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American Pie – June 8th.

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White House is directing agencies to cut budgets

The White House is directing agencies to develop plans for trimming at least 5 percent from their budgets by identifying programs that do little to advance their missions or President Obama’s agenda.

The request, made amid rising public anxiety over government spending, comes on top of a pledge by Obama this winter to freeze spending at most agencies for the next three years. In a joint memo to be delivered Tuesday morning, White House Chief of Staff Rahm Emanuel and budget director Peter Orszag order agency heads to go further by listing the programs that “are least critical” to their overall goals.

Republicans have relentlessly hammered Obama and congressional Democrats for their roles in driving budget deficits to record levels with expensive stimulus spending. With voters increasingly alarmed about the run of red ink, and with midterm congressional elections approaching, the White House has stepped up efforts to blunt criticism. The new directive is the latest in a series of initiatives, legislative proposals and veto threats in recent weeks aimed at demonstrating that Obama is minding every penny.

“The public wants to know that we’re willing to be very aggressive on spending. They’re willing to invest, but they also want to know that you’re going to wear the green eyeshades,” Emanuel said in an interview Monday. “That’s exactly what’s happening here.”

Previous administrations have asked agency heads to justify programs, but budget analysts said they could not recall a time when agencies had been ordered to volunteer programs for elimination. To encourage cooperation, Obama also will ask Congress for new authority to let agencies keep half the savings they identify, administration officials said. The agencies could then put the cash toward higher priorities rather than surrendering it all for deficit reduction, as is typical. Read more in The Washington Post.

As China’s Wages Rise, Export Prices Could Follow

SHANGHAI — The cost of doing business in China is going up. Coastal factories are increasing hourly payments to workers. Local governments are raising minimum wage standards. And if China allows its currency, the renminbi, to appreciate against the United States dollar later this year, as many economists are predicting, the relative cost of manufacturing in China will almost certainly rise.

The salaries of factory workers in China are still low compared to those in the United States and Europe: the hourly wage in southern China is only about 75 cents an hour. But economists say wage increases here will eventually ripple through the global economy, driving up the prices of goods as diverse as T-shirts, sneakers, computer servers and smartphones.

“For a long time, China has been the anchor of global disinflation,” said Dong Tao, an economist at Credit Suisse, referring to how the two-decade-long shift to manufacturing in China helped many global companies lower costs and prices. “But this may be the beginning of the end of an era.”

The shift was illustrated Sunday, when Foxconn Technology, one of the world’s largest contract electronics manufacturers and the maker of well-known products that include Apple iPhones and Dell computer parts, said that it was planning to double the salaries of many of its 800,000 workers in China, beginning in October. The new monthly average would be 2,000 renminbi — about $300, at current exchange rates.

The announcement follows a spate of suicides at two Foxconn campuses in southern China and criticism of the company’s labor practices.

Foxconn, based in Taiwan and employing more than 800,000 workers in China, said the salary increases were meant to improve the lives of its workers. Read more in The New York Times.

Global jitters as Britain, Germany announce severe spending cuts

The plans reflect concern about the consequences of crises in Greece, Spain and other weaker European economies. They also amount to a rejection of U.S. warnings that cutbacks now could imperil global recovery. Reporting from Washington, London and Los Angeles — Europe’s debt crisis sent more shockwaves around the world Monday as Britain’s new prime minister announced drastic cutbacks in government spending and Germany pressed ahead with its own austerity plans — steps that are likely to impede the U.S. and global economic recoveries.

British Prime Minister David Cameron warned that spending cuts would be felt “for years, perhaps even decades.” And German Chancellor Angela Merkel, who presides over Europe’s biggest economy, announced similar plans for spending reductions, higher taxes and other belt-tightening measures.

The British and German actions reflect concern about the consequences of government debt crises in Greece, Spain and other weaker European economies, but they also amount to a blunt rejection of the Obama administration’s warnings that cutbacks now could imperil the global recovery.

Europe’s woes already have been blamed for triggering a plunge in global stock markets in the last five weeks. On Monday the Dow Jones industrial average fell 115 points, or 1.2%, to 9,816, the lowest close for the blue-chip index since November. The Dow has fallen more than 12% since late April.

Sinking stock prices increase the risk that American consumers will cut back their spending and that companies will not invest or add new workers.

By most accounts, the U.S. economy has been growing since last summer, thanks largely to federal stimulus spending and rising global demand for American goods. But hiring has been muted and a slowdown in Europe would only make matters worse.

Deep government spending cuts, amid an already weak economic outlook there, would make Europe more vulnerable to falling back into recession, threatening demand for U.S. exports — a crucial part of President Obama’s job-creation strategy. Read more in The Los Angeles Times.

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Written by Theophyle

June 8, 2010 at 7:56 am

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