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THE MORNING BRIEF
February 17, 2005 -- 6:32 a.m. EST
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Greenspan's endorsement of President Bush's 2001 tax-cutting goals was a major factor in the political momentum that pushed those cuts through. Now both sides of the Social Security debate will be trying to marshal the Fed chairman's comments yesterday in the same way.
The Addition of Greenspan
Roils Social Security Debate
By JOSEPH SCHUMAN
THE WALL STREET JOURNAL ONLINE
Alan Greenspan's 2001 endorsement of President Bush's tax-cutting goals, at a time of projected budget surpluses, was a major factor in the political momentum that pushed those cuts through. Now both sides of the Social Security debate will be trying to marshal the Fed chairman's comments yesterday in the same way.
Mr. Greenspan offered ammunition to those who support Mr. Bush's still-vague proposals to add private-investment accounts to the system, saying he approves the concept. But he also gave support to those who oppose such changes, expressing wariness of the trillions of dollars in added government debt likely involved. "I think you have to do it in a cautious, gradual way," he said during his semiannual testimony before Congress. And he warned that on top of the "huge transition costs," the addition of private accounts wouldn't make up for the expected long-term funding shortfall of Social Security that is considered the system's main problem, nor would it bolster net national savings. "We're not doing that, and any scheme cannot get around the fact that there is a huge hole in the system and we have no choice but to find a way to fill it," he said.
Still, the tacit approval by the senior U.S. economic statesman could help the president, and Mr. Bush sought to advance the debate as well yesterday, for the first time leaving the door open to raising Social Security taxes on upper-income people to help lessen the shortfall, the New York Times reports. The two developments came as a Wall Street Journal/NBC poll finds Americans drifting away from his Social Security ideas. The survey indicated that by a 50%-40% margin respondents prefer that the system stay "basically as is" rather than add private accounts, and by a 51%-40% margin they called private accounts "a bad idea." Separately, Journal columnist David Wessel notes that while the White House has chosen to make public few details of how the president wishes to proceed, a crunching of the numbers under the most likely scenarios underscores "how far Mr. Bush would move Social Security away from a system that offers monthly payments regardless of the financial market's ups and downs to one in which retiree benefits depend heavily on stock and bond market performance."
Halliburton's Bustling Business in Iran
Just weeks before Halliburton announced it was pulling out of Iran last month, the Texas-based oil-services firm quietly signed a major new deal to develop the country's natural-gas fields, Newsweek reports on its Web site. The deal suggests a far closer connection between the company and Iran's hard-line government, the magazine says, and it comes at a time of escalating tension between Washington and Tehran. Diplomatic sources tell Newsweek that the deal was signed with an Iranian oil company whose principals include Sirus Naseri, Iran's chief international negotiator on its hotly disputed nuclear-enrichment program, which the Bush administration says is aimed at producing atomic weapons. The company is already sensitive about its Iranian connections, after becoming the subject of a Justice Department investigation into whether it has violated U.S. sanctions prohibiting American companies from doing direct business with Tehran.
Documents disclosed by the Justice Department probe into the Iran dealings show that it covers the period when Vice President Dick Cheney was running Halliburton. Newsweek notes that Mr. Cheney, who currently speaks of Iran as a potential enemy, "repeatedly and forcefully criticized the U.S. sanctions laws restricting business in Iran, arguing that they caused U.S. firms like Halliburton to lose business to international competitors." Halliburton didn't at first publicly announce the new gas deal. But once its role was reported by the Iranian press, the company acknowledged that its Dubai-based subsidiary was awarded the contract. A Halliburton official tells Newsweek the deal will net the parent company between $30 million and $35 million over the next several years. And Congressional investigators tell the magazine that the deal raises questions about the Jan. 28 announcement by Mr. Cheney's successor, David Lesar, that the firm would cease doing business in Iran.
Fiorina's Last Quarter Beat Expectations
Hewlett Packard beat Wall Street's expectations with its fourth-quarter revenue, which rose 1% to $21.5 billion, the Los Angeles Times reports, even as its profit was up just 0.7% at $943 million. The results underscored the trouble that H-P has had in eking out a profit in personal and corporate computer systems, the Times notes, which was one of the reasons behind the H-P board's decision to fire Chief Executive Carly Fiorina last week. But The Wall Street Journal reports that analysts said H-P's strong sales outlook damped fears that the company would derail following the exit of Ms. Fiorina. And the results also add some credibility to the board's insistence that it didn't oust Ms. Fiorina over strategy, but rather over the execution of the company's approach.
Oil Provokes Worries, and Protests
The Organization of Petroleum Exporting Countries predicted a significant tightening of oil markets toward the end of this year, warning it would have to pump close to its maximum capacity next winter to meet rising demand from China against the backdrop of slowing Russian production, the Financial Times reports. Separately, the FT says that Greenpeace protesters marked the day the Kyoto Protocol came into force by storming the International Petroleum Exchange and forcing the trading floor to close, though electronic trading wasn't affected.
Salt Industry Goes After NIH
The U.S. salt industry is leaning on the National Institutes of Health, going to court to force it to release the raw data that underpin a study that links salt consumption to high blood pressure, the journal Nature reports. The Virginia-based Salt Institute is using the Data Quality Act, a law championed by the Bush administration and that took effect in 2002. It allows companies and citizens to challenge government statements and rules and to force corrections if the government can't demonstrate their scientific validity. The study under fire by the salt producers looked at the impact of dietary sodium intake on blood pressure, and the results were published in the New England Journal of Medicine, the American Journal of Cardiology and other peer-review publications.
The researchers at the National Heart, Lung, and Blood Institute who undertook the study say that they could have released all the data the Salt Institute could want or need, but that the industry is misusing the act, Nature says. "It is trying to slice and dice the data set so it finds a group that seems not to have a blood pressure that's responsive to reduction in salt," Lawrence Appel, a physician at Johns Hopkins School of Public Health, tells Nature. Salt Institute President Richard Hanneman counters that the NHLBI has shown a consistent "pattern of obfuscation and non-responsiveness" over requests for access to unpublished data.
Also of Note...
Wall Street Journal: In a filing recommending prison time for former Boeing finance chief Michael Sears, prosecutors for the first time explicitly blame Boeing's "senior management" for not asking "logical questions" regarding Mr. Sears's effort in 2002 to recruit the Air Force's top civilian acquisition official.
Jane's Defence: Europe has overtaken North America as the region where large-scale defense-industry consolidation is possible, now that the process among top-tier U.S. defense contractors is largely complete following the sale of TRW's defense business to Northrop Grumman.
Seattle Post-Intelligencer: Former White House cybersecurity and counterterrorism tsar Richard Clarke called on Microsoft and other software companies to become more publicly accountable for their secure software by creating a set of development standards by which they could be judged.
Washington Post: The Department of Homeland Security led a list of seven agencies that received flunking grades for their cybersecurity efforts in 2004, with the federal government at large earning an overall grade of "D-plus."
Sports Illustrated: The National Hockey League canceled what was left of its decimated schedule after a round of last-gasp negotiations failed to resolve differences over a salary cap, the flash-point issue that led to a lockout.
New York Times: Women in labor may suffer needlessly because doctors mistakenly advise them to delay a common pain treatment for fear that it will impede contractions and lead to a Caesarean section, researchers report.
Quote of the Day
"Islamic extremists are exploiting the Iraqi conflict to recruit new anti-U.S. jihadists. These jihadists who survive will leave Iraq experienced in and focused on acts of urban terrorism. They represent a potential pool of contacts to build transnational terrorist cells, groups and networks in Saudi Arabia, Jordan and other countries," CIA Director Porter J. Goss told the Senate Select Committee on Intelligence.
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TODAY'S MARKETS
Stocks gyrated and bonds fell on Greenspan's testimony, but the Dow industrials ended the session almost flat at 10834.88.
http://online.wsj.com/article/0,,SB1108555...tml?mod=djemTMBFast-food chains are trying to tackle the problem of high turnover with a higher starting wage as part of their retention efforts. But Domino's is willing to try all sorts of tactics to keep employees -- except paying them significantly more.
http://online.wsj.com/article/0,,SB1108591...tml?mod=djemTMBMuch of the roughly $1.1 billion in tsunami aid pledged for Sri Lanka still hasn't arrived, and many survivors, tired of waiting, are instead taking out loans.
http://online.wsj.com/article/0,,SB1108578...tml?mod=djemTMBThe tendency of work to expand beyond allotted hours, with no corresponding increase in pay is a big problem for part-timers. Sue Shellenbarger looks at how law and accounting firms are dealing with the situation.
http://online.wsj.com/article/0,,SB1108596...tml?mod=djemTMBIn a new Online Journal column, reporter Sarah Rubenstein fields reader questions on health-care costs. In this installment: comparing insurers' networks; finding the tax advantages in your health-care expenses; and getting eye care if you don't have coverage for it.
http://online.wsj.com/article/0,,SB1108046...tml?mod=djemTMBA 2001 rule change gave the IRS the power to waive penalties and taxes on IRA rollovers that don't take place within 60 days due to mistakes or errors. But recent letter rulings show the agency is getting tougher on individuals who try to use the waiver loophole to get a penalty-free short-term loan.
http://online.wsj.com/article/0,,SB1108507...tml?mod=djemTMB