Obama’s 'Grand Bargain' for job creation
Recapping the day's news and newsmakers through the lens of CNBC.
President Obama wants corporate tax reform and job creation. OK, but when all is said and done, will this make corporate taxes higher or lower?
For business executives, that's the bottom-line question in President Obama's new "Grand Bargain" that would pay for roads and other infrastructure spending with a business tax overhaul.
Many details are yet to come, but the plan would, on the one hand, cut the top corporate tax rate to 28 percent from 35, while on the other it would change depreciation schedules and impose a minimum tax on foreign earnings. Taxes on manufacturers would be capped at 25 percent.
Just how much new revenue this would raise is not yet clear, but Obama had earlier proposed $50 billion in infrastructure spending focused on projects intended to create jobs.
The strategy, outlined in a speech to be given today at an Amazon.com facility in Chattanooga, Tenn., is to break congressional gridlock by coupling corporate tax reform Republicans want with infrastructure spending desired by Democrats. In addition to roads and bridges, the money would be used to improve community colleges and promote manufacturing.
Skeptics say proposals sketched out by Obama in recent day are sketchy, that the government's ability to create jobs is limited and that foreign earnings repatriation often fails to raise significant tax revenue.
"As part of his efforts to focus Washington on the middle class, today in Tennessee the president will call on Washington to work on a grand bargain focused on middle-class jobs by pairing reform of the business tax code with a significant investment in middle-class jobs."—Obama senior advisor Dan Pfeiffer
"I think the most important point here with respect to the corporate tax rate, or at least in the context of this discussion—the tax repatriation push—is that you're really talking about a very small group of companies."—Dan Greenhaus, BTIG chief global investment strategist
Wall Street snores
Everyone agrees the deficit is the country's biggest problem, stifling growth and job creation, mortgaging our children's futures and just basically causing a world of hurt.
Well, that view's so, so January. Back then 80 percent of experts polled in a CNBC survey said the U.S. should immediately establish a deficit reduction plan. Nowadays, the deficit is a bit of a yawner, with just 40 percent favoring immediate action.
That's among the findings of the July CNBC Fed Survey of 50 top economists and other experts, which also found that 52 percent of respondents feel the country has "at least a couple of years" to set up a deficit reduction plan, up from 16 percent in January.
What's changed? For starters, the deficit has already dropped considerably, from 10.47 percent of gross domestic product to 3.96 percent. Also, many economists believe current deficit-reduction moves, such as sequestration and tax hikes, are undermining growth, cutting GDP growth by as much as 1.5 percentage points.
Those polled also think Congress is less likely now than in recent years to have a showdown over the debt ceiling.
"Respondents put the possibility that Congress will fail to raise the debt ceiling and the U.S. will default on its payments at just over 5percent. About a third of respondents see the coming debt ceiling debate asless contentious than the last one."—CNBC's Steve Liesman
Big home price gains
Home prices rose 12.2 percent from May 2012 to May 2013, the largest annual increase since 2006, according to the widely followed S&P/Case-Shiller index.
Clearly, the housing market is on the mend, which bodes well for the economy as a whole. Rising prices make homeowners feel more rich, encouraging them to spend, and higher prices reduce the legions of "underwater" homeowners, making the labor force more mobile.
Still, the Case-Shiller report released this morning showed that price gains may be leveling off, with a 1 percent seasonally adjusted gain in May, compared to 1.7 percent in April.
Yale professor Robert Shiller, co-founder of the index, nonetheless said that prices should continue to rise fast enough to make house-flipping a profitable business.
"The cities that bubbled in the past are bubbling again. To me, it seems to be at least partly psychological. They've seen it before and they're ready for it again. … It seems like California has historically been the most bubbly state in the country and it continues. ... For a flipper who can get out in about a year, it seems to be a fairly safe bet."—Yale's Robert Shiller
And that's despite a recent string of expensive recalls. Chrysler's Italian partner Fiat recently reported a quadrupling of net income in the second quarter. The companies are in the process of merging.
"Chrysler Group is poised for a very strong performance in the second half of the year, with the new Jeep Grand Cherokee and Ram 1500 pickup earning best-in-class recognition, and the all-new Jeep Cherokee now rolling off the line."—Chrysler Group Chairman and CEO Sergio Marchionne
—By Jeff Brown, Special to CNBC.com