Summers: Obama stimulus aimed at long term too

Sun Dec 28, 2008 4:51pm GMT

WASHINGTON, Dec 28 (Reuters) - Spending government money solely to stimulate consumer spending would be a short-sighted mistake, one of U.S. President-elect Barack Obama's top economic advisers said on Sunday.

Lawrence Summers, a former treasury secretary and Obama's pick to head the White House National Economic Council, said policy needed to address both immediate job creation and longer-term investment needs.

"In this crisis, doing too little poses a greater threat than doing too much," Summers wrote in the Washington Post.

"Some argue that instead of attempting to both create jobs and invest in our long-run growth, we should focus exclusively on short-term policies that generate consumer spending," Summers said.

"But that approach led to some of the challenges we face today -- and it is that approach that we must reject if we are going to strengthen our middle class and our economy over the long run."

Obama has said that signing a major economic stimulus package will be his first priority when he takes office on Jan. 20. His advisers have been working with Congress to try to get a package ready for his approval right away.

Vice President-elect Joe Biden said on Tuesday the incoming administration was "getting awful close" to reaching agreement with Congress. Government sources have talked about moving a stimulus bill with a price tag in the range of $675 billion to $775 billion over two years.

The U.S. economy has been in a recession for a year and many economists expect growth to contract through the first half of 2009. That would make this the longest recession since World War Two.

"I don't think Americans can wait," Obama adviser David Axelrod said on the CBS program "Face the Nation" on Sunday. "People are suffering, our economy is sliding and we need to act. And so our message to Congress is to work on it with all deliberate speed."

Some in Congress have expressed concern about the huge amounts of money that have already been spent under the Bush administration in an effort to quell the financial crisis.

Sen. Bob Corker, the Tennessee Republican who called the $152 billion stimulus package that was passed earlier this year "silly", cautioned against rushing into more spending.

"Anything that's done in a stimulus package ought to be those kinds of things that are productive and move us ahead and are not just throwing money out in order to say that we've done something," Corker said on ABC's "This Week" show. (Reporting by Emily Kaiser; Editing by John O'Callaghan)

GE Reduced to ‘Sell’ by Sterne Agee Analyst Heymann

By Rachel Layne

Dec. 17 (Bloomberg) -- General Electric Co.’s rating was reduced to “sell” from “hold” by Sterne Agee & Leach Inc. analyst Nick Heymann, who cited economic challenges facing all its business units and predicted the company may cut as much as 9 percent of the workforce to shrink costs.

Heymann cut his projection for 2009 per-share profit by 30 cents to $1.40. GE yesterday said it would stop providing per- share forecasts and outlined a profit rise of no more than 5 percent next year for its nonfinancial units. That’s less than a targeted range of 10 percent to 15 percent the company provided in September.

“While it is highly understandable that GE would decide to eliminate quarterly earnings guidance, the reticence of the company to offer any annual full year EPS guidance likely speaks to several acute and complicated challenges that have emerged,” Heymann, who has covered the company for 25 years, wrote in a note to clients today.

Those challenges include the Fairfield, Connecticut-based company’s efforts to sustain its $1.24 annual dividend, keep its AAA debt rating, and reduce the size of the finance segment.

“We infer that GE is now increasingly being managed to protect its annual dividend -- in essence, GE’s new ‘core’ investor is the retail investor, which is supplanting institutional investors,” wrote Heymann.

As GE focuses on delivering the dividend, it may take “an extended period of time” before the company can fundamentally re-emerge as a growth and yield investment, the analyst wrote.

Read complete article

Public, private sector to invest US$280mn in Santa Marta mass transport system - Colombia

Tuesday, December 9, 2008

By Eva Medalla, Business News Americas

Colombia's government and the private sector will invest an estimated US$280mn to implement an integrated mass transport system in Santa Marta, in northern Magdalena department, an official from the national planning department (DNP) told BNamericas.

The public sector will invest US$123mn, while the private sector is expected to invest some US$157mn to install the necessary infrastructure, the official said, commenting on a plan presented by authorities at the CG-LA South American Integration Forum, held in Cartagena on December 2-3.

Works include the construction of at least 70km of road corridors to be used exclusively by buses. Authorities will carry out these roadworks, build bus terminals, install technology and improve road signaling, as well as financing project management, the official said.

Meanwhile, the private sector will cover the cost of purchasing, maintaining and operating buses, and will implement an electronic ticket system, as well as covering general maintenance costs, the official added.

Investments are expected to start next year and conclude in 2016 if all goes as planned, the official said.

Colombia has years of experience in integrated mass transport systems, beginning with the Transmilenio system in Bogotá. However, authorities still examined a number of international examples when designing the Santa Marta system, to avoid as many mistakes as possible.

Problems when implementing mass transport systems can be very expensive, said the official, citing Chilean capital Santiago's Transantiago as an example of a project gone wrong, costing the state and private sector much more than initially expected.

According to the official, implementing well-designed transport systems is a priority for the national government, which seeks to improve safety while simultaneously optimizing investment.

Visit CG/LA's page

Cisco Becomes Infrastructure Play on Obama Tech

Dec. 9 (Bloomberg) -- Cisco Systems Inc., General Electric Co. and Emcor Group Inc. may be winners as President-elect Barack Obama seeks to revive the U.S. economy by rewiring classrooms and libraries for high-speed Internet service and repairing bridges and highways.

While industrial giants such as U.S. Steel Corp. and Caterpillar Inc. were called on to build 47,000 miles of roads, bridges and tunnels under President Dwight Eisenhower in the 1950s, technology companies will be tapped under Obama to improve efficiency at hospitals and schools, ease congested traffic and make alternative fuels work, said analysts and company executives.

The president-elect’s transition team hasn’t put a number on the package. Economist James Galbraith, a Democratic Party adviser, recommends spending of more than $900 billion.

“This is a non-traditional stimulus,” said Frank MacInnis, chief executive officer of Emcor Group Inc., a Norwalk, Connecticut-based maker of systems for voice and data, electrical power and lighting. “These new priorities of the Obama administration are indicative of the way that systems installation is capable of improving the efficiency of existing facilities.”

Investors drove up shares of construction companies and steelmakers including Cemex SAB, Fluor Corp. and Olympic Steel Inc., by close to one-quarter yesterday after Obama said in a Dec. 6 radio address he’d launch “the single largest new investment in our national infrastructure since the creation of the federal highway system in the 1950s.”

Read complete article

$1 trillion rescue: Not so far-fetched

As economic conditions worsen, the estimated cost of stimulating the economy shoots up.

NEW YORK (CNNMoney.com) -- President-elect Barack Obama hasn't put a dollar figure yet on his promise to create an economic recovery package that he says will generate or save 2.5 million jobs over two years.

His reluctance may be with good reason: Obama is six weeks from taking office, and the potential cost of helping the economy could rise.

On Friday, the government reported that 533,000 jobs were lost in November, far more than economists had forecast. On Thursday alone, companies across a variety of industries announced nearly 30,000 layoffs.

It's not clear yet how bad things will be by the time Obama takes office in January.
"The picture is very fluid, and it's changing very quickly," said Gus Faucher, the director of macroeconomics at Moody's Economy.com.

Congress is expected to have an economic rescue bill ready for Obama to sign on Jan. 20. The Bush administration so far has been unwilling to commit more money to economic stimulus, although it did recently agree to an increase in unemployment benefits.

The more conditions deteriorate, the more likely it is that economists will jack up their estimates for what's required to put the economy back on track.

One leading economist, Economy.com founder Mark Zandi -- who was an unpaid adviser to the campaign of Republican presidential candidate John McCain -- boosted his estimate for needed stimulus to $600 billion from $400 billion in just nine days late last month.

Even with his increased estimate, "the $600 billion stimulus plan would not forestall a sizable decline in real GDP in 2009," Zandi wrote. He believes such a plan, however, would limit job loss and help restore gross domestic product -- the broadest measure of the economy's performance -- to its previous peak by the summer of 2010.

A Democratic aide in the House told CNNMoney.com that at the moment it's likely the proposed stimulus package for January will be between $400 billion and $500 billion and would include elements for infrastructure spending, green energy initiatives and tax cuts.

And if they can secure White House support, Democrats next week may try to pass an increase in food stamp benefits and in payments to states to help them fund Medicaid coverage, demand for which goes up when unemployment rises. But as of Friday afternoon, that seemed highly unlikely.

In mid-November Larry Summers, whom Obama has named to head his National Economic Council, said estimates for needed stimulus range between $500 billion and $700 billion.
But now some are saying even that may not be enough. Nobel Prize-winning economist Joseph Stiglitz of Columbia University, for instance, said in an op-ed in the New York Times last week that the size of the stimulus package could run as high as $1 trillion. Obama's goal of creating or saving 2.5 million jobs is too modest and should be doubled, he added.

Economy.com's Faucher said the total cost of stimulus could come close to $1 trillion but not necessarily all at once.

Lawmakers might pass a $500 billion or $600 billion package in January, but in the months that follow "if something goes wrong that ups the ante," Faucher said. Congress might need to commit another $400 billion or so by June of next year if the credit markets don't loosen up sufficiently, if the jobless rate continues to rise or if large companies like the automakers go belly up, he explained.

In the end, a serious guessing game

Not all economists are eager to put a price cap on a stimulus package.
"Be skeptical of all these numbers. All of them are guesses. ... They're based on notions without foundation, that we can forecast the depth and duration of the downturn," said Douglas Holtz-Eakin, a former Congressional Budget Office director who served as McCain's top economic adviser during the campaign.

The risk of making the wrong assumptions about the scope of the downturn is that Congress commits too much or too little money to deal with it, or disburses the money at the wrong time in the economic cycle.

This week, the National Bureau of Economic Research formally concluded that the United States has been in recession since December 2007.

Not long ago, many economists believed the recession would end by June 2009. Now most view that time frame as a best case scenario.

Rich Yamarone, director of economic research at Argus Research, describes himself as the "most optimistic guy on Wall Street." Three weeks ago he told CNNMoney.com he saw gloom, but not doom, in the economy.

Now he's not so sure.

Yamarone has changed his outlook in the past two weeks because of business data and sentiment surveys, as well as his conversations with C-suite executives across the country.
"We've gone from a yellow flag warning to a gale 5 hurricane warning," Yamarone said. "We're talking about a drowning economy." Without a sufficiently big stimulus package, he noted, "there's no catalyst for this to change."

That said, he's still reasonably optimistic that the economy might start to turn around next summer if Congress passes a stimulus package in the neighborhood of $700 billion and if the infrastructure projects funded by that package and intended to create jobs are up and running within 30 to 90 days from the time the package is approved. Any longer and he said he'll have to rethink his forecast.

At this point, it's all about jobs and fostering conditions to create them, Yamarone said. "The government has to bail out its citizens. This situation gets more grave by the day."

Interconexión entre Colombia y Panamá es fundamental para poder soñar con la unión energética desde Alaska hasta la Patagonia

“Ojalá esta obra se pueda iniciar, por tarde, en diciembre de 2009 o en el primer trimestre de 2010”, dijo el Presidente de la República, Álvaro Uribe Vélez, durante el foro ‘Construyendo Infraestructura para la Competitividad Regional’, que se realizó en Cartagena.

Cartagena, 2 dic (SP). La interconexión eléctrica entre Colombia y Panamá es fundamental para poder soñar con la unión energética desde Alaska hasta la Patagonia, aseguró este martes el Presidente de la República, Álvaro Uribe Vélez.

“Ojalá esta obra -la interconexión entre Colombia y Panamá- se pueda iniciar, por tarde, en diciembre de 2009 o en el primer trimestre de 2010”, dijo el Jefe de Estado, al intervenir en el foro ‘Construyendo Infraestructura para la Competitividad Regional’, que se realizó en Cartagena.

Durante el encuentro, el Mandatario explicó que otro de los proyectos del Gobierno es la contrucción de la Transversal de las Américas, obra que va desde Paraguachón -en la frontera con Venezuela-, hasta Palo de Letras -en la frontera con Panamá-.

Esta es una de las iniciativas viales más ambiciosas de la infraestructura colombiana, que permitirá incrementar la competitividad y fomentar el progreso económico y social de la Costa Atlántica.

El proyecto vial “Autopistas de las Américas” contempla el mejoramiento de alrededor de 1.575 kilómetros de carreteras existentes y la construcción de más de 1.650 kilómetros de nuevas vías, que serán desarrolladas en 3 fases.

Lea el artículo completo

Obama Pledges to Work with Governors to Address States' Budget Woes

PHILADELPHIA - The nation's governors came to tell tales of financial woe, but President-elect Barack Obama was already sold on their playing a role in the national economic recovery plan.

After convening almost a complete set of the state chief executives on Tuesday, Obama pledged "action, and action now" to address the budget shortfalls expected in no less than 41 states this year or next.

"As president, I will not simply ask our nation's governors to help implement our economic recovery plan," Obama told an assembly of 48 governors gathered in historic Congress Hall. "I will ask you to help design that plan. Because, if we're listening to our governors, we'll not only be doing what's right for our states, we'll be doing what's right for our country."

The pledge is easier said than accomplished. Twenty states have together cut $7.6 billion from their fiscal year 2009 budgets, the National Governors Association reports. Thirty states say they are expecting additional shortfalls totaling more than $30 billion.

After tenuous relationships with the Bush administration, several governors - most of them Democrats, as is Obama - said they were hopeful the incoming president would take their counsel as he crafts his economic recovery plan.

They, in turn, promised to help Obama promote his proposal to the American people.

"This is an unprecedented opportunity you're affording the nation's governors to have input on something that we believe is crucial to beginning the process of turning this country's economy around," Pennsylvania Gov. Ed Rendell told Obama.

The meeting came as Obama continued to send warm signals to state and local government officials. In introducing Arizona Gov. Janet Napolitano earlier this week as his choice to head the Department of Homeland Security, Obama said she knows "firsthand the need to have a partner in Washington that works well with state and local governments."

Obama is expected on Wednesday to name another governor, New Mexico's Bill Richardson, to serve as commerce secretary.

Obama had requested the meeting with the governors, which Rendell arranged and put in the historic hall where Congress used to meet before Washington was the nation's capital.

In a private meeting with Obama, there was general agreement among Democratic and Republican governors about the need for investments in infrastructure, said sources who were present.

The Obama team agreed.

"We need to rebuild America ... and an Economic Recovery Act has to do that," said Rep. Rahm Emanuel, D-Ill., who will serve as Obama's chief of staff and who was at the meeting. "You have Democratic and Republican governors who see that as essential to ... economic recovery in their states, and we see it as essential to the economic recovery for the country."

Read complete article

Press Release: The Five Champions Remaking Our World

2nd Annual Global Infrastructure Leadership Forum Announces

“The Five Champions Remaking Our World”

Washington, DC • Mayflower Hotel • December 10-12, 2008

Excerpt:

Washington DC – December 1, 2008 – CG/LA Infrastructure LLC, the world leader in strategic infrastructure project identification and development, announced today the selection of five ‘Champions who are Re-Making our World.’ The five Champions— Alfredo Elias Ayub, Eike Bautista, Quentin Kopp, Peter Barker-Homek and Peter Bezukladnikov—will be honored at the 2° Annual Global Infrastructure Leadership Forum, taking place from December 10-12 at the Mayflower Hotel in Washington, DC.

“These are the people whose imagination, hard work, creativity and professional capacity build the projects that define our world, they are truly extraordinary,” says Norman Anderson, President & CEO of CG/LA Infrastructure and the Global Infrastructure Leadership Forum.

The Five Global Forum Champions: The five champions come from Russia, Mexico, Brazil, the US and Abu Dhabi.

Alfredo Elias Ayub – CEO of Mexico’s Federal Electricity Commission, for the last 10 years he has overseen the steady growth in Mexico’s power sector, and specifically in terms of generation matrix. CFE provides service to more than 26 million customers throughout Mexico. They have been ranked #1 in Latin America for the last three years by the AmericaEconomia-CG/LA Infrastructure Rankings.

Eike Bautista – One of the world’s visionary infrastructure project developers, he is developing two major ports in Brazil, a major oil company and a series of critical power projects.

Quentin Kopp – Chairman of the California High Speed Rail Authority, he successfully negotiated the approval of a $10 billion bond approval for the project. Among key infrastructure developments is the extension of San Francisco’s BART metro, including an extension to the San Francisco airport.

Peter Barker-Homek – CEO of the TAQA, the Abu Dhabi sovereign wealth fund focused on energy and renewable energy projects. In two years he has built TAQA into a global enterprise with 2800 employees.

Peter Bezukladnikov – Director General, Group E4, the Russian Federation’s largest engineering company. E4 Group comprises 13 holding companies and 50 business units employing more than 17,000 specialists in 25 regions and in all federal districts of the Russian Federation.

Read complete Press Release

Not so fast: Valley high-speed rail plan still needs cash

ENR.com - Russell Clemings

Nov. 27--Now that California voters have approved $9 billion for a network of 220-mph trains, the system's sponsors are aiming at an even bigger prize -- $12 billion to $16 billion from the federal government.

The voters may not have realized it, but the bond issue they narrowly authorized Nov. 4 will cover scarcely 25% of the estimated $33.6 billion cost of the system's first phase, from San Francisco to Anaheim via Fresno, Bakersfield and Los Angeles.

Nevertheless, the 52.4% yes vote was enough to boost the spirits of high-speed rail proponents and -- in combination with the upcoming Washington power shift -- raise hopes that more money will be coming soon, perhaps even in an economic stimulus bill now under discussion.

"All of a sudden we're popular," said former state senator and Superior Court Judge Quentin Kopp, chairman of the California High-Speed Rail Authority board of directors.

The fast trains also hold potential to breathe new life into long-struggling places such as downtown Fresno, where a high-speed rail station is planned, most likely along the Union Pacific corridor near Chukchansi Park.

If and when it is built, high-speed rail "will ultimately change our task from focusing on attracting development to accommodating development, which is a happy transition," said Marlene Murphey, executive director of the Fresno Redevelopment Agency.

But with a bankroll amounting to a fraction of what it eventually needs, the rail authority isn't ready to call its plan a sure thing yet.

Three days after the election, the authority published an update of its 8-year-old business plan. It estimated construction costs at $23.5 billion in 2008 dollars, plus $3.2 billion to $4 billion for trains and about $6.1 billion for design work, rights of way and other expenses.

Besides the $9 billion authorized by Proposition 1A and the hoped-for $12 billion to $16 billion in federal funds, the authority also is counting on $6.5 billion to $7.5 billion from pension funds and other investors, plus $2 billion to $3 billion from local governments along the route.

Read complete article