Fresh from his lengthy tour abroad, presumed Democratic presidential nominee Barack Obama surrounded himself with economic heavyweights on Monday in what the BBC and others labeled an “economic summit,” even though the entry on the on the official Obama blog called it an “economic meeting.” (The campaign also misspelled the name of legendary investor Warren Buffett.) The account on Marketwatch noted the presence of former Treasury Secretary Robert Rubin, Google CEO Eric Schmidt, and former Federal Reserve Chairman Paul Volcker.
Aside, however, from the rather generic goal of “restoring balance to the economy,” it was difficult to find any specific plans that Obama is offering. The Wall Street Journal’s version does include Obama’s opposition to the Bush tax cuts and his willingness to renegotiate parts of free trade agreements; it also notes that “Sen. Obama will hold town-hall style events in Missouri and Iowa this week where he is expected to focus on job loss and the economy.” No doubt those events will yield greater detail.
Regardless of whether Obama wins in November, it is certain that the next occupant of the Oval Office will inherit a budget deficit that, by some yardsticks, is the largest in U.S. history. The projected $482 billion in red ink, saysthe Washington Post, is “driven by war costs, tax rebates and a slowing economy that will leave the next president little room to fulfill costly campaign promises.”
As a strict dollar amount, that unwelcome gift is a record figure, although as a percentage of gross domestic product, the Bush White House can at least claim that Ronald Reagan and George H.W. Bush had larger deficits. But it seems likely the $482 billion figure is too low; as the Post notes, that number “does not include the costs of the massive housing bill Congress approved last weekend, nor does it reflect the new law reversing scheduled cuts in Medicare reimbursements to doctors.”Merrill Lynch knows a bit about red ink as well. A mere 10 days after declaring a $4.65 billion second-quarter loss, the investment bank announced another $5.8 billion writedown and the need to issue $8.5 billion in new common stock, which will substantially dilute the value of current stock. As the Financial Times disturbingly puts it:“[T]he latest Merrill writedowns raise new questions about whether banks themselves understand the extent of their problems.” The Journal puts its Merrill story on Page One and highlights the massive amount of “toxic mortgage-related assets” that the investment bank is selling at a fraction of their once-presumed value. More than other outlets, Bloomberg’s story puts particular emphasis on the role played by Temasek Holdings, the sovereign wealth fund controlled by Singapore’s government. Temasek will buy $3.4 billion of the newly issued Merrill stock. Has anyone asked Temasek if they’d like to buy the debt-ridden portions of the U.S. government while they’re at it? Finally, the Starbucks implosion has gone global. As Slate amply documented earlier this month, the announcement that 600 Starbucks outlets will close nationwide left many communities—particularly in rural areas—feeling deprived. Now that pain is being felt Down Under: Starbucks International has announced that it is shuttering 61 of its 84 stores—or 72 percent—in Australia, eliminating nearly 700 jobs and leaving just Melbourne, Sydney, and Brisbane as the remaining Aussie locales for Starbucks.
“Speculation of widespread closures was sparked when every Australian store was ordered to close at 2pm so all staff could attend 28 meetings around the country,” reports the Sydney Morning Herald. The company cited the need to “concentrate its attention and resources on profitable growth,” and will disclose the full list of closures on July 31, according to the corporate Web site. For a company that once seemed intent on global domination, this is a sobering retreat, and it’s hard to believe that Australia will be the only non-U.S. country affected.