Krebs Daily Briefing 26 February 2016


UBS Faces Money Laundering and Fraud Inquiry in Belgium

LONDON — The Swiss bank UBS is under scrutiny by the Belgian authorities over accusations of money laundering and fraud in an inquiry into whether the bank assisted wealthy individuals in avoiding taxes. A Belgian investigating magistrate judge is conducting an inquiry into whether the bank has committed serious and organized tax fraud, money laundering and other crimes, according to a statement by the Brussels prosecutor’s office. The Swiss bank is suspected of having directly approached Belgian customers, without going through its Belgian subsidiary, to encourage clients to engage in transactions meant to evade taxes, according to the Brussels prosecutor’s office, which declined to comment further. UBS acknowledged the inquiry, but said little more. “We take note of various articles in the press which indicate that an official investigation will be conducted,” a UBS spokesman said. “UBS will continue to defend itself against any unfounded allegations.” The judicial inquiry came after Belgium authorities said that they had received “excellent cooperation” from the authorities in France, which has conducted a similar inquiry into UBS’s activities. UBS was placed under formal investigation in France in July 2014 and ordered to post a bail of more than $1 billion after it was accused of money laundering and tax fraud for helping French clients hide funds from the national tax administration in the period from 2004 to 2012. That case is still underway. The investigation in Belgium is not the bank’s first run-in with the authorities in that country. In 2014, Marcel Bruehwiler, the chief executive of UBS’s Belgium business, was charged by the Belgian authorities for money laundering and other crimes after raids at the bank and his home and a client’s home. Later that year, the Belgian private bank Puilaetco Dewaay agreed to acquire UBS Belgium for an undisclosed sum. Tax authorities in the United States and Europe have been increasingly pursuing individuals who seek to avoid paying taxes and the institutions that assist them.

U.S. Plans to Put Advisers on Front Lines of Nigeria’s War on Boko Haram

DAKAR, Senegal — The Pentagon is poised to send dozens of Special Operations advisers to the front lines of Nigeria’s fight against the West African militant group Boko Haram, according to military officials, the latest deployment in conflicts with the Islamic State and its allies. Their deployment would push American troops hundreds of miles closer to the battle that Nigerian forces are waging against an insurgency that has killed thousands of civilians in the country’s northeast as well as in neighboring NigerChad and Cameroon. By some measures, Boko Haram is the world’s deadliest terrorist group. The deployment is a main recommendation of a recent confidential assessment by the top United States Special Operations commander for Africa, Brig. Gen. Donald C. Bolduc. If it is approved, as expected, by the Defense and State Departments, the Americans would serve only in noncombat advisory roles, military officials said. Even as President Obama has drawn down the large American armies sent to Iraq and Afghanistan, he has relied heavily on Special Operations forces to train and advise local troops fighting the Islamic State, also known asISIS or ISIL, and to carry out clandestine counterterrorism missions. More:

U.S. test-fires ICBMs to stress its power to Russia, North Korea

The U.S. military test-fired its second intercontinental ballistic missile in a week on Thursday night, seeking to demonstrate its nuclear arms capacity at a time of rising strategic tensions with Russia and North Korea. The unarmed Minuteman III missile roared out of a silo at Vandenberg Air Force Base in California late at night, raced across the sky at speeds of up to 15,000 mph (24,000 kph) and landed a half hour later in a target area 4,200 miles (6,500 km) away near Kwajalein Atoll in the Marshall Islands of the South Pacific. Deputy Defense Secretary Robert Work, who witnessed the launch, said the U.S. tests, conducted at least 15 times since January 2011, send a message to strategic rivals like Russia, China and North Korea that Washington has an effective nuclear arsenal. “That’s exactly why we do this,” Work told reporters before the launch. “We and the Russians and the Chinese routinely do test shots to prove that the operational missiles that we have are reliable. And that is a signal … that we are prepared to use nuclear weapons in defense of our country if necessary.” Demonstrating the reliability of the nuclear force has taken on additional importance recently because the U.S. arsenal is near the end of its useful life and a spate of scandals in the nuclear force two years ago raised readiness questions. The Defense Department has poured millions of dollars into improving conditions for troops responsible for staffing and maintaining the nuclear systems. The administration also is putting more focus on upgrading the weapons. President Barack Obama’s final defense budget unveiled this month calls for a $1.8 billion hike in nuclear arms spending to overhaul the country’s aging nuclear bombers, missiles, submarines and other systems. The president’s $19 billion request would allow the Pentagon and Energy Department to move toward a multiyear overhaul of the atomic arms infrastructure that is expected to cost $320 billion over a decade and up to 1 trillion dollars over 30 years. More:

Stock Markets Yawn at North Korea’s Nukes

The world — or at least the marketplace — has grown accustomed to North Korea’s nuclear belligerence. Pyongyang has conducted four nuclear tests and five long-range missile tests since 2006. Its most recent nuclear and missile tests, on Jan. 6 and Feb. 7 2016 respectively, incited the United States and China to announce in late February that they would work together on tough new sanctions. But while the regime’s experimentations with its weapons of war may have rattled the region, they’ve failed to shock stock markets. Why? It seems that while Pyongyang’s provocations erode Asia’s security, they do not weaken the region’s economic vitality. To test this hypothesis, we examined whether the Shanghai Composite Index (SSE) and Seoul’s Korea Composite Stock Price Index (KOSPI), China’s and South Korea’s most important stock market indexes, revealed any anxiety following a North Korean nuclear test. Consider, for example, concerns about market volatility in Europe following the 2005 terrorist attacks on London, and the 2015 attacks in Paris. If the North Korean nuclear tests moved markets anywhere, it would likely be China, Pyongyang’s biggest benefactor, or South Korea, which lives under constant threat of attack from their unstable neighbor. (The nuclear tests have had no measurable effect on the New York Stock Exchange (NYSE), the world’s largest.) More:

Former Mexico president Vicente Fox rips Donald Trump: ‘I’m not going to pay for that f***ing wall’

In a scathing takedown of United States presidential candidate Donald Trump, former Mexico president Vicente Fox told Fusion that Trump is a “crazy guy” and urged Hispanics in the U.S. who support the billionaire real estate tycoon and reality TV star to “open their eyes.” Fox, speaking to Jorge Ramos, also uttered a profanity-laced statement regarding Trump’s assertion that he will build a wall along the U.S.-Mexico border and that the Mexican government will pay for it. “I declare, I’m not going to pay for that f***ing wall,” Fox said. “He should pay for it. He’s got the money.” Asked if he’s concerned that Trump will become the next U.S. president, Fox replied: “Not at all. Democracy can’t take us to crazy people that don’t know what’s going on in the world today.” As for Trump winning 44 percent of the Hispanic vote during Tuesday’s caucus in Nevada, Fox said: “I’d like to know who those Hispanics are because they are followers of a false prophet. He’s going to take them to the desert. And if they think that they will benefit with an administration led by Donald Trump, they are wrong.  “They must open their eyes. Please, you Hispanics … in the U.S., open your eyes. [The U.S.] is going to fail if it goes in the hand of a crazy guy. What is Trump? He’s not a Republican … he’s not a Democrat. He’s egocentric.” Fox, 73, served as Mexico’s president from 2000 to 2006. Mexico’s current president is Enrique Peña Nieto.



U.S. fourth-quarter GDP growth revised higher on strong inventory investment


U.S. economic growth slowed in the fourth quarter, but not as sharply as initially thought, with businesses less aggressive in their efforts to reduce unwanted inventory, which could hurt output in the first three months of 2016. Gross domestic product increased at a 1.0 percent annual rate instead of the previously reported 0.7 percent pace, the Commerce Department said on Friday in its second GDP estimate.

Economists polled by Reuters had expected that fourth-quarter GDP growth would be revised down to a 0.4 percent pace. The economy grew at a rate of 2.0 percent in the third quarter and expanded 2.4 percent in 2015. U.S. stock index futures extended gains after the data, while prices of Treasuries fell. The dollar .DXY added to gains against a basket of currencies. Businesses accumulated $81.7 billion worth of inventory in the fourth quarter rather than the $68.6 billion reported last month. The largest contributors to the upward revision to inventory investment were retail trade and mining, utilities and construction.  As a result, inventories subtracted only 0.14 percentage point from GDP growth instead of the previously reported 0.45 percentage point. The bigger inventory build is bad news for first-quarter GDP growth as it means businesses will have little incentive to place new orders, which will continue to hold down production. “The weaker drag from inventories in the fourth quarter means that any rebound in the first quarter could be slightly more modest than we previously expected,” said Paul Ashworth, chief U.S. economist at Capital Economics in Toronto. “Nevertheless, it still appears that first-quarter GDP growth is on track to rebound to a very healthy 2.5 percent annualized or higher, which should dampen any concerns about an imminent recession.” More:


Sorting Out Dodd-Frank’s Treatment of Failed Broker-Dealers

All the relevant financial regulators recently got together and released proposed rules regarding the treatment of failed broker-dealers under Dodd-Frank’s Title II (also known as “orderly liquidation authority”). The proposed rules are long, and there was little attention. But there was one interesting bit: namely, the assertion in the proposed rules that when Dodd-Frank says there is to be “an application for a protective decree under the Securities Investor Protection Act of 1970 as to the covered broker or dealer,” it does not actually mean there would be a case filed under the Securities Investor Protection Act. That is not the way I understood the statute. And I suspect it was not the way most lawyers — outside the regulators, at least — understood the statute. Dodd-Frank’s treatment of failed broker-dealers has always been a bit confusing. In short, the law seems to contemplate that an orderly liquidation authority proceeding will be commenced against the broker-dealer and that the Federal Deposit Insurance Corporation will take control over a large part of the operation by moving assets into a “bridge bank,” although perhaps here we should call it a “bridge broker-dealer.” This is a newly created company — unlike most broker-dealers it can be given a federal charter — that will keep operating the broker-dealer for at least an interim period. The orderly liquidation authority also mandates that the Securities Investor Protection Corporation be appointed trustee of whatever is left, and that the application “for a protective decree” cited in the rules is to be filed with a federal court under the Securities Investor Protection Act. I read this to mean that the S.I.P.C. would conduct a traditional liquidation under the act of the “stub” of the failed broker-dealer. Whatever assets remained would be administered for the benefit of creditors, which would potentially include bondholders and customers whose claims exceeded the protection provided by S.I.P.C.’s insurance system. And the language in Dodd-Frank that I quoted above sure sounds like the same language in the statute that explains how the Securities Investor Protection Corporation normally commences a case. But instead, the regulators are asserting that “in reality there is no proceeding under S.I.P.A. and the covered broker-dealer is being liquidated under Title II.” More:

Apple calls FBI iPhone request ‘unprecedented’ in court filing

Apple Inc (AAPL.O) on Thursday struck back in court against a U.S. government request to unlock an encrypted iPhone belonging to one of the San Bernardino shooters, arguing such a move would violate its free speech rights and require the company to devote significant resources to comply. The U.S. Federal Bureau of Investigation is seeking Apple’s help to access shooter Rizwan Farook’s iPhone by disabling some of its passcode protections. Apple argued in its brief that software was a form of protected speech, and thus the Justice Department’s demand violated the constitution. “The government’s request here creates an unprecedented burden on Apple and violates Apple’s First Amendment rights against compelled speech,” it said. Apple also argued that the court was over-stepping its jurisdiction, noting that Congress had rejected legislation that would have required companies to do the things the government is asking Apple to do in this case. Apple said the court order, if upheld, could leave individuals and business vulnerable to an unlimited array of government directives. “Under the same legal theories advocated by the government here, the government could argue that it should be permitted to force citizens to do all manner of things ‘necessary’ to assist it in enforcing the laws,” Apple said. It gave examples, “like compelling a pharmaceutical company against its will to produce drugs needed to carry out a lethal injection in furtherance of a lawfully issued death warrant or requiring a journalist to plant a false story in order to help lure out a fugitive.” Apple’s resistance has intensified a national debate about whether the government should have technological access, or a “back door” to get into privately owned phones. The Justice Department has argued that Apple has no legal basis to refuse its help. More:


The latest victims of student debt? The elderly.

Economists at the New York Federal Reserve released a new analysis Wednesday morning showing that older Americans held significantly more debt last year than in 2003. This “graying of American debt” might not be that surprising, except that it has largely come from one source we don’t associate with older people: Student loans. Debt held by borrowers between the ages of 50 and 80 has increased by about 60 percent over the last 12 years, with student loan debt more than doubling. This isn’t normally the student-loan problem we think of: The focus on student debt has largely centered on young borrowers, who too often end up with high loan payments and no degree. In their new report, the Fed economists used data on consumer credit and found that total debt balance has increased significantly for older Americans in the past 12 years. Some of that is due to the aging of the population—more old people means cumulative debt totals for the elderly will be higher. But they also found major increases in debt for seniors even after accounting for the aging population. The student debt crisis is the main driver behind this trend. Over the past 12 years, mortgage debt, home equity lines of credit, auto debt and credit card debt have stayed relatively flat for most elderly borrowers. But student debt has increased substantially: see chart at link below. This is a troubling trend, especially for financial vulnerable older people. Student debt doesn’t work like normal debt: it’s not dischargeable in bankruptcy, and the Department of Education can garnish Social Security payments to recover the balance of debt, which your bank can’t do. The more seniors with heavy student debt loads, the more who will eventually see their benefits confiscated by the government—and the more who will find themselves destitute in old age. Essentially, the government is sending out Social Security checks only to recoup some of money for its student loan guarantees. It’s an elaborate and circular way to funnel money to the higher-ed sector. More:

Scalia’s Death Prompts Dow to Settle Lawsuits for $835 Million

Dow Chemical Co. said it agreed to pay $835 million to settle an antitrust case that was on appeal to the U.S. Supreme Court in the wake of Justice Antonin Scalia’s death earlier this month. Dow, the largest U.S. chemical maker by sales, said Friday the accord will resolve its challenges to a $1.06 billion jury award to purchasers of compounds for urethanes, a chemical used to make foam upholstery for furniture and plastic walls in refrigerators. The Midland, Michigan-based company disputed a jury’s finding it had conspired with four other chemical makers to fix urethane prices and asked the Supreme Court to take the class-action case on appeal. Scalia, one of the court’s most conservative members, had voted to scale back the reach of such group suits. “Growing political uncertainties due to recent events with the Supreme Court and increased likelihood for unfavorable outcomes for business involved in class-action suits have changed Dow’s risk assessment of the situation,” the company said in an e-mailed statement. Scalia’s death has changed expectations about the way the nation’s highest court may approach thorny legal questions. His absence, for example, has raised questions about how the Supreme Court will address challenges to a Texas law requiring abortion clinics to be equipped and operated more like a hospital. The antitrust case is In re Urethane Antitrust Litigation, 04-md-01616, U.S. District Court, District of Kansas (Kansas City).

Justice Scalia spent his last hours with members of this secretive society of elite hunters

When Supreme Court Justice Antonin Scalia died 12 days ago at a West Texas ranch, he was among high-ranking members of an exclusive fraternity for hunters called the International Order of St. Hubertus, an Austrian society that dates back to the 1600s. After Scalia’s death Feb. 13, the names of the 35 other guests at the remote resort, along with details about Scalia’s connection to the hunters, have remained largely unknown. A review of public records shows that some of the men who were with Scalia at the ranch are connected through the International Order of St. Hubertus, whose members gathered at least once before at the same ranch for a celebratory weekend. Members of the worldwide, male-only society wear dark-green robes emblazoned with a large cross and the motto “Deum Diligite Animalia Diligentes,” which means “Honoring God by honoring His creatures,” according to the group’s website. Some hold titles, such as Grand Master, Prior and Knight Grand Officer. The Order’s name is in honor of Hubert, the patron saint of hunters and fishermen. Cibolo Creek Ranch owner John Poindexter and C. Allen Foster, a prominent Washington lawyer who traveled to the ranch with Scalia by private plane, hold leadership positions within the Order. It is unclear what, if any, official association Scalia had with the group. “There is nothing I can add to your observation that among my many guests at Cibolo Creek Ranch over the years some members of the International Order of St. Hubertus have been numbered,” Poindexter said in an email. “I am aware of no connection between that organization and Justice Scalia.” An attorney for the Scalia family did not respond to requests for comment for this article. Two other private planes that landed at the ranch for the weekend are linked to two men who have held leadership positions with the Texas chapter of the Order, according to a review of state business filings and flight records from the airport. After Scalia’s death, Poindexter told reporters that he met Scalia at a “sports group” gathering in Washington. The U.S. chapter of the International Order of St. Hubertus lists a suite on M Street NW in the District as its headquarters, although the address is only a mailbox in a United Parcel Service store. The International Order of St. Hubertus, according to its website, is a “true knightly order in the historical tradition.” In 1695, Count Franz Anton von Sporck founded the society in Bohemia, which is in modern-day Czech Republic. The group’s Grand Master is “His Imperial Highness Istvan von Habsburg-Lothringen, Archduke of Austria,” according to the Order’s website. The next gathering for “Ordensbrothers” and guests is an “investiture” March 10 in Charleston, S.C. More:

I prosecuted O.J. Simpson. Here’s what I learned about race and justice in America. by Marcia Clark

When the verdict was handed down on October 4, 1995, I couldn’t imagine that we would still be talking about The People v. Orenthal James Simpson more than 20 years later. I certainly never would have guessed there would be a hugely popular television series on the trial. The trial raised many issues: racism, celebrity, domestic violence, media coverage of criminal cases. As a result, it generated some very important and necessary discussions. As lead prosecutor on the case, I have followed those discussions very closely. Here are the five things I’d like to say about those issues:

Disable this feature to stop your Samsung Smart TV from listening to you

It sounds like something straight out of George Orwell’s 1984. Samsung’s Smart TV privacy policy, which most people never bother reading, reveals that your shiny new television set may be capable of spying on you. Samsung warns that customers should “be aware that if your spoken words include personal or other sensitive information, that information will be among the data captured and transmitted to a third party through your use of Voice Recognition.” It sounds scary, but it’s a bit overblown. Many devices have similar speech features that are always listening; that includes the Moto X , Nexus devices, Amazon Echo , Microsoft Kinect and even the iPhone (when the device is plugged in and the Hey, Siri command is enabled). This so-called scandal also affects only a small number of Samsung Smart TV models. While most of Samsung’s Smart TVs have some sort of voice function, almost all of them require you press the microphone button on the remote before it starts listening. The models that can recognize your voice are the ones that include a built-in camera and microphone, such as the Samsung PN60F8500 . The TV won’t actually begin to process anything you say, however, until you say a voice command, such as “Hi TV.” Regardless, if you are fearful that Samsung and an unnamed third-party partner (the company actually translating your vice to text) are listening to your conversations, you can simply turn off the Voice Recognition feature. To do this, head to the Settings menu and select Smart Features. Then scroll down to Voice Recognition and switch it off. While you will no longer be able to use the “Hi TV” command to activate the voice features, you can still access them by pressing the microphone button on your remote.

GOP Gov. Brian Sandoval takes himself out of the running for SCOTUS

GOP Gov. Brian Sandoval of Nevada on Thursday officially removed himself from the running for the Supreme Court nomination. His decision came only a day after reports swirled about the White House vetting Sandoval for the open seat left by the late Justice Antonin Scalia who died Feb. 13. “Earlier today, I notified the White House that I do not wish to be considered at this time for possible nomination to the Supreme Court of the United States,” Sandoval said in a statement. Sandoval also said he conveyed the same message to Senate Minority Leader Harry Reid, D-Nevada, with whom he met on Monday in Washington, D.C., Sen. Dean Heller, R-Nevada, and Senate Majority Leader Mitch McConnell, R-Kentucky. “The notion of being considered for a seat on the highest court in the land is beyond humbling and I am incredibly grateful to have been mentioned,” he added. On Wednesday, CBS News confirmed that Sandoval was one of the people the White House had been eyeing. Sandoval has served as Nevada’s governor since 2011 and the Senate unanimously confirmed him in 2005 after President George W. Bush nominated him to be a judge for the U.S. District Court for the District of Nevada, which he served as until 2009. There has been speculation about several other potential nominees, but the White House has not revealed the list of names they’re looking at. President Obama was seen walking along the White House colonnade from the Oval Office last Friday evening carrying a thick binder of Supreme Court materials. Sandoval’s decision also comes just a short while after Hillary Clinton told Democratic voters in South Carolina that she hopes President Obama winds up choosing a “true progressive” instead of someone like Sandoval. The Senate has to confirm the person Mr. Obama nominates and earlier this week, the Senate Republican majority ruled out holding confirmation hearings and a vote for the nominee. They agreed they should wait to take any action until the next president is sworn in next January.

Fact-checking the 10th GOP debate

CNN aired the 10th GOP presidential debate on Feb. 25, a prime-time event starring the five remaining aspirants for the Republican nomination. Not every candidate uttered statements that are easily fact checked, but the following is a list of 13 suspicious or interesting claims. As is our practice, we do not award Pinocchios when we do a roundup of facts in debates. “You look at our borders, they’re like swiss cheese, everybody pours in.”— Donald Trump. Trump keeps saying undocumented immigrants are pouring over the United States-Mexico border, but that’s not correct. Data show illegal immigration flows have fallen to their lowest level in at least two decades. The nation’s undocumented immigrant population, which more than tripled, to 12.2 million, between 1990 and 2007, has dropped by about 1 million, according to the Pew Research Center. The flood of undocumented immigrants from Mexico peaked in 2000, when more than 1.6 million people were apprehended, according to Department of Homeland Security data. Those numbers have decreased about 400,000 per year since 2012, and continued to go down in fiscal 2015. An estimated 7 million undocumented Mexican immigrants were living in the United States during its peak in 2007, according to the Pew Hispanic Center’s 2012 report. But there has been a sharp downward trend in net migration from Mexico since then, Pew found. Recent figures through census data are less reliable, but they suggest that the downward trend in net immigration from Mexico continued through 2014, PolitiFact reported. More:

House conservative leaders want to break spending deal

Leaders of the conservative Republican Study Committee voted Thursday to oppose last year’s spending bill, throwing the House GOP’s budget plans into turmoil. The RSC is the most powerful caucus of House Republicans and includes 170 of the House GOP’s 246 members. Their decision to oppose the deal, as a result, is a major problem for Speaker Paul Ryan (R-Wis.) A House GOP aide confirmed that the RSC leaders voted Thursday to oppose the $1.1 trillion spending limits set by the deal. The RSC, led by Rep. Bill Flores (R-Texas), is now pushing Ryan to cap spending at $1.04 trillion – a move that would break the terms of last fall’s accord set by then-Speaker John Boehner (R-Ohio). Last year’s agreement has remained unpopular among the party’s fiscal hawks even after a majority of House Republicans voted to confirm it last fall. Some members of the RSC had already urged Ryan to break last fall’s unpopular accord. The vote took place the same day that Flores met with Ryan, as well as the chairmen of the conservative House Freedom Caucus and the moderate Tuesday Group, to discuss the budget. One day earlier, the full House GOP caucus met to discuss the budget. Flores told The Hill after that meeting that he had expected to hear a “comprehensive” budget proposal from House Budget Committee Chairman Tom Price (R-Ga.) at that meeting, but did not receive one. Flores has previously said he would seek a lower spending limit, and said as recently as Wednesday that he is keeping his options open. Price earlier this week said that his budget proposal would stick by the spending caps, which amount to about $30 billion more spending than the previous year. He promised a vote on that proposal would be coupled with a vote on a bill to trim the deficit sometime this year. Publicly, Ryan and other GOP leaders did not commit to that idea, and instead reiterated that the decision would be made by the full caucus. Ryan said as recently as Thursday that the party did not have to pass a budget. This is the first time many House Republicans are drawing a line in the sand on this year’s budget process. Until now, most rank-and-file members have held their fire as Price and the Budget Committee have offered options on how to keep the spending levels in tact. The opposition from the Republican Study Committee severely compromises the GOP’s efforts to pass a joint budget resolution, which would allow them to begin the appropriations process and achieve what Ryan calls “regular order.” Both Ryan and his Senate counterpart, Majority Leader Mitch McConnell (R-Ky.), set out to pass a joint budget resolution in 2016.   Those prospects have shrank dramatically in the last several weeks, as the House Freedom Caucus began to dig in its heels against the Obama-Boehner spending caps and the Senate has been confronted with a new battle over a Supreme Court nominee.

We’ve lost sight of how wildly irresponsible the Republican tax plans are

You know what hasn’t gotten enough attention in this election? How utterly ridiculous the Republican tax plans have become. Marco Rubio, Ted Cruz, and Donald Trump are the top three contenders for the Republican nomination. Rubio has promised tax cuts amounting to $6.8 trillion, Cruz $8.6 trillion, and Trump a whopping $9.5 trillion, according to the Tax Policy Center (and that’s not including interest on the debt they would rack up!). To put that in perspective, the tax cuts George W. Bush proposed during the 2000 campaign were $1.32 trillion — which would be $1.82 trillion in today’s dollars. And taxes were higher in 2000 than they are today, and the country was running surpluses rather than deficits. It gets worse. Rubio and Cruz both support a Balanced Budget Amendment, so they can’t just add their tax cuts to the national debt. They also support spending more on the military — up to $1 trillion for Rubio, about $2.4 trillion for Cruz. Trump supports more military spending and has also promised to avoid cuts to Social Security and Medicare. All this talk of trillions of dollars can melt the brain. So let’s get more specific. We worked with Marc Goldwein of the Center for a Responsible Federal Budget and reams of Congressional Budget Office numbers to come up with some illustrative examples of how much the Republicans would have to cut to pay for their tax plans.1 These aren’t their only paths, of course — but for every FBI they want to save, they would need to cut other spending of equal value. As you’ll see, it gets very hard, very fast.


David Duke: Voting against Trump is ‘treason to your heritage’

David Duke, a white nationalist and former Klu Klux Klan grand wizard, told his audience Wednesday that voting for anyone besides Donald Trump “is really treason to your heritage.” “Voting for these people, voting against Donald Trump at this point, is really treason to your heritage,” Duke said on the David Duke Radio Program. BuzzFeed News first reported the comments. “I’m not saying I endorse everything about Trump. In fact, I haven’t formally endorsed him. But I do support his candidacy, and I support voting for him as a strategic action. I hope he does everything we hope he will do.” The former Louisiana representative told listeners to start volunteering for Trump. “And I am telling you that it is your job now to get active. Get off your duff. Get off your rear end that’s getting fatter and fatter for many of you everyday on your chairs. When this show’s over, go out, call the Republican Party, but call Donald Trump’s headquarters, volunteer,” he said. “They’re screaming for volunteers. Go in there, you’re gonna meet people who are going to have the same kind of mind-set that you have.” In December, Duke told POLITICO that Trump’s candidacy allows Americans to be more open about their racial animus. “He’s made it OK to talk about these incredible concerns of European Americans today, because I think European Americans know they are the only group that can’t defend their own essential interests and their point of view,” Duke said. “He’s meant a lot for the human rights of European Americans.”

Cruz holding up Flint aid deal in Senate

Ted Cruz is standing in the way of a bipartisan Senate bill to provide hundreds of millions of dollars in aid for Flint, Mich., and other communities that need to upgrade their drinking water infrastructure. Senate Democrats blinked when they agreed this week to pay for federal aid to address lead-tainted drinking water in Flint by cutting a program prized by the state’s senators.  Now they say it’s Republicans’ turn — but at least one GOP holdout is blocking the bill. Cruz, who is campaigning ahead of Thursday’s Republican debate, has placed a “soft hold” on the aid package to give him more time to study the details of the proposal, the Texas Republican’s spokeswoman Rachael Slobodien said Thursday. Without naming Cruz, Sen. Jim Inhofe (R-Okla.), a lead negotiator on the Flint aid package, acknowledged a hold was preventing it from moving to the floor, but Inhofe said he was hopeful the impasse could be resolved. Slobodien also said she did not expect Cruz to hold up the bill permanently. More:

America doesn’t have enough ‘morons’ to elect Trump, baseball stats guru says

The man who revolutionized baseball with statistical analysis says there just aren’t enough morons in the country to elect Donald Trump. Bill James, in a blog post, says the numbers won’t work for Trump in a two-person race. James is the inventor of what’s called sabermetrics, or the use of advanced data to analyze baseball. “When you divide the public in two and then divide the voters in one of those halves among five candidates or more, a candidate can win by dominating the moron vote because it only takes about one-seventh of the total population to take the ‘lead’ under those circumstances. But when you’re talking about needing 51% of the WHOLE population, rather than needing 30% of half of the population, you run out of morons,” he said. Politico was first to write about the post. By contrast, Andrew Sabisky writes in The International Business Times that Trump has learned from his professional wrestling times — Trump participated in World Wrestling Entertainment WWE, +2.39%  events — to break through the fourth wall. Referring to Trump describing his own supporters as “poorly educated,” the author says Trump understands he has to get beyond his own base. “He’ll need to reach out to swing voters of all stripes, and breaking the fourth wall — giving off little verbal slips that reveal he’s fully aware of his own campaign’s calculated strategy and the mad, carnival atmosphere he’s cultivated — will make it easier for him to reassure those higher-information, better-educated voters that he is fit to be U.S. president,” he writes. Late-night talk-show host Jimmy Kimmel, meanwhile, lampooned the Trump comment about the poorly educated:


How America Made Donald Trump Unstoppable


The first thing you notice at Donald Trump’s rallies is the confidence. Amateur psychologists have wishfully diagnosed him from afar as insecure, but in person the notion seems absurd.

Donald Trump, insecure? We should all have such problems. At the Verizon Giganto-Center in Manchester the night before the New Hampshire primary, Trump bounds onstage to raucous applause and the booming riffs of the Lennon-McCartney anthem “Revolution.” The song is, hilariously, a cautionary tale about the perils of false prophets peddling mindless revolts, but Trump floats in on its grooves like it means the opposite. When you win as much as he does, who the hell cares what anything means? He steps to the lectern and does his Mussolini routine, which he’s perfected over the past months. It’s a nodding wave, a grin, a half-sneer, and a little U.S. Open-style applause back in the direction of the audience, his face the whole time a mask of pure self-satisfaction. “This is unbelievable, unbelievable!” he says, staring out at a crowd of about 4,000 whooping New Englanders with snow hats, fleece and beer guts. There’s a snowstorm outside and cars are flying off the road, but it’s a packed house. He flashes a thumbs-up. “So everybody’s talking about the cover of Time magazine last week. They have a picture of me from behind, I was extremely careful with my hair … ” He strokes his famous flying fuzz-mane. It looks gorgeous, like it’s been recently fed. The crowd goes wild. Whoooo! Trump!

It’s pure camp, a variety show. He singles out a Trump impersonator in the crowd, tells him he hopes the guy is making a lot of money. “Melania, would you marry that guy?” he says. The future first lady is a Slovenian model who, apart from Trump, was most famous for a TV ad in which she engaged in a Frankenstein-style body transfer with the Aflac duck, voiced by Gilbert Gottfried. She had one line in that ad. Tonight, it’s two lines:  “Ve love you, New Hampshire,” she says, in a thick vampire accent. “Ve, together, ve vill make America great again!” As reactionary patriotic theater goes, this scene is bizarre – Melania Knauss didn’t even arrive in America until 1996, when she was all of 26 – but the crowd goes nuts anyway. Everything Trump does works these days. He steps to the mic. “She’s beautiful, but she’s more beautiful even on the inside,” he says, raising a finger to the heavens. “And, boy, is she smart!”

Before the speech, the PA announcer had told us not to “touch or harm” any protesters, but to instead just surround them and chant, “Trump! Trump! Trump!” until security can arrive (and presumably do the touching and/or harming). I’d seen this ritual several times, and the crowd always loves it. At one event, a dead ringer for John Oliver ripped off his shirt in the middle of a Trump speech to reveal body paint that read “Eminent Domain This!” on his thorax. The man shouted, “Trump is a racist!” and was immediately set upon by Trump supporters, who yelled “Trump! Trump! Trump!” at him until security arrived and dragged him out the door to cheers. The whole Trump run is like a Jerry Springer episode, where even the losers seem in on the gags. More:



Alabama Gov. Bentley signs bill blocking cities from setting own minimum wage

MONTGOMERY, Ala. (AP) — Gov. Robert Bentley has signed a bill blocking cities and municipalities from setting their own minimum wage. The Alabama Senate on Thursday approved the bill 23 votes to 10, largely along party lines. GOP legislators supported the bill to push back against the Birmingham City Council, which voted to raise their city’s minimum wage to $10.10. Republican Sen. Jabo Waggoner of Vestavia Hills says the state should not have a “hodgepodge” of different minimum wages. Sen. Linda Coleman-Madison, a Democrat from Birmingham, says she is concerned about people trying to feed their families on current hourly wages.


Gun-Trafficking Controversy Swirls around Alabama Senate Challenger

With less than one week until Alabama’s Senate primaries, curious elements of Republican Jonathan McConnell’s record are coming to the fore. McConnell, the fresh-faced 33-year-old Iraq War veteran challenging five-term incumbent Senator Richard Shelby, has already raised eyebrows on the campaign trail. In November, McConnell admitted that he’d offered fellow primary candidate John Martin a bribe to exit the race. According to Yellowhammer News, McConnell’s father, Roger McConnell, a former chairman of the state’s Republican party, called Martin to apologize after the incident. Now, with the primary just days away, McConnell is being dogged by questions about his maritime-defense business, Meridian Global Consulting, which he often touts in his stump speech. reported earlier this month that Meridian has close ties to federal agencies and DC officials, which could undercut McConnell’s claim as the outsider in the race. And according to e-mails obtained by National Review, the firm appears to have a shady history of illegal gun trafficking. As McConnell tells it, he was inspired to start the Mobile-based Meridian after Somali pirates hijacked an American container ship, the MV Maersk Alabama, in 2009. The firm contracts with former Marines to safeguard U.S. merchant ships, and the business has largely flourished since its inception. On May 19, 2011, however, according to regional reports and e-mails, two of McConnell’s employees were detained in Sri Lanka for attempting to traffic rifle parts in their carry-on baggage aboard a U.S.-bound flight. Nexus Consulting had contracted McConnell’s employees to provide security for the Singapore-flagged ship MV Pramoni on its May 2010 journey from Oman to Sri Lanka. Nexus provided Meridian employees with firearms to secure the ship throughout its route, but instructed them to disassemble and destroy those firearms at sea before entering Sri Lankan waters. But the two Meridian guards disregarded those instructions, retaining several parts of the M4 rifles after they entered Sri Lanka before attempting to smuggle them back into the U.S. According to e-mails from Dilkushi Rajapakse, general manager for Nexus’s shipping company, to McConnell, the two employees — Alex Lupson and Matthew Schuman — were apprehended by a customs agent at the Bandaranaike airport. “This is a serious violation of Sri Lankan Law/National Security and accordingly [the Criminal Investigation Department] is carrying out investigations,” Rajapakse wrote McConnell. He also wrote that the CID had referred the incident to the US Embassy in Colombo. “I am both personally and professionally embarrassed,” McConnell wrote in an e-mail to Nexus president Kevin Doherty. McConnell, in an e-mail, immediately notified his contractors that he had severed ties with Nexus. “Meridian Global lost one of its biggest clients last week,” he wrote. “When you signed up to work with Meridian, you signed two contracts. One, was a contract with Meridian Global, and the other was a contract with Meridian Global’s strategic partner, Nexus Consulting of Alexandria, Virginia. Following Friday’s conference call with Nexus, Meridian Global and Nexus will be phasing out their strategic partnership.” According to the e-mail, the severed ties appeared to take a hit on Meridian as a whole. “Operations are slowing down immensely,” McConnell wrote. “It will take several weeks for me to rework former contacts and retain more contracts.” McConnell did not return requests for comment. In recent weeks, Shelby’s campaign, perhaps threatened by the most competitive primary challenge he’s faced in over a decade — indeed, McConnell has the backing of Citizens United — has repeatedly criticized the young candidate’s professional conduct, arguing that it makes him unfit for the Senate. But when asked Shelby’s thoughts on the Sri Lankan incident, a spokeswoman for the Senator declined to comment.


Ala. Senate approves $1.8 billion General Fund budget


The Senate Thursday evening passed a General Fund budget that would level-fund most state agencies but leave Medicaid unable to shift to managed care and possibly force cutbacks in services. The budget passed 23 to 10 after a long discussion, which featured a lengthy debate over a proposal to set rates for Medicaid organizations in the budget and a failed attempt to restore state employee pay raises.

In the Montgomery delegation, Sen. Dick Brewbaker, R-Montgomery, voted for the budget. Senate Minority Leader Quinton Ross, D-Montgomery, voted against it. The budget moves to the House of Representatives. The $1.8 billion budget, which goes into effect Oct. 1, would maintain most state agencies at their current levels. It includes small increases for the state’s National Guard and trial courts.

The budget also maintains state funding for Medicaid, the mitochondria of the state’s health care system, at $685.1 million. Medicaid officials warn that funding level would make it impossible to install regional care organizations (RCOs), aimed at moving Medicaid from a fee-for-service delivery model to one that rewards health outcomes. The funding level could also lead to service cuts. But Republican leadership in the Senate said the budget could not sustain ongoing increases in Medicaid, which now makes up 38 percent of total spending in the General Fund. “We have a consensus in this body, and I think in the House, too, that we cannot keep putting these large increases in Medicaid to the detriment of the other governmental agencies in the state,” said Senate President Pro Tem Del Marsh, R-Anniston. House leadership and Sen. Trip Pittman, R-Montrose, the chairman of the Senate General Fund budget committee, say they think the budget will be the start of a “discussion” on the role of Medicaid.

“I think that’s why this is important, to let people see this budget and let people understand the consequences of this budget and the extra money that could be garnered if we fund Medicaid,” Pittman said during the debate. The debate over the budget hit a few bumps Thursday. Sen. Arthur Orr, R-Decatur, introduced an amendment that would have set the capitation rate for the RCOs within the budget, which would likely have required shifts in revenue. The Senate defeated the proposal on a close 19 to 16 vote, but opposition was strong. Sen. Rodger Smitherman, D-Birmingham, said the proposal would “gut” Children’s Hospital in Birmingham. Another amendment proposed by Sen. Cam Ward, R-Alabaster, would have given a two percent raise to state workers. Gov. Robert Bentley included the raise in his initial budget proposal. The Senate version does not include it. Pittman said Wednesday he felt a raise would not emerge this year with the issues in the Medicaid. Senators tabled the proposal on a 19 to 12 vote. Brewbaker voted against the tabling motion. Democrats questioned why the budget was moving out early. The budgets generally do not begin making progress until midway through the session. Sen. Vivian Davis Figures, D-Mobile, also criticized majority Republicans for not listening to Democratic ideas.

“We’re here representing different parts of the population in this state, but we are not heard,” she said.

Pittman said the leadership wanted to begin work on the budgets in part to avoid last year’s budget battles, which required three legislative sessions to resolve. He also promised to give an “up or down vote” in committee on a proposal from Figures to create a five percent ad valorem tax to fund the General Fund.


Rubio endorsed by 31 Alabama state elected officials

Republican presidential candidate Marco Rubio rolled out endorsements from 31 Alabama state politicians on Thursday in Montgomery. The elected officials, led by Rubio Alabama state campaign chairman and Alabama state Rep. Will Ainsworth, gathered on the steps of the Alabama capitol to argue that Rubio is the most viable primary candidate to win the general election in November. Alabamians will head to the polls on March 1 for the state’s primary. “Our party needs Marco Rubio and I am so happy that all these leaders across our state are joining with me in supporting him,” Ainsworth said. “Now that this field has started to winnow, it’s clear that any vote not for Marco is a vote for Donald Trump. We need our nominee to be a serious conservative that can win in November and that is what Marco Rubio will be.” Alabama State Sen. Slade Blackwell echoed that sentiment. “I am proud that I can stand beside so many influential Alabama leaders today as we announce our support for Marco Rubio,” Blackwell said. “Marco needs our support at the polls on March 1 because we need a nominee that can beat the Democrats in the fall and take back the White House so we can solve our nation’s problems through conservative principles.” Here’s the full list of Alabama state elected officials supporting Rubio:


University of Alabama student starts petition seeking repeal of SEC’s gameday alcohol prohibition


A candidate for University of Alabama’s student government association president is seeking to have the SEC’s gameday prohibition of alcohol sales repealed. Patrick Fitzgerald, a junior marketing major, said his petition andpromotional video isn’t about winning votes. It’s primarily about student safety.

“Too many times in my college career, I’ve walked past the tents on the quad on the way to the stadium and seen students passed out in their chairs,” Fitzgerald wrote. “Alcohol is a part of many students’ gameday experience, but because alcohol is not sold in Bryant-Denny and other athletic facilities, students feel the need to binge drink before games.” Making alcohol sales legal, would put students in less dangerous situations, he said. “It is an issue that a lot of people are passionate about on campus,” Fitzgerald said. He is also trying to garner support from SGA presidents of other SEC universities.

If the SEC changed its policy, Fitzgerald said it would mean less gameday arrests as well. He said West Virginia University saw its gameday arrest rate decrease 35 percent after repealing its ban on alcohol.

Permitting alcohol sales at Bryant-Denny Stadium would be “a huge revenue booster,” Fitzgerald said. It could also drive attendance to other sporting events on campus. Alabama’s stadium is similar in size to the University of Texas at Austin stadium where alcohol sales garnered $1.8 million in revenues last year, he said. Many student services are in need of these revenues, Fitzgerald said. He also pointed out that alcohol is already allowed in Bryant-Denny’s luxury boxes so why not make it available for purchase.




Why Alabama lawmakers just killed Birmingham’s minimum wage

On Thursday, state Sen. Jabo Waggoner, R-Vestavia Hills, warned his colleagues in the Alabama Legislature that raising the minimum wage in Birmingham would devastate businesses there, cause hard-working people to lose their jobs and send the regional economy into a slump. “I can promise you employment will go downhill,” Waggoner said. And on Thursday, state Sen. Rodger Smitherman, D-Birmingham, argued forcefully that hiking the minimum employees can make would lift families out of poverty and inject new spending into the regional economy, lifting everyone up. “When you lift a person on the bottom, everybody above them is lifted up,” Smitherman said. Waggoner was speaking in favor of a bill that would repeal the City of Birmingham’s lone-wolf increase in the minimum wage to $10.10 per hour. Smitherman, obviously, was on Birmingham’s side. It might seem like a mutually exclusive proposition, that one of these men must be wrong and the other, by default, must be right. As much bluster and ballyhooing as they might muster, the truth is much more ambiguous. There’s not good evidence that the minimum wage does what anyone says it might do. Economists who make bold pronouncements and predictions about the minimum wage, frequently wind up looking stupid, no matter which side they take, because the outcomes have almost always been neither as positive nor as negative as the prophets and doomsayers predict. Yes, some employers have to cut employees or shave off hours when the wage goes up. But also, employees make more money when they do work. And yes, raising the wage cuts into corporate profits and can hurt mom-and-pops. And yet, it does inject more money into the economy by putting more cash in the hands of people who are prone to spend it because they aren’t yet to a point where they can afford savings. And at the same time, there are a million other forces at work on any economic ecosystem that tinkers with the wage (or doesn’t), so many so that isolating its effects is difficult. So when Smitherman and Waggoner insist they are certain what would happen if Birmingham raised its minimum wage, both are full of it. But (and you probably guess already there was one of those coming) there’s more to be upset about here than who’s right and wrong. This fight isn’t about minimum wage. It’s about home rule. Or rather, what little home rule have in Alabama since the South Alabama plantation owners and North Alabama industrialists hoarded political power in Montgomery with the Alabama Constitution in 1901. Goat Hill wants to keep power and authority on Goat Hill, and on Thursday, the Alabama Legislature voted to do just that. The Republican majority in the Alabama Legislature that pushed this bill down Birmingham’s throat is the same one that wails and gnashes teeth every time the federal government forces the state to do so much as tie its shoes. They chant unholy incantations of the 10th Amendment and states rights, when they do. And inevitably you’ll hear someone argue that the government closest to the people governs best. I’m not sure that’s true, with obvious examples — Jefferson County’s debt implosion, the mass-psychosis of Birmingham Mayor Larry Langford’s tenure in office, the baseball-bat-to-the-face redneck soap opera of former Talladega Mayor Larry Barton. I’m stopping at three examples, but you can add your own. The government closest to the people doesn’t always govern best, but it is the most accountable — when the people decide to care. And it has the most direct impact on your life. City and county governments must pave your roads, fill your potholes, police your streets, put out your fires and educate your children. You might, like a lot of people, have strong opinions about Donald Trump or Barack Obama or Washington insiders, etc. It all makes for good TV. But when the ballots go in the box, how much say do you really have in all that? Not very much — one vote among millions, and the Big Money gets to vote first. But a city council race? A county commission race? These elections turn on handfuls of votes. If you wanted, you might conceivably be able to swing a municipal election just by walking out your front door and talking to your neighbors. If Birmingham’s mayor and city council want to raise the minimum wage, that should be their prerogative. And if the citizens there don’t like it, then it’s up to them to say so, either pressuring the City Hall to reverse course or cleaning the place out in the next election. Birmingham can hold its own accountable, but that decision shouldn’t be made by Montgomery lawmakers. Accountability isn’t in their dictionary, and it certainly isn’t in Alabama’s wretched constitution.


Morning Money

GOP DEBATE WRAP: WILD NIGHT IN HOUSTON — Donald Trump finally took serious and consistent fire from both Marco Rubio and Ted Cruz who ripped the billionaire for hiring undocumented immigrants — and paying fines for it — while contributing huge amounts to Democrats over the years. Rubio also blistered Trump for a lack of specifics on how he would replace Obamacare while taking a shot at the billionaire’s inheritance: “Here’s the guy that inherited $200 million. If he hadn’t inherited $200 million, you know where Donald Trump would be right now? Selling watches in Manhattan.” Rubio also ripped Trump’s wall with Mexico plan: “If he builds the wall the way he built Trump Tower, he’ll be using illegal immigrants to do it.”

Both Cruz and Rubio slammed Trump for refusing to release his tax returns. Trump claimed he couldn’t because he was being audited. MM is not aware of any reason Trump couldn’t release completed returns regardless of the status of any audits. And if he is being audited for just the last year, why couldn’t he release previous years? The obvious (and almost certainly correct) answer is that Trump doesn’t want to release the returns during the primaries because he doesn’t want people to see what’s in them. What exactly is he afraid people will see? Email your ideas to:

Will any of it matter? History would suggest not. Trump certainly didn’t wilt under the onslaught and there’s little reason to think his supporters will ever abandon him. If they cared about his obvious and comical lack of depth on policy, they would have left already. Could the debate performance boost Rubio? Maybe. But not likely enough to deny Trump a bunch of big wins next week on Super Tuesday. The biggest question of the night: Why did it take until the 10th debate for Rubio to go after Trump? Could all this be wrong and this debate FINALLY be the moment the Trump Train slows down? Sure. But don’t bet on it.

The reality is it would take a sustained and coordinated attack on Trump from every level of the Republican Party plus tens of millions of dollars in ad spending by outside groups — along with a single alternative candidate — to deny Trump the nomination. And even that might not work. Jeff Greenfield writes about this scenario here:

Bloomberg View’s Jonathan Bernstein: “Rubio and … Cruz turned their attacks on [Trump], and fully exposed him as basically a fraud and a buffoon. Whether the media will say that — in the news pages, not just the opinion pages — is an open question. It’s also unclear whether Republican voters will care.”

RUBIO AMBUSHES TRUMP — POLITICO’s Kyle Cheney: “Rubio thrashed … Trump on the debate stage … hurling his harshest attacks of the campaign at the mogul just five days before the most crucial votes are … The Florida senator was quick on his feet, a dramatic reversal from his debate debacle earlier this month, as he tried to convince voters that the GOP frontrunner can’t be trusted to pursue conservative policies — not on judges, not on religious liberty, not on health care, and not even on his signature issue, immigration”

CLINTON ON HER BANK SPEECHES — HRC on Morning Joe took a shot at Bernie Sanders’ vote for the Commodities Futures Modernization Act of 2000 saying it “had a greater impact than most of the talk that we’re now doing.”

NYT EDIT PAGE: RELEASE THE TRANSCRIPTS — Via NYT editorial: “‘Everybody does it,’ is an excuse expected from a mischievous child, not a presidential candidate. But that is Hillary Clinton’s latest defense for making closed-door, richly-paid speeches to big banks, which many middle-class Americans still blame for their economic pain, and then refusing to release the transcripts. … Voters have every right to know what Mrs. Clinton told these groups. …

“Her conditioning her releases on what the Republicans might or might not do is mystifying. Republicans make no bones about their commitment to Wall Street deregulation and tax cuts for the wealthiest Americans. Mrs. Clinton is laboring to convince struggling Americans that she will rein in big banks, despite taking their money. Besides, Mrs. Clinton is not running against a Republican in the Democratic primaries. She is running against Bernie Sanders, a decades-long critic of Wall Street excess”

WHAT’S UP WITH KASHKARI? — A left-leaning Dem emails: “Lots of folks are wondering what he is up to. … After his dismal run for Governor in California he obviously hasn’t lost the political bug and is clearly trying to position himself for the future. To what end I don’t know but mark my words he hasn’t given up on politics. He sees the populist wave that is out that he and he wants to ride it as well. By some accounts there are several folks at the Fed that are upset with his little stunt, including Fischer and Tarullo.”

HOPE FOR A PUERTO RICO DEAL? — Guggenheim’s Jaret Seiberg: “Treasury advisor Antonio Weiss proposed … that Congress facilitate a Puerto Rican debt restructuring by relying on the territorial clause of the U.S. Constitution rather than changing the bankruptcy code. … We believe it will be politically easier for Congress to use the territorial clause of the Constitution to help Puerto Rico rather than amend Chapter 9 of the bankruptcy code, which some fear could more broadly impact the municipal debt market. As a result, we believe Washington is getting closer to a solution to Puerto Rico’s fiscal troubles, though we acknowledge that there remain substantive disagreements that may delay a deal for many months.

HILLARY DEFENDED ON TRANSCRIPTS — A progressive Dem emails: “Yesterday’s ‘Dem strategist’ observations on Clinton’s speech transcripts are completely backwards. It’s a primary only issue, not a general election issue, presumably why she isn’t releasing the transcripts. The key Clinton issue in the primaries is trust and the speeches are just one of many Wall Street-related examples causing voters to question whether she is trustworthy and will in fact represent them.

“While those issues will undoubtedly reappear in the general, Rubio has so far received $4 million from Wall Street and will assuredly get millions more. He or any of the other Republican candidates will comfortably fit in the ‘Wall Street bought and paid for shill’ category. Clinton’s trust problem will likely remain, but she won’t lose on that issue.”

DRIVING THE DAY — President Obama heads to Jacksonville, Florida where he will visit Saft America Advanced Batteries Plant to “highlight the significant progress the American economy has made since he signed the Recovery Act” … Treasury Secretary Jack Lew will be in Shanghai, China for the G-20 Finance Ministers and Central Bank Governors Meeting … Second estimate of Q4 GDP expected to be revised down to 0.4 percent from 0.7 percent … Personal Income and Spending at 8:30 a.m. expected to rise 0.4 percent and 0.3 percent respectively … Univ. of Michigan Sentiment at 10:00 a.m. expected to dip to 91.0 from 92.0 …

ALSO TODAY: GIG ECONOMY EVENT — The Coalition to Promote Independent Entrepreneurs is holding a briefing at 2:00 p.m. in DC:

THE INSIDERS’ TAKE — As 2016 heats up, so has the POLITICO Caucus. The POLITICO Caucus is expanding into key battleground states that will be essential in determining who will be the GOP presidential nominee. Get insights and predictions leading into Super Tuesday from POLITICO’s exclusive insider survey of more than 300 of the most plugged-in operatives, activists and elected officials now in four additional states: Florida, Ohio, Virginia and North Carolina. Read this week’s survey here:

MARKET TURMOIL TAKES A BREAK … FOR NOW — WSJ’s Mike Cherney, Leslie Josephs and Corrie Driebusch: “The crushing start to the year for markets has taken a respite. But poor earnings, heightened volatility and turbulence in the market for low-rated corporate bonds remain, stoking concerns that the breather for stocks may be just a blip. … Thursday marked the sixth trading day out of nine that U.S. stocks ended on an up note, putting February in the green for major indexes.

“The Dow industrials are up 1.4 percent this month after slumping more than 9 percent in the first three weeks of the year. In a sign of newfound resilience, stock markets in both Europe and the U.S. on Thursday shrugged off a 6.4 percent selloff in Chinese stocks. Two months ago, declines like that dragged down global indexes. … Yet, the recent rally faces obstacles. Even as stocks rose Thursday, investors bought U.S. Treasurys, sending prices up and yields down. … And new cracks emerged in the corporate bond market”

APPLE FIGHT HEATS UP — NYT’s Katie Benner, Eric Lichtblau and Nick Wingfield: “The legal wrangling over a federal court order requiring Apple to help law enforcement break into an iPhone intensified … with the company filing its formal response and asking the court to drop its demand. Other technology companies — Microsoft, Google, Twitter, Facebook and Yahoo — also moved to throw their weight behind Apple in court. The companies said they planned to file one or more briefs backing Apple next week in federal court in California.

“The flurry of legal activity by the companies came as the F.B.I. also escalated the matter, calling on Congress to settle the question of when law enforcement should get access to citizens’ private data. Apple earlier this week had also asked for Congress to step in. ‘The larger question isn’t going to be answered in the courts, and shouldn’t be,’ James B. Comey Jr., the F.B.I. director, said in a hearing of the House Intelligence Committee earlier on Thursday. ‘It’s really about who do we want to be as a country and how do we want to govern ourselves.’”

2015: BAD YEAR FOR TRADE — FT’s Shawn Donnan in Washington and Joe Leahy in São Paulo: “Weaker demand from emerging markets made 2015 the worst year for world trade since the aftermath of the global financial crisis, highlighting rising fears about the health of the global economy. The value of goods that crossed international borders last year fell 13.8 per cent in dollar terms — the first contraction since 2009 — according to the Netherlands Bureau of Economic Policy Analysis’s World Trade Monitor. Much of the slump was due to a slowdown in China and other emerging economies.

“The new data released on Thursday represent the first snapshot of global trade for 2015. But the figures also come amid growing concerns that 2016 is already shaping up to be more fraught with dangers for the global economy than previously expected. Those concerns are casting a shadow over a two-day meeting of G20 central bank governors and finance ministers due to start on Friday”

ASIA RISES AHEAD OF G20 — Reuters: “Asian shares made guarded gains on Friday as a gathering of world finance leaders provided a welter of reassuring comments, but little in the way of actual policy stimulus. Setting the tone for the Shanghai meeting of the Group of 20, China’s central bank chief, Zhou Xiaochuan, said Beijing still had the room and tools to support the world’s second largest economy. Yet, German Finance Minister Wolfgang Schaeuble was quick to declare that the scope for monetary and fiscal policy was exhausted globally and called for more structural reform.

“The S&P 500 had already scored its highest close since early January after oil staged a turnaround to end Thursday 3 percent higher on speculation a March meeting of major producers might stabilize prices. … With the recent market turbulence front and center, the G20 is under pressure to agree a coordinated stimulus program that could stop a global slowdown from turning into something worse. Yet, G20 meetings have a long history of disappointing and analysts see little reason why this one should end differently”

MORE G-20 PREP — Bloomberg: “Investors burned by turmoil in global markets are looking for signs the world’s top finance officials are ready to take action to bolster growth and calm currency moves. .. As finance chiefs and central bankers from Group of 20 nations begin talks in Shanghai, Citigroup Inc.’s Steven Englander said a failure to include more explicit support for fiscal stimulus in the closing statement from policy makers would be taken badly by investors.

“For Andrew Brenner, head of international fixed income at National Alliance Capital Markets in New York, a commitment to fiscal expansion and clarity on China’s currency policy will send equities higher next week, while stocks will slide if those issues aren’t addressed. The meeting comes amid a weakening in global demand that’s sent equities into a bear market and stirred up foreign-exchange volatility”

POTUS Events

10:15 am || Departs White House
12:25 pm || Arrives Jacksonville, Florida
1:30 pm || Tours Saft America Advanced Batteries Plant
1:55 pm || Delivers remarks on the American Recovery and Reinvestment Act
4:05 pm || Departs Jacksonville
6:00 pm || Arrives White House

Floor Action

House returns at 9 a.m. for legislative business. First and last votes of the day between 11:30 a.m. and 12:30 p.m. Senate out until Monday.



Five Things You Should Know about the Child Tax Credit  


The Child Tax Credit is an important tax credit that may save you up to $1,000 for each eligible qualifying child. Be sure you qualify before you claim it. Here are five useful facts from the IRS on the Child Tax Credit:

  1. Qualifications. For the Child Tax Credit, a qualifying child must pass several tests:
  • Age. The child must have been under age 17 at the end of 2015.
  • Relationship. The child must be your son, daughter, stepchild, foster child, brother, sister, stepbrother, stepsister, half brother, or half sister. The child may be a descendant of any of these individuals. A qualifying child could also include your grandchild, niece or nephew. You would always treat an adopted child as your own child. An adopted child includes a child lawfully placed with you for legal adoption.
  • Support. The child must have not provided more than half of their own support for the year.
  • Dependent. The child must be a dependent that you claim on your federal tax return.
  • Joint return. The child cannot file a joint return for the year, unless the only reason they are filing is to claim a refund.
  • Citizenship. The child must be a U.S. citizen, a U.S. national or a U.S. resident alien.
  • Residence. In most cases, the child must have lived with you for more than half of 2015.
  1. Limitations. The Child Tax Credit is subject to income limitations. The limits may reduce or eliminate your credit depending on your filing status and income.
  2. Additional Child Tax Credit. If you qualify and get less than the full Child Tax Credit, you could receive a refund even if you owe no tax with the Additional Child Tax Credit.
  3. Schedule 8812. If you qualify to claim the Child Tax Credit, make sure to check if you must complete and attach Schedule 8812, Child Tax Credit, with your tax return. For example, if you claim a credit for a child with an Individual Taxpayer Identification Number, you must complete Part I of Schedule 8812. If you qualify to claim the Additional Child Tax Credit, you must complete and attach Schedule 8812. You can visit to view, download or print IRS tax forms anytime.
  4. IRS E-file. The easiest way to claim the Child Tax Credit is with IRS E-file. This system is safe, accurate and easy to use. You can also use IRS Free File to prepare and e-file your taxes for free. Go to to learn more.

Each and every taxpayer has a set of fundamental rights they should be aware of when dealing with the IRS. These are your Taxpayer Bill of Rights. Explore your rights and our obligations to protect them on