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1 2012 CLIA LEADERSHIP FORUM. 2 Howard Frank Vice Chairman, Carnival Corporation Chairman, CLIA.

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Presentation on theme: "1 2012 CLIA LEADERSHIP FORUM. 2 Howard Frank Vice Chairman, Carnival Corporation Chairman, CLIA."— Presentation transcript:

1 CLIA LEADERSHIP FORUM

2 2 Howard Frank Vice Chairman, Carnival Corporation Chairman, CLIA

3 3 Christine Duffy President and CEO, CLIA

4 4 Ken Kies Managing Director, Federal Policy Group

5 Post Election Tax and Budget Policy – Complexity Ahead 2012 CLIA Leadership Forum Hollywood, Florida November 14, 2012 Kenneth J. Kies Managing Director Federal Policy Group A Practice of Clark & Wamberg

6 Page 6 View from Washington

7 Page 7 Overview Federal Fiscal Outlook Economic Outlook Debt Ceiling Outcome Massive Tax Uncertainty Election Outcome How Popular is Congress What Were the Game Changers

8 Page 8 The Outlook for 2011 Federal Fiscal Outlook

9 Page 9 Deficit Outlook Under Obama Budget Source: CBO Baseline Budget Outlook, August 2012/ President Obama’s budget for fiscal year 2013, Mid-Session Review, July, 2012

10 Page 10 Federal Debt Outlook: Treasury Source: President Obama’s budget for fiscal year 2013, Mid-Session Review, July, 2012

11 Page 11 Federal Debt Outlook: Treasury Source: Congressional Budget Office, Economic Outlook, August 2012

12 Page 12 Economic Outlook

13 Page 13 States in Fiscal Crisis

14 Page 14 States and Cities in Fiscal Crisis States face over $4 trillion pension funding shortfall –A 2012 Harvard Kennedy School study found that all 50 states collectively face a public pension shortfall of up to $4.4 trillion. “For purposes of comparison, an unfunded liability of $4.4 trillion would constitute a substantial 33% of the 2011 real U.S. GDP of $13.32 trillion.” Underfunded Public Pensions in the United States, 2012 –Unfunded pension liabilities are the dark cloud on the horizon of state budgets; a cloud totaling trillions of dollars… Though they represent unavoidable fiscal debt, pension liabilities often slip under the radar when states tally up their spending, thanks to their status as "future payments" and accounting games. Aggressive pension reform is urgently needed in almost every state: StateBudgetSolutions.org, October 9, 2012 –New accounting rules could TRIPLE projected funding gap: The Washington Post, August 16, 2012

15 Page 15 States and Cities in Fiscal Crisis States face trillions in pension funding shortfall (continued) –Government pensions rate of return doubted by some The Courier-Journal, October 8, states where the public pension fight is fierce (Unfunded Liability): California ($100 billion), Illinois ($85 billion), Kansas ($9.2 billion), Kentucky ($30 billion), Louisiana ($18 billion), New Hampshire ($4.26 billion), New Jersey ($41.7 billion), New York ($9 billion), Oklahoma ($10.6 billion), Rhode Island ($4 billion) Wall Street Journal, October 7, 2012 Some cities face bankruptcy –“Los Angeles could go bankrupt if it doesn't overhaul its finances with new taxes, possible layoffs and the privatization of some city services, the city's top budget official says.” San Francisco Chronicle, April 7, 2012 –Stockton, California's City Council “was poised to approve a budget plan for possible bankruptcy filing.” The Wall Street Journal, June 27, 2012 –“Atwater, California files for bankruptcy.” Reuters, October 4, 2012

16 Page 16 Economic Indicators Consumer confidence –Rose to 70.3 in September, up from 60.6 in August 2012 –A confidence rating that is between 90 and 100 indicates that the economy is on solid footing. (source: Conference Board) Unemployment –Unemployment in October increased to 7.9% from September’s 7.8%. In October, 171,000 net new jobs were created. –Roughly 200,000 jobs must be created every month to maintain current unemployment rate.

17 Page 17 Record Number of Youth Unemployed –Nearly One-Quarter of workers between the ages of 16 and 19 were unemployed in September, 23.7%, an increase since January’s 23.2%. –“[P]art of the [job] growth came from a surge in the number of people taking part-time jobs because full-time slots weren't available. That suggests employers continue to be reluctant to expand in the face of threats to the U.S. and global economies, including deteriorating conditions in Europe and the prospect of year-end spending cuts and tax increases in the U.S - The Wall Street Journal, October 5, 2012 Underemployment –BLS shows 14.6% of American workers in October were either unemployed or working part-time, but wanting full time work. –40.1% of unemployed in September had been out of work for at least 27 weeks. –The long-term unemployment rate has remained at or above 40 percent every month since March of –“Never before in the postwar period have the unemployed been unemployed for so long.” - Federal Reserve Bank of Richmond

18 Page 18 Economic Indicators Residential real estate –“ Sales of previously owned U.S. homes in March unexpectedly fell for the third time in the last four months, showing an uneven recovery in the housing market. ” - Bloomberg, April 19, 2012 –“Many homeowners who would like to sell their home are not placing them on the market because they are worried home prices might dip again. Others can't sell because they are underwater on their mortgage, meaning they owe more than their home is worth.” - Huffington Post, September 5, 2012 –“ While property markets across the country rose together during the housing boom and fell together during the crash, new data analyzed by real-estate firm Zillow Inc. for The Wall Street Journal show that markets are exiting the downturn at different speeds.” - The Wall Street Journal, June 20, 2012 Most recent GDP growth numbers were discouraging. First quarter was 2%, down from 3.0 for Fourth Quarter Second quarter growth was a dismal 1.3%. Third quarter was a little better at 2.2%. -Commerce Department, September 27, 2012

19 Page 19 Is the U.S. Recovery in Free Fall? "US risks tepid recovery turning into recession, IMF warns" - The Telegraph, July 3, 2012

20 Page 20 CEOs Pessimistic Economic Outlook  CEOs envision slower economic growth for 2012 and have lowered expectations for sales, and hiring.  More CEOs expect hiring to decline in the next six months than think that hiring will increase, 34% versus 29%.  Fewer CEOs think sales will increase in the next six months, 58% in Q3 versus 75% in Q2.  Debt Crisis in Europe continues to have negative effect on U.S. economy.  “Sales are going down fast in Europe,” Jim McNerney, Chairman Business Roundtable  Fiscal Cliff becomes more worrisome at year-end grows closer.  “The closer you get, the more nervous you get,” Jim McNerney, Chairman Business Roundtable Source: Business Roundtable CEO Economic Outlook

21 Page 21 Déjà vu all over again ? “If history is a guide, the odds that the American economy is falling into a double-dip recession have risen in recent weeks and may even have reached 50 percent… The United States appears to have entered some version of the vicious cycle. Most ominously, job growth has slowed to a pace that typically signals the start of a recession." - New York Times, September 8, 2011 “The U.S. economy is in a vicious cycle in which countless interventions and bailouts have resulted in distorted financial markets… The labor market still isn’t growing at a sustainable pace that keeps up with population growth.” - The Wall Street Journal, July 11, 2012

22 Page 22 Tax and Budget Outlook Massive Tax Uncertainty Deficit Reduction / Tax Reform

23 Page 23 Sophisticated Discussion on Tax Reform? The current tax code “is kind of screwy.” President Barack Obama, April 6, 2011

24 Page 24 Expiring Tax Provisions January 1, 2013: –Top individual rate remains at 35% through –Bottom rate stays at 10%. –Other marginal income tax rates also stay at 2010 levels. –Top capital gains and dividend tax rates remain at 15% through –Estate tax returns at 35 percent rate with a $5 million exemption instead of $1 million exemption and a top rate of 55% rate, but only through December 31, Cost of extending 2001 and 2003 Tax Act cuts: $3.312 trillion (FY ). Individual AMT: –Temporary “patch” extended through –Permanent patch at inflation-adjusted 2009 levels would cost $1.9 billion ( ).

25 Page 25 Pending Federal Tax Increases Current Law Tax Increases to Take Effect in 2013 (includes effect of (1) higher top marginal ordinary income tax rate, (2) expiration of qualified dividend tax rate, (3) expiration of reduced long term capital gains tax rate, (4) imposition of higher Medicare tax) Type of IncomeTop Rate in 2011 Top Rate in 2013 Percent Change In Rates Earned Income37.9%43.4%18.33% Unearned Income (except Qualified Dividends and Long Term Capital Gains) 35%43.4%27.4% Qualified Dividends15%43.4%197.3% Long Term Capital Gains 15%23.8%66.7%

26 Page 26 Pending Federal Tax Increases(continued)

27 Page 27 “Congress risks taking the economy over a ‘massive fiscal cliff,’ Federal Reserve Chairman Ben Bernanke warned lawmakers on Wednesday. In remarks that hit Wall Street stock prices, the central bank boss suggested the economy could hit a serious roadblock if Congress allows the Bush tax rates and payroll tax cut to expire and $1.2 trillion in spending cuts to be implemented simultaneously in January.” - The Hill, March 1, 2012

28 Page 28 Election Outcome

29 Page Election Outcome: President President Obama wins re-election  Electoral Vote:  Obama 303*  Romney 206 *Obama has a slight lead for Florida’s 29 Electoral Votes, which have not yet been awarded.  Popular Vote:  Obama 50% (60,144,795 votes)  Romney 48% (57,443,964 votes)

30 Page 30 National Electoral College Results Obama Romney 270 votes needed to win 303 Obama 206 Romney 2012 Electoral Map 29 Unknown Obama Romney Barack Obama (D) Mitt Romney (R) Unknown HI NH 4 MA 11 CT 7 RI 4 NJ 14 DE 3 MD 10 DC 3 VT Last Updated 3:00 a.m. 11/7/12

31 Page 31 National Popular Vote Results 173 Romney Obama 55% 54% 57% 52% 62% HI 72% 55% 73% 67% 55% 69% 51% 53% 58% 61% 60% 67% 54% 52% 53% 52% 53% 57% 54% 50% 61% 59% 61% 57% 59% 55% 61% 53% 55% 51% 52% 62% VT 67% 56% NH 52% MA 61% CT 57% RI 63% NJ 58% DE 59% MD 61% DC 91% Barack Obama (D) Mitt Romney (R) 50% 100% Unknown 2012 Popular Vote Map 62% Last Updated 3:00 a.m. 11/7/12 National Total 50% Obama 48% Romney

32 Page 32 Source: Exit polls results available at Presidential Election Votes by Demographic Voted for ObamaVoted for Romney Gender Women55%44% Men45%52% Race White (non-Hispanic)39%59% Black93%6% Hispanic71%27% Education Non-College Graduate51%47% College Graduate50%48% Age 18 to 29 years60%37% 30 to 44 years52%45% 45 to 64 years47%51% 64+ years44%56% Income Less than $50,00060%38% $50,000 to $100,00046%52% $100,000 or more44%54% Last Updated 2:40 a.m., 11/7/12

33 Page Election Outcome: Senate  Democrats pick up Republican seats in ME, MA, and IN  Republicans pick up Democratic seat in NE DemocratsRepublicans Current (112 th ) Congress 53 (includes one independent caucusing with D’s) 47 Incoming (113 th ) Congress 55 (includes two independents expected to caucus with D’s) 45

34 Page Election Outcome: House Republicans easily retain control of the House. Democrats needed a net gain of 25 seats. With 12 seats yet to be decided, Republicans thus far have lost a net of only two, a total that is unlikely to increase more than a very few seats, if at all. Despite the huge gain of 63 seats in 2010, which often portends loss of marginal seats in the next election, Republicans suffered only modest losses. Democrats made very few inroads outside CA, IL, NY, and NH, which were largely offset by scattered GOP gains. RepublicansDemocrats Current (112 th ) Congress (figures include 5 vacancies) Incoming (113 th ) Congress *12 seats not yet called 232*191*

35 Page 35 How Popular is Congress?

36 Page 36 Real Clear Politics: 13.8% approve of how Congress is handling its job while 79.6% disapprove, Aug 5 – Sept 17

37 Page 37 How is Congress Doing? The Bottom of the Barrel Degree of Confidence Degree of Confidence The Military: 78% Small Business 64% The Police 56% The Church 48% Hospitals 39% Supreme Court 37% The Presidency 35% Justice System 28% Newspapers 28% TV News 27% Banks 23% Labor 21% Big Business 19% HMOs 19% CONGRESS 12% Gallup, June 23, 2011 Gallup, June 23, 2011

38 Page 38 What Were the Game Changers?

39 Page 39 Game Changers for 2012 Euro Zone Meltdown Iran Nuclear Activity North Korea China Economy Middle East Unrest Natural Disasters Terrorist Attack Presidential Debates

40 Page 40 Fast and Furious Solyndra Bankruptcy General Services Administration – “It didn’t stay in Vegas” Cartagena - Gate

41 Page 41

42 Page 42 Predictions

43 CLIA LEADERSHIP FORUM

44 Ports of San Francisco and Victoria, BC, Canada Environmental Awards Bureau Veritas The World’s First Six Golden Pearls American Maritime Safety Inc Quality Ship Management Weekend Weekly Go Green Award 2012 Most Devoted Go Green Organization CRUISE LINE AWARDS 44

45 Sustainable Tourism Education Program (STEP) Bronze Certification Make a Wish Foundation Corporation of the Year “e-stewards enterprise” Basel Action Network CRUISE LINE AWARDS 45

46 Ethisphere World’s Most Ethical Companies U.S. Coast Guard Gold 2012 Rear Admiral William M. Benkert Environmental Protection Award CRUISE LINE AWARDS 46

47 47

48 48 Captain Richard Kenin, USCG Seventh District Chief of Staff

49 49 U.S. COAST GUARD PUBLIC SERVICE AWARD


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