Month: February 2018

U.S. President Donald Trump has reached an agreement with the Boeing Co to provide two Air Force One planes for $3.9 billion, the White House said on Tuesday.

“President Trump has reached an informal deal with Boeing on a fixed-price contract for the new Air Force One Program,” Deputy Press Secretary Hogan Gidley told Reuters. He said the contract will save taxpayers more than $1.4 billion, but those savings could not be independently confirmed.

Trump has said Boeing’s costs to build replacements for Air Force One aircraft – one of the most visible symbols of the U.S. presidency – were too high and urged the federal government in a tweet to “Cancel order!”

The Boeing 747-8s are designed to be an airborne White House able to fly in worst-case security scenarios, such as nuclear war, and are modified with military avionics, advanced communications and a self-defense system.

“President Trump negotiated a good deal on behalf of the American people,” Boeing said in a news release.

U.S. aerospace analyst Richard Aboulafia said the White House was engaging in “political theater.”

“There’s no evidence of a discount,” said Aboulafia, vice president of analysis at Teal Group.

Earlier this month, the Pentagon released Air Force budget documents for fiscal year 2019 disclosing the $3.9 billion cost for the two-aircraft program. The same 2018 budget document, not adjusted for inflation, showed the price at $3.6 billion.

Boeing would only have so much room to offer discounts given the high proportion of supplier content on Air Force One, from refrigerators to missile warning systems, Aboulafia said by phone.

The big U.S. defense contractor said the deal includes work to develop and build two planes, including unique items such as a communications package, internal and external stairs, large galleys and other equipment.

The “informal deal” will need to be codified in a formal contract with comprehensive, complex terms and conditions said Franklin Turner, a partner specializing in government contracts at law firm McCarter & English, suggesting a final deal was still a ways off.

Boeing stock was up 1.4 percent at $368.54, trading at an all-time high.

 
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Federal Reserve Chairman Jerome Powell, pledging to “strike a balance” between the risk of an overheating economy and the need to keep growth on track, told U.S. lawmakers on Tuesday that the central bank would stick with gradual interest rate increases despite the added stimulus of tax cuts and government spending.

Fed policymakers anticipate three rate increases this year, and Powell gave no indication in prepared remarks to the House Financial Services Committee that the pace needs to quicken even as the “tailwinds” of government stimulus and a stronger world economy propel the U.S. recovery.

“The [Federal Open Market Committee] will continue to strike a balance between avoiding an overheating economy and bringing … price inflation to 2 percent on a sustained basis,” Powell said in prepared remarks for his first monetary policy testimony to Congress as Fed chief.

“Some of the headwinds the U.S. economy faced in previous years have turned into tailwinds,” Powell said, noting recent fiscal policy shifts and the global economic recovery. Still, “inflation remains below our 2 percent longer-run objective. In the (FOMC‘s) view, further gradual rate increases in the federal funds rate will best promote attainment of both of our objectives.”

The testimony sent Powell’s first signal as Fed chief that the massive tax overhaul and government spending plan launched by the Trump administration will not prompt any immediate shift to a faster pace of rate increases. “Gradual” has been the operative word since the Fed began raising rates under Powell’s predecessor, Janet Yellen, in late 2015.

The Fed is expected to approve its first rate increase of 2018 at the next policy meeting in March, when it will also provide fresh economic projections and Powell will hold his first press conference.

“This is a continuation of where this Fed was under Chair Yellen,” said Robert Albertson, principal and chief strategist at Sandler O‘Neill & Partners in New York.

“They are normalizing, they are not tightening … The surprises, if we are going to see them, are going to be after more data comes out in the next month or two,” and accounts for things like the tax cuts and whether business investment spending continues higher, he said.

Market reaction was muted. U.S. stocks were trading slightly lower while the dollar .DXY was stronger against a basket of currencies. Prices of U.S. Treasuries were mixed.

Valuation pressures

Powell’s appearance before the House panel is his first as Fed chief. He used his prepared remarks to strike notes likely to be welcomed by the Republican majority on the panel – including promises of “transparency” and a nod to the monetary policy rules some of them favor.

“I am committed to clearly explaining what we are doing and why we are doing it,” Powell said.

But in his remarks and in a monetary policy report issued to Congress by the Fed last week he also stuck close to a safe script, mentioning none of the new initiatives that some of his colleagues have pushed for, such as a review of the Fed’s system for managing inflation.

That report acknowledged “valuation pressures” in parts of the economy, and noted the recent return of volatility in stock markets.

Though rising long-term interest rates and recent equity market volatility have tightened financial conditions, Powell said, “we do not see these developments as weighing heavily on the outlook for economic activity, the labor market and inflation.”

Rather, “the robust job market should continue to support growth in household incomes and consumer spending, solid economic growth among our trading partners should lead to further gains in U.S. exports, and upbeat business sentiment and strong sales growth will likely continue to boost business investment,” he said.
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Just as “Black Panther” is setting records at the box office, a new study finds that diverse audiences are driving most of the biggest blockbusters and many of the most-watched hits on television.

UCLA’s Bunche Center released its fifth annual study on diversity in the entertainment industry Tuesday, unveiling an analysis of the top 200 theatrical film releases of 2016 and 1,251 broadcast, cable and digital platform TV shows from the 2015-2016 season. Among its results: minorities accounted for the majority of ticket buyers for five of the top 10 films at the global box office, and half of ticket buyers for two more of the top 10.

“There has been some progress, undeniably. Things are not what they were five years ago,” said Darnell Hunt, director of the center, which focuses on African American studies, at the University of California, Los Angeles. “People are actually talking about diversity today as a bottom-line imperative as opposed to just the right thing to do. We’ve amassed enough evidence now that diversity does, in fact, sell.”

Minorities make up nearly 40 percent of the U.S. population, but Hispanic and African-American moviegoers over-index among moviegoers. According to the Motion Picture Association of America, Latinos make up 18 percent of the U.S. population but account for 23 percent of frequent moviegoers. Though African Americans are 12 percent of the population, they make up 15 percent of frequent moviegoers.

UCLA found that films with casts that were 21 to 30 percent minority regularly performed better at the box office than films with the most racially and ethnically homogenous casts.

Hunt believes that the wealth of data, as well as box-office successes like “Black Panther,” have made obvious the financial benefits of films that better reflect the racial makeup of the American population.

“I think the industry has finally gotten the memo, at least on the screen in most cases, if not behind the camera,” said Hunt. “That’s where there are the most missed opportunities.”

The report, titled “Five Years of Progress and Missed Opportunities,” covers a period of some historic high points for Hollywood, including the release of the best picture-winning “Moonlight,” along with fellow Oscar nominees “Hidden Figures” and “Fences.”

But researchers found the overall statistical portrait of the industry didn’t support much improvement in diversity from 2015 to 2016.

“With each milestone achievement, we chip away at some of the myths about what’s possible and what’s not,” said Hunt. “Every time a film like this does really well, every time we see a TV show like ‘Empire,’ it makes it harder for them to make the argument that you can’t have a viable film with a lead of color. Or you can’t have a universally appealing show with a predominantly minority cast. It’s just not true anymore because the mainstream, itself, is diverse.”

Some of the largest disparities for minorities detailed by the UCLA report were in roles like film writers (8.1 percent of 2016’s top films) and creators of broadcast scripted shows (7.1 percent). Hunt blamed the lag behind the camera on, among other factors, executive ranks that are still overwhelmingly male.

“It’s a white-male controlled industry and it hasn’t yet figured out how to incorporate other decision-makers of color and women into the process. So you have these momentary exceptions to the rule,” said Hunt, pointing to “Black Panther,” which has grossed $700 million worldwide in two weeks of release.

Such films, he said, show the considerable economic sense of making movies and television series that don’t ignore nearly half of their potential audience.

“It’s business 101,” Hunt said.
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U.S. President Donald Trump will meet with senators and Cabinet officials on Tuesday to discuss ways to lower the cost of the nation’s biofuels policy to oil refiners, according to sources familiar with the matter.

The meeting reflects rising concern in the White House over the current state of the U.S. Renewable Fuel Standard, a law requiring refiners to mix biofuels such as corn-based ethanol into their fuel, after a Pennsylvania refiner blamed the regulation for its recent bankruptcy.

The meeting will include Republican Senators Ted Cruz of Texas, Pat Toomey of Pennsylvania, Chuck Grassley and Joni Ernst of corn state Iowa, along with Environmental Protection Agency Administrator Scott Pruitt, Agriculture Secretary Sonny Perdue, and Energy Secretary Rick Perry, according to the sources.

The meeting will also include White House legislative director Marc Short, who will seek to ensure any agreement can be achieved through executive orders and regulatory actions defensible in court, the sources said.

Representatives for those officials, and the White House, declined to comment.

U.S. farm groups urged Trump in a letter on Monday not to weaken the RFS, calling it a critical engine of rural jobs. “Any action that seeks to weaken the RFS for the benefit of a handful of refiners will, by extension, be borne on the backs of our farmers,” according to the letter.

Under the RFS, refiners must earn or purchase biofuel blending credits called RINs to prove to the federal government that enough biofuels are being blended into their gasoline and diesel to comply with the policy.

As biofuels volumes quotas have increased over the years, however, so have prices for the credits – meaning refiners that buy them instead of acquire them by blending fuels themselves are facing rising costs.

Oil refiner Philadelphia Energy Solutions (PES), which employs more than 1,000 people in a key electoral state, declared bankruptcy last month and blamed the regulation for its demise. Reuters reported other factors may also have played a role in the company’s bankruptcy, including the withdrawal of more than $590 million in dividend-style payments from the company by its investor owners.

Two of the sources familiar with the agenda of the Tuesday meeting said at least four options aimed at reducing the cost of RINs to refiners like PES will be considered — though they noted the effort would be constrained by political and legal realities that have derailed previous reform efforts.

Prices of RINs tumbled by nearly 20 percent in the past week on expectations of a regulatory tweak.

One idea would be to count U.S. ethanol exports toward annual biofuels volumes mandates that are currently focused purely on domestic usage, an idea the sources said had been studied by Agriculture Secretary Perdue who now favors it.

Another idea would be to place a cap on the price of a RIN.

Senator Cruz late last year suggested capping RIN prices at 10 cents each, far below the current value of over 60 cents, in a move that was roundly rejected by biofuels advocates.

The meeting will also consider measures to remove speculation from the RIN market, potentially by limiting RIN transactions to those directly involved in generating and consuming them: blenders and refiners, the sources said.

Any plan would also likely include a concession to the ethanol industry, they said, such as a waiver to allow gasoline containing 15 percent ethanol to be sold year round. Sales of high-ethanol blends are currently restricted in the summer due to concerns over smog.

The meeting could also look at solutions focused more directly on refiner PES — like waiving its current RIN obligation valued at about $350 million, the sources said. But any such move would likely draw a backlash from other refiners who have no hope of receiving such a waiver.

 
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Barriers to equality are posing threats to democracy in the U.S. as the country remains segregated along racial lines and child poverty worsens, says a study examining the nation 50 years after the release of the landmark 1968 Kerner Report.

The new report released Tuesday blames U.S. policymakers and elected officials, saying they’re not doing enough to heed the warning on deepening poverty and inequality as highlighted by the Kerner Commission a half-century ago, and it lists a number of areas where the country has seen “a lack of or reversal of progress.”

“Racial and ethnic inequality is growing worse. We’re resegregating our housing and schools again,” former U.S. Sen. Fred Harris of Oklahoma, a co-editor of the new report and last surviving member of the original Kerner Commission created by President Lyndon Johnson in 1967. “There are few more people who are poor now than was true 50 years ago. Inequality of income is worse.”

The new study titled “Healing Out Divided Society: Investing in America Fifty Years After the Kerner Report” says the percentage of people living in deep poverty — less than half of the federal poverty level — has increased since 1975. About 46 percent of people living in poverty in 2016 were classified as living in deep poverty — 16 percentage points higher than in 1975.

And although there has been progress for Hispanic homeownership since the Kerner Commission, the homeownership gap has widened for African-Americans, the report found. Three decades after the Fair Housing Act of 1968 passed, black homeownership rose by almost 6 percentage points. But those gains were wiped out from 2000 to 2015 when black homeownership fell 6 percentage points, the report says.

The report blames the black homeownership declines on the disproportionate effect the subprime crisis had on African-American families.

In addition, gains to end school segregation were reversed because of a lack of court oversight and housing discrimination. The court oversight allowed school districts to move away from desegregation plans and housing discrimination forced black and Latino families to move into largely minority neighborhoods.

In 1988, for example, about 44 percent of black students went to majority-white schools nationally. Only 20 percent of black students do so today, the report says.

The result of these gaps means that people of color and those struggling with poverty are confined to poor areas with inadequate housing, underfunded schools and law enforcement that views those residents with suspicion, the report said.

Those facts are bad for the whole country, and communities have a moral responsibility to address them now, said Harris, who now lives in Corrales, New Mexico.

The new report calls on the federal government and states to push for more spending on early childhood education and a $15 minimum wage by 2024. It also demands more regulatory oversight over mortgage leaders to prevent predatory lending, community policing that works with nonprofits in minority neighborhoods and more job training programs in an era of automation and emerging technologies.

“We have to have a massive outcry against the state of our public policies,” said the Rev. William J. Barber II, a Goldsboro, North Carolina pastor who is leading a multi-ethnic “Poor People’s Campaign: A National Call for Moral Revival” next month in multiple states. “Systemic racism is something we don’t talk about. We need to now.”

The late President Johnson formed the original 11-member Kerner Commission as Detroit was engulfed in a raging riot in 1967. Five days of violence over racial tensions and police violence would leave 33 blacks and 10 whites dead, and more than 1,400 buildings burned. More than 7,000 people were arrested.

That summer, more than 150 cases of civil unrest erupted across the United States. Harris and other commission members toured riot-torn cities and interviewed black and Latino residents and white police officers.

The commission recommended that the federal government spend billions to attack structural racism in housing, education and employment. But Johnson, angry that the commission members didn’t praise his anti-poverty programs, shelved the report and refused to meet with members.

Alan Curtis, president of the Milton S. Eisenhower Foundation and co-editor of the new report, said this study’s attention to systemic racism should be less startling to the nation given the extensive research that now calls the country’s discriminatory housing and criminal justice systems into question.

Unlike the 1968 findings, the new report includes input from African-Americans, Latinos, Native Americans and women who are scholars and offer their own recommendations.

“The average American thinks we progressed a lot,” said Kevin Washburn, a law professor at the University of New Mexico, a citizen of the Chickasaw Nation of Oklahoma and one of the people who shared his observations for the report. “But there are still some places where Native people live primitive lives. They don’t have access to things such as good water, electricity and plumbing.”

Like the 1968 report, the new study also calls out media organizations for their coverage of communities of color, saying they need to diversify and hire more black and Latino journalists.

News companies could become desensitized to inequality if they lack diverse newsrooms, and they might not view the issue as urgent or newsworthy, said journalist Gary Younge, who also gave input to the report.

“It turns out that sometimes ‘dog bites man’ really is the story,” Younge said. “And we keep missing it.”
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The governor of Sao Paulo and likely centrist presidential candidate Geraldo Alckmin said on Monday that he would privatize Brazil’s state-run oil company Petroleo Brasileiro SA if he wins the elections in October.

Alckmin, who has single digit support in opinion polls, said during a television interview with Band TV that he favored private ownership of Petrobras, as Brazil’s biggest company is known, as long as the sale was conducted within a strict regulatory framework.

Once a taboo issue in Brazilian politics because of national sovereignty concerns, the privatization of Petrobras is set to become a campaign issue this year as Brazil struggles to bring an unsustainable budget deficit under control.

Brazil’s left fiercely rejects the sale of Petrobras, but the leftist leader leading early opinion polls, former President Luiz Inacio Lula da Silva, will likely be barred from running because of a corruption conviction and there are no obvious politicians who can fill his shoes.

It is not clear where the far right candidate Jair Bolsonaro, who is currently second in opinion polls, stands on relinquishing state control of Petrobras.

But his economic policy advisor Paulo Guedes told Valor newspaper in an interview published on Monday that he favored selling all state companies to raise 700 billion reais that would help pay off one fifth of Brazil’s public debt.
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