments rose 27 percent as record numbers of people took advantage of the programs, while unemployment benefits rose 34 percent as Congress extended benefits for the long-term jobless.

"The FY 2010 deficit remained elevated as a result of the severe economic recession, high unemployment, and the financial crisis inherited by the current administration," Treasury Secretary Timothy Geithner and acting White House budget director Jeffrey Zients said in a statement announcing the results.

Rising deficits will present headaches for policymakers regardless of which party controls Congress after November.

The administration is projecting that the deficit for the 2011 budget year, which began on Oct. 1, will climb to $1.4 trillion. Over the next decade, it will total $8.47 trillion. Deficits of that size will constrain the administration's agenda over the next two years and will certainly be an issue in the 2012 presidential race.

"Since the Democrat majority has taken control of the nation's checkbook, deficits have risen to staggering levels and will average $1 trillion annually for the next decade under the president's policies," said Sen. Judd Gregg, R-N.H. "These abrupt and shocking changes in our fiscal situation cannot be dismissed as 'inherited' problems when the tally of the majority's spending spree has climbed into the trillions."

Government revenues rose by $57.4 billion in 2010 compared to 2009, but more than two-thirds of that increase reflected higher payments from the Federal Reserve to the Treasury on all the investments the central bank has made to support the economy and the financial system during the recession.

Income tax revenue fell slightly as unemployment stays near 10 percent nationwide, though corporate tax receipts were up almost 40 percent as the economy slowly pulls out of the worst recession since the Great Depression.

Leading officials with the National Association for Business Economics forecast this week that the 2011 deficit will total $1.2 trillion, only slightly better than the administration's estimate. They cited excessive federal debt as their single greatest concern, even more so than high unemployment.

Obama's bipartisan deficit commission is supposed to report a deficit-cutting plan on Dec. 1, but panel members are unsure at best whether they'll be able to agree on anything approaching Obama's goal of cutting the deficit to about 3 percent of the size of gross domestic product (GDP).

The recommendations of the commission need the backing of 14 of its 18 members to trigger a congressional vote. Building that level of consensus will be difficult. Republicans are strongly opposed to a plan that includes tax increases to chip away at the deficit. Democrats are less inclined to move a package that relies solely on spending cuts.

Even if Congress doesn't vote on a deficit-cutting proposal, it faces the challenge of reaching a consensus on what to do with the Bush-era tax cuts that are set to expire on Dec. 31.

The Republicans are fighting to renew all of the tax cuts. Obama and the Democrats want to extend the tax cuts for every family making less than $250,000, but let them expire for the wealthiest households.

The difference between the two parties amounts to $700 billion that would be added to projected deficits over the next decade if the tax cuts for the wealthy were extended along with the other tax cuts.

So far, the huge deficits have not been a threat to the country. That's because interest rates have been so low coming out of the recession and the United States has been seen as a safe haven for foreign investors willing to keep buying U.S. Treasury bonds.

But the situation could change once the economy gains more momentum, analysts warn.

"If we get to 2013 and policymakers don't look like they have a credible plan to deal with the deficit, then interest rates are likely to rise significantly and that will jeopardize the recovery we have under way at that time," said Mark Zandi, chief economist at Moody's Analytics. (source)