The New York Times, Los Angeles Times, and Washington Postlead with President Obama’s new plan to overhaul international tax rules to crack down on multinational corporations and wealthy individuals who avoid paying U.S. taxes by keeping money abroad. Obama says his plan would raise $210 billion over the next 10 years but immediately raised the ire of big corporations that said the plan would end up hurting U.S. businesses and cost jobs. Even though the plan wouldn’t be enacted until 2011, opponents immediately said the administration is seeking to increase taxes during a global recession. The NYT declares that the proposal is likely to spark “an epic battle,” and the LAT says it could “produce the administration’s first major confrontation with a broad segment of corporate America.”
USA Todayleads with a look at how federal money is now the No. 1 source of revenue for state and local governments. Since the mid-1970s, the biggest source of state and local revenue was the sales tax, but that changed in the first three months of the year when federal grants soared. This disparity is likely to continue increasing as tax collections take further hits due to the economic downturn, while federal stimulus money will continue to be doled out. The Wall Street Journalleads its world-wide newsbox with a look at how health officials are beginning to track back on some of the measures that were taken to prevent the spread of swine flu. The number of confirmed cases continued to increase, but despite initial fears most have proved to be relatively mild and the Centers for Disease Control may ease up on its recommendation that schools close for up to two weeks once a student has tested positive for the new virus. Mexico City will begin to regain some life this week when restaurants and bars, as well as city government offices, reopen on Wednesday.
By changing international tax rules, Obama insists he’s just trying to make the process fairer in “a tax code that says you should pay lower taxes if you create a job in Bangalore, India, than if you create one in Buffalo, New York.” The WP makes clear that in proposing the change, Obama is taking the United States in the opposite direction of other major economic powers by going against the growing trend of countries only taxing profits that are earned within its borders. But using what the NYT describes as “some of his most populist language to date,” Obama said many are currently being “aided and abetted by a broken tax system, written by well-connected lobbyists on behalf of well-heeled interests and individuals.” The LAT notes that due to the fact that lawmakers are reluctant to talk about increasing taxes during a time of economic turmoil, Obama may have a hard time getting his plan through Congress. Indeed, several key Democrats on Capitol Hill weren’t very enthusiastic about the plan.
The NYT talks to tax experts who caution that the move could put American companies at a disadvantage in the global marketplace and might encourage more of them to locate their headquarters outside the United States. The WSJ points out that Obama’s attempts to overhaul the tax system are unlikely to end here. Even if this controversial proposal doesn’t become a reality anytime soon, it could still “provide the basis for a broad corporate-tax overhaul” that many say is “increasingly likely over the next two years.”
The WSJ goes high with word that the so-called stress tests on the nation’s 19 biggest banks will direct around 10 of them to increase capital. The results of the stress test will be known on Thursday, and the numbers aren’t set in stone quite yet. The WSJ hears that at one point there was talk that 14 banks would be required to raise more money to protect themselves against future turmoil, but that number appears to have gone down in recent days. Administration officials are confident that most of the banks will be able to raise money from the private sector and won’t have to turn to the federal government. Those that don’t have luck in the private sector can also agree to turn the government’s preferred shares into common equity, which would give the government an ownership stake in some of the nation’s banks. Despite fears that the stress tests could deliver more bad news to a beleaguered sector of the economy, it seems that they have, in fact, helped to boost confidence. Bank stocks soared yesterday.
Financial stocks may have been leading the pack, but they were hardly alone. The WSJ fronts, and everyone notes, the broad Standard & Poor’s 500-stock index surged 3.4 percent and recovered all of this year’s losses. That hardly means we’re out of the woods yet, and the S&P 500 is still down 42 percent from its record close in late 2007, but the overall gains signal that investors are beginning to feel optimistic about the future of some of the nation’s most troubled sectors. For its part, the Dow Jones industrial average increased 2.6 percent but is still down almost 4 percent for the year.
The WP fronts word that Murtech, a company owned by the nephew of Democratic Rep. John Murtha of Pennsylvania, has received millions of dollars in no-bid contracts for Pentagon work. Murtha is the chairman of the House appropriations defense subcommittee and thus has lots of influence over Pentagon spending, but everyone denies he had anything to do with the money that his nephew’s company has received over the years. Still, Murtech received the bulk of its contracts for the Army Space and Missile Defense Command in Huntsville, Ala., “which has been generous to companies in John Murtha’s district and enjoys a close relationship with the congressman,” reports the paper. Murtha’s nephew insists his company is uniquely qualified to take up some of the Pentagon work, but government watchdog groups say that, regardless of his personal connections, the fact that the company managed to receive so many no-bid contracts is troubling.
As experts continue to be relieved that the swine flu hasn’t yet proved to be as deadly as many feared, Mexicans are still suffering from the stigma of being associated with the virus, notes the NYT. Several countries have canceled flights from Mexico, Chile declined to host Mexican soccer teams, and, most extreme of all, China has quarantined dozens of seemingly healthy Mexicans. Mexican President Felipe Calderon criticized those who are “acting out of ignorance and disinformation” and imposing “repressive, discriminatory measures.” In a front-page dispatch from Hong Kong, the WSJ takes a look at how more than 300 guests and staff at a hotel in Hong Kong are being subjected to a seven-day involuntary confinement because they happened to be staying there when one Mexican guest tested positive for swine flu. So far, none of the guests has tested positive for the virus, but the government has decided not to take any chances. The hotel is surrounded by police and journalists, and at one point one guest held a handwritten sign up to a window that read: “We will exchange information for beer and food and cigarettes.”
The WP fronts a look at how Taliban militants are “tightening their grip” in the area surrounding Pakistan’s Swat Valley as the military continues its campaign to get them out of Buner province. Even as the two sides are battling it out, Pakistan’s military has yet to unleash its full force on the Taliban, hoping that there can still be a nonviolent solution that allows the peace agreement to survive. The WSJ sees things a bit differently and says Pakistan’s military has, for all intents and purposes, all but abandoned the peace deal with militants. The paper clarifies that the government hasn’t exactly declared that it’s abandoning the truce, but it has said it will continue to implement Islamic law, or sharia, in the area, thereby robbing “the militants of their main source of popular support.” The WP talks to analysts who say it’s unlikely that the military will be able to keep up a sustained fight against the Taliban militants.
The NYT talks to a 28-year-old “Pakistani logistics tactician for the Taliban” who described how a big part of the group’s strategy to defeat the rising number of U.S. troops in Afghanistan involves taking advantage of the pretty much open border with Pakistan. The tactician is confident they won’t be defeated by American troops because of their ability to hide out in Pakistan, as well as their seemingly endless supply of Pakistani recruits and the cooperation from Afghan villagers. The tactician’s account illustrates how the Pakistani Taliban are coordinating offensives on both sides of the border “in what for them is a seamless conflict.”
In the WP’s op-ed page, star Pakistani journalist Ahmed Rashid writes that “the Taliban offensive in northern Pakistan has the potential to become a nationwide movement within a few months,” and Congress must act right away to provide aid to the Pakistani government so this doesn’t happen. Although the recent offensive against militants was no doubt partly a response to U.S. pressure, it also was motivated by “a dramatic shift in public opinion toward opposing the Taliban.” Congress must see these changing attitudes as an opportunity and give the administration the money it has asked for to help out Pakistan’s military. While it’s natural for lawmakers to be skeptical after so much money has been sunk into Pakistan over the last few years, this is not the time to worry about past sins. “I do not want to see my country go down because Congress is more concerned with minutiae than with the big picture,” writes Rashid. “Yes, there must be a sea change in attitudes and policies. … But tomorrow may be too late. Pakistan needs help today.”