Transcript 2012 CLIA LEADERSHIP FORUM - Cruise Lines International
2012 CLIA LEADERSHIP FORUM
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Howard Frank
Vice Chairman, Carnival Corporation Chairman, CLIA
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Christine Duffy
President and CEO, CLIA
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Ken Kies
Managing Director, Federal Policy Group
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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
View from Washington
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Overview
Federal Fiscal Outlook Economic Outlook Debt Ceiling Outcome Massive Tax Uncertainty Election Outcome How Popular is Congress What Were the Game Changers
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The Outlook for 2011
Federal Fiscal Outlook
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Deficit Outlook Under Obama Budget
Annual Budget Deficit Baseline vs. Obama Budget
$1,800 $1,600 $1,400 $1,200 $1,000 $800 $600 $400 $200 $0
$1,413 $1,293 $1,300 $1,211 $991 $661 $595 $615 $576 $543 $578 $604 $627 20 09 20 10 20 11 20 12 20 13 20 14 20 15 20 16 Fiscal Year 20 17 20 18 20 19 20 20 20 21 CBO Baseline Obama Budget
Source: CBO Baseline Budget Outlook, August 2012/ President Obama’s budget for fiscal year 2013, Mid-Session Review, July, 2012 Page 9
Federal Debt Outlook: Treasury
Total Public Debt
$20.3
$20 $15 $10 $9.9
$5 $0 2008 $11.9
2009 $13.5
2010 $15.4
$16.2
$17.5
2011 2012
Fiscal Year
2013 $18.5
$19.4
2014 2015 2016 Source: President Obama’s budget for fiscal year 2013, Mid-Session Review, July, 2012 Page 10
Federal Debt Outlook: Treasury
Source: Congressional Budget Office, Economic Outlook, August 2012 Page 11
Economic Outlook
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States in Fiscal Crisis
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States and Cities in Fiscal Crisis
States face over $4 trillion pension funding shortfall
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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
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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
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New accounting rules could TRIPLE projected funding gap: The Washington Post, August 16, 2012
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States and Cities in Fiscal Crisis
States face trillions in pension funding shortfall (continued)
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Government pensions rate of return doubted by some The Courier-Journal, October 8, 2012
10 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
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“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
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Stockton, California's City Council “was poised to approve a budget plan for possible bankruptcy filing.” The Wall Street Journal, June 27, 2012
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“Atwater, California files for bankruptcy.” Reuters, October 4, 2012
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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.
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Record Number of Youth Unemployed
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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%.
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“[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 2010. “Never before in the postwar period have the unemployed been unemployed for so long.”
- Federal Reserve Bank of Richmond Page 17
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.
”
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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 2011. Second quarter growth was a dismal 1.3%. Third quarter was a little better at 2.2%.
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Commerce Department, September 27, 2012
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Is the U.S. Recovery in Free Fall?
"US risks tepid recovery turning into recession, IMF warns"
- The Telegraph, July 3, 2012
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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 Page 20
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."
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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
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Tax and Budget Outlook
Massive Tax Uncertainty Deficit Reduction / Tax Reform
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Sophisticated Discussion on Tax Reform?
The current tax code “is kind of screwy.” President Barack Obama, April 6, 2011
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Expiring Tax Provisions
January 1, 2013:
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Top individual rate remains at 35% through 2012.
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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 2012.
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, 2012.
Cost of extending 2001 and 2003 Tax Act cuts: $3.312 trillion (FY 2010-19).
Individual AMT:
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Temporary “patch” extended through 2011.
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Permanent patch at inflation-adjusted 2009 levels would cost $1.9 billion (2013 - 2022).
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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 Income Earned Income Unearned Income (except Qualified Dividends and Long Term Capital Gains) Qualified Dividends Long Term Capital Gains Top Rate in 2011 37.9% Top Rate in 2013 43.4% Percent Change In Rates 18.33% 35% 43.4% 27.4% 15% 15% 43.4% 23.8% 197.3% 66.7%
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Pending Federal Tax Increases (continued)
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“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
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Election Outcome
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2012 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)
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National Electoral College Results
55 7 12 3 6 4 10 6 3 3 5 HI 4 9
2012 Electoral Map
3 3 5 38 6 7 10 6 10 6 8 10 20 11 6 16 11 8 9 18 16 5 9 VT 3 4 20 13 15 29 NH 4 MA 11 RI 4 CT 7 NJ 14 DC 3 DE 3 MD 10 29 Unknown Romney Obama 206 Romney 29 Unknown 270 votes needed to win 303 Obama Page 30
National Popular Vote Results
57% 54% 55% 52% 67% 73% 55% 55% 69% 51% 53%
2012 Popular Vote Map
58% VT 67% 56% 58% 61% 60% 67% 53% 52% 54% 61% 52% 53% 57% 54% 61% 50% 62% 52% 51% 62% NJ 58% DE 59% MD 61% NH 52% MA 61% RI 63% CT 57% DC 91% Obama 51% 59% 55% 57% 59% 55% 61% 53%
National Total
• 50% Obama • 48% Romney 62% 173 Romney HI 72% Barack Obama (D) Mitt Romney (R) Unknown 50% 100% Page 31
2012 Presidential Election Votes by Demographic
Gender Race Education Age Income
Women Men White (non-Hispanic) Black Hispanic Non-College Graduate College Graduate 18 to 29 years 30 to 44 years 45 to 64 years 64+ years Less than $50,000 $50,000 to $100,000 $100,000 or more
Voted for Obama
55% 45% 39% 93% 71% 51% 50% 60% 52% 47% 44% 60% 46% 44%
Voted for Romney
44% 52% 59% 6% 27% 47% 48% 37% 45% 51% 56% 38% 52% 54%
Source: Exit polls results available at http://www.cnn.com/election/2012/results/race/president#exit-polls
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2012 Election Outcome: Senate
Democrats pick up Republican seats in ME, MA, and IN
Republicans pick up Democratic seat in NE Current (112 th ) Congress Incoming (113 th ) Congress Democrats 53 (includes one independent caucusing with D’s) 55 (includes two independents expected to caucus with D’s) Republicans 47 45
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2012 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. Republicans Democrats Current (112 th ) Congress (figures include 5 vacancies) Incoming (113 th ) Congress *12 seats not yet called 240 232* 190 191*
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How Popular is Congress?
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Real Clear Politics: 13.8% approve of how Congress is handling its job while 79.6% disapprove, Aug 5 – Sept 17
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How is Congress Doing?
The Bottom of the Barrel The Military: Degree of Confidence 78% Small Business 64% The Police The Church 56% 48% Hospitals 39% Supreme Court 37% The Presidency 35% Justice System 28% Newspapers TV News Banks Labor Big Business HMOs CONGRESS 28% 27% 23% 21% 19% 19% 12% Gallup, June 23, 2011 Page 37
What Were the Game Changers?
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Game Changers for 2012
Euro Zone Meltdown
Iran Nuclear Activity
North Korea
China Economy
Middle East Unrest
Natural Disasters
Terrorist Attack
Presidential Debates
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Fast and Furious
Solyndra Bankruptcy
General Services Administration – “It didn’t stay in Vegas”
Cartagena - Gate
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Predictions
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2012 CLIA LEADERSHIP FORUM
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CRUISE LINE AWARDS
Ports of San Francisco and Victoria, BC, Canada Environmental Awards Bureau Veritas The World’s First Six Golden Pearls American Maritime Safety Inc.
2012 Quality Ship Management Weekend Weekly Go Green Award 2012 Most Devoted Go Green Organization
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CRUISE LINE AWARDS
Make a Wish Foundation Corporation of the Year “e-stewards enterprise” Basel Action Network Sustainable Tourism Education Program (STEP) Bronze Certification
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CRUISE LINE AWARDS
Ethisphere World’s Most Ethical Companies U.S. Coast Guard Gold 2012 Rear Admiral William M. Benkert Environmental Protection Award
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Captain Richard Kenin, USCG
Seventh District Chief of Staff
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U.S. COAST GUARD PUBLIC SERVICE AWARD
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