Actual finance blog

On the day the Deepwater Horizon sank, BP officials warned in an internal memo that if the well was not protected by the blow-out preventer at the drill site, crude oil could burst into the Gulf of Mexico at a rate of 3.4 million gallons a day, an amount a million gallons higher than what the government later believed spilled daily from the site.

The email conversation, which BP agreed to release Friday as part of federal court proceedings, suggests BP managers recognized the potential of the disaster in its early hours, and company officials sought to make sure that the model-developed information wasn’t shared with outsiders. The emails also suggest BP was having heated discussions with Coast Guard officials over the potential of the oil spill.

The memo was released as part of the court proceedings to determine the division of responsibility for the nation’s worst offshore oil disaster, which began when the BP-leased Deepwater Horizon exploded April 20, 2010, killing 11 men about 50 miles southeast of the Louisiana coast. The first phase of the trial is set to start Feb. 27.

BP officials declined to comment on the emails late Friday.

The official amount of oil that flowed from the well was pegged at 206 million gallons from at least April 22 until the well was capped on July 15, a period of 85 days. That’s a daily flow rate of about 2.4 million gallons _ two-thirds of the way to BP’s projection of what could leak from the well if it was an “open hole.” BP has disputed the government’s estimates.

Having an accurate flow rate estimate is needed to determine how much in civil and criminal penalties BP and the other companies drilling the well face under the Clean Water Act.

In the memo, a BP official urges not to share the flow-rate projections and refers to the “difficult discussions” the company was having at the time with the Coast Guard guaranteed personal loan approval.

Gary Imm, a BP manager, told Rob Marshall, BP’s subsea manager in the Gulf, to tell the modeler doing the estimates “not to communicate to anyone on this.”

“A number of people have been looking at this we already have had difficult discussions with the USCG on the numbers,” Imm said in the email string, referring to the Coast Guard and flow estimates.

On April 23, 2010, the Coast Guard, relying on BP’s remotely operated vehicles, said no oil was leaking from the well a mile under the sea. A day later, Coast Guard Rear Adm. Mary Landry announced that oil was leaking an estimated rate of 42,000 gallons a day. The Coast Guard and BP did not divulge how they reached that figure.

In the second week after the spill, the official flow rate was increased to 210,000 gallons a day, an estimate the government continued to use until May 27.

On May 24, BP informed Congress they used an “undisclosed method to generate much higher figures” than the official estimates, according to a report from a presidential commission investigating the spill. BP estimated that the flow rates were between 210,000 gallons and 1.6 million gallons a day, the January 2011 report said.

As the spill grew into weeks and months, and soiled fishing grounds, beaches and coastal marshes, independent scientists questioned the official flow rates. Eventually, the federal government convened teams of government and independent scientists to determine how much oil leaked out of the well. They came up with an official estimate of about 2.4 million gallons of oil a day on average.

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If Republican primary voters are inclined to reward candidates who have big, bold, game-changing plans for the tax code, Mitt Romney might be in trouble.

Compared to the ideas pushed by other White House hopefuls this cycle — particularly Newt Gingrich — Romney’s plan is just not that aggressive.

Of course, Romney’s plan is still firmly rooted in mainstream Republican thought, and that means big tax cuts and a corresponding reduction in federal revenue.

If the Bush tax cuts remain in place — something Romney favors — the federal government would bring in $180 billion less in 2015 under Romney’s plan, according to an analysis conducted by the Tax Policy Center, a group of tax experts who have already examined the plans of Gingrich and Rick Perry.

The rich would see the most benefit, with individuals in the top 1% receiving a tax cut of more than $80,000, while the average person would get a little more than $1,000 break.

"In many ways, Romney’s tax plank is a fairly mainstream Republican offering," Howard Gleckman of TPC said in a blog post. The plan, he said, contains "no major tax reform."

Romney would leave marginal tax rates on income at their current levels, while eliminating taxes on interest, dividends and capital gains for taxpayers who make less than $200,000.

The Romney plan also calls for the elimination of the estate tax, and a reduction in the tax rate paid by corporations from 35% to 25%.

Other candidates have gone further.

"It’s timid, at least by standards of Republican primary plans," said Daniel Mitchell, a senior fellow at the Cato Institute. "From the perspective of the average primary voter, he is probably just trimming around the edges."

Romney has not proposed a flat tax like Gingrich or Perry, and the front-runner has also shied away from the retail sales tax that was the centerpiece of Herman Cain’s now famous 9-9-9 plan personal loan for poor credit.

The Tax Foundation, a think tank that generally advocates for lower tax rates, has said that Romney’s plan for the individual code "really takes no step toward fundamental reform."

In fact, Romney is the lone Republican candidate who has not proposed modifying current tax brackets or substantially reducing income tax rates. Instead, he has articulated only a vague promise to pursue a future plan with "lower, flatter rates on a broader base."

Even President Obama’s fiscal commission, which won plaudits from both sides of the aisle, planned to lower individual rates across the board while eliminating special deductions and loopholes. Under that plan, the top rate paid by individuals would have dropped from 35% to 23%.

On corporate taxes, Romney favors higher rates than his competitors. Romney’s 25% proposed rate carries a less aggressive reduction than that of Gingrich (12.5%), Perry (20%), Rick Santorum (17.5%) or Ron Paul (15%).

America’s Choice 2012

Andrea Saul, a spokeswoman for the campaign, said Romney’s economic policies are a "blueprint for governing that includes dramatic spending cuts to reduce the deficit and pro-growth tax policies."

Grover Norquist, head of the anti-tax advocacy group Americans for Tax Reform, said late last year that Romney’s plan was "fine" but noted that he was falling behind his rivals.

"I think Romney put his plan in very early, Norquist said on Meet the Press, and he "needs to update it to catch up with where the debate’s going,"

But after capturing the Iowa caucuses, Romney might not need to change or explain his tax policies in more detail.

"If you’re the front-runner, then there are a lot of incentives to just run out the clock," Mitchell said. 

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The job market is looking a little brighter at the start of the new year.

Weekly unemployment benefit applications have fallen to levels last seen more than three years ago. Holiday sales were solid. Service companies grew a little faster in December. And many small businesses say they plan to add jobs over the next three months.

The mix of private and government data released Thursday sketched a picture of an economy that is slowly strengthening, stoking optimism one day ahead of the government’s important read on December job growth.

“Businesses have increased hiring to meet the underlying pick-up in (consumer) demand,” said Neil Dutta, an economist at Bank of America Merrill Lynch.

The mostly positive reports had little impact on financial markets. Traders seemed more focused on the debt crisis in Europe, which could slow U.S. growth later this year. The Dow Jones industrial average dropped 37 points in midday trading. Broader indexes were mixed.

Weekly applications for unemployment benefits dropped to a seasonally adjusted 372,000 last week, the Labor Department said Thursday. That’s 11 percent lower than the same time last year.

The four-week average, which smooths fluctuations, fell to 373,250 _ the lowest level since June 2008.

When applications drop below 375,000 _ consistently _ they generally signal that hiring is strong enough to reduce the unemployment rate.

Steven Wood, an economist at Insight Economics, said applications last year averaged 411,000 per week, down from 459,000 per week in 2010.

That’s “a clear indication that the pace of layoffs has slowed,” Wood said.

U.S. service firms, which employ roughly 90 percent of the work force, grew a little faster in December, according to the Institute for Supply Management.

The trade group of purchasing managers said its index of non-manufacturing activity rose to 52.6. That’s slightly above November’s reading of 52 _ the lowest in nearly two years _ but well below last year’s high of 59.7 recorded in February.

Any reading above 50 indicates expansion.

An increase in new orders and stronger imports drove last month’s modest expansion. But a gauge of hiring showed many service firms were hesitant to add workers no fax payday advance.

Retailers, meanwhile, reported solid but not spectacular sales gains last month. And much of the increase stemmed from heavy discounting that will likely cut into profits.

Sales rose 3.5 percent in December for a group of 25 retail chains tracked by the International Council of Shopping Centers. Holiday sales, which cover the last two months of the year, rose 3.3 percent, a decent rise but less than last year’s gain.

Small businesses remain encouraged about their plans to hire over the next three months. The National Federation of Independent Business says the proportion of those firms that expect to add workers is slightly off from the three-year high hit last month.

Economists are predicting that overall hiring increased in December and will strengthen this year.

John Ryding, an economist at RDQ Economics, forecasts that employers added 180,000 jobs last month, a big jump from November’s 120,000 net jobs.

Economists surveyed by the Associated Press project that the economy will generate an average of 175,000 jobs per month this year. That would be a step up from average monthly gains of 130,000 last year and 78,000 in 2010.

In November, the unemployment rate fell to 8.6 percent from 9 percent. Still, about half that decline occurred because many of the unemployed gave up looking for work. When people stop looking for a job, they’re no longer counted as unemployed.

The pickup in hiring reflects some modest improvement in the economy. Growth will likely top 3 percent at an annual rate in the final three months of this year, economists expect. That would be a sharp improvement over the 1.8 percent growth in the July-September quarter.

Even so, many economists forecast that growth could slow to roughly 2 percent this year. Europe is almost certain to fall into recession because of its financial troubles. And without more jobs and higher incomes, consumers may have to cut back on spending. That could drag on growth in 2012.

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AP Economics Writer Martin Crutsinger contributed to this report.

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South Korean President Lee Myung Bak said a new era in inter-Korean relations was possible if the North begins behaving sincerely, after the nuclear-armed nation accused Lee of

Asian stock markets fell Tuesday after Standard and Poor’s warned 15 countries using the euro currency that their credit ratings are at risk of a downgrade.

Japan’s Nikkei 225 dropped 0.8 percent to 8,628.73. South Korea’s Kospi dipped 0.7 percent to 1,908.75 and Hong Kong’s Hang Seng lost 1 percent to 18,988.82. Australia’s S&P/ASX 200 shed 0.6 percent to 4,293.90. Benchmarks in Singapore, Taiwan and New Zealand also gave up ground.

The S&P announcement came only hours after French President Nicolas Sarkozy and German Chancellor Angela Merkel on Monday unveiled sweeping plans to change the European Union treaty in an effort to keep tighter checks on overspending nations.

The S&P warning left out only two of 17 countries that use the euro: Cyprus, whose bonds have near-junk status, and Greece, which already has ratings low enough to suggest that it’s likely to default soon anyway. The inclusion on the list of Germany, Europe’s strongest economy, was the biggest surprise.

The Franco-German plan, which would tie the 17 euro nations closer together, would likely also result in heavier financial burdens for Germany and other stronger economies that have already put up billions of euros to rescue Greece, Ireland and Portugal no fax payday loans.

Sarkozy and Merkel discussed several broad changes for the EU treaty, including the introduction of a penalty for any government that allows its deficit to exceed 3 percent of gross domestic product. The penalty would be automatic _ unless a majority of nations opposed it, a loophole that drew sharp criticism from analysts.

Andrew Sullivan, principal sales trader at Piper Jaffray in Hong Kong, said the sanctions were “subject to political control” and in reality represent no change from mechanisms already in existence.

The French-German proposal will be taken up at a summit of EU leaders on Thursday and Friday aimed at fixing a debt crisis so severe that it threatens the viability of the euro currency.

On Wall Street, the Dow Jones industrial average rose 0.7 percent to 12,097.83. The S&P 500 rose 1 percent to 1,257.1. The Nasdaq added 1.1 percent to 2,655.76.

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U.S. manufacturing is recovering from a slump, and inflation may be peaking. The latest government reports suggest businesses and consumers may be seeing some relief after the economy stumbled earlier this year.

Industrial production rose in October at the fastest pace in three months. Factories made more trucks, electronics and business equipment.

At the same time, Americans paid less for gas, cars and computers last month as overall prices fell for the first time since June.

The data follow a strong report on retail sales in October and point to an economy that is growing at a solid pace in the October-December quarter. Still, the resurgence in the price of oil and a possible recession in Europe threaten to drain the economy’s momentum.

“The continued resilience of manufacturing is encouraging, since this should be the sector most exposed to the global economic slowdown,” said Paul Ashworth, chief U.S. economist with Capital Economics.

Output at the nation’s factories, utilities and mines rose 0.7 percent last month, the Federal Reserve said Wednesday.

Factory output, the largest component of industrial production, increased a solid 0.5 percent. It was the fourth straight monthly gain.

Production of autos and auto parts surged. Business equipment rose for the sixth straight month. Electrical equipment, appliances and transportation equipment all climbed.

Manufacturers “are benefiting from the strong growth in emerging markets, and domestic businesses are confident enough in the future to continue expanding purchases of capital equipment,” said Daniel Meckstroth, chief economist for the Manufacturers Alliance/MAPI, a trade group.

Production was dragged down this spring after the Japanese earthquake and tsunami disrupted key supply chains for automakers and other manufacturers. Rising food and gas costs and shaky financial markets caused consumers to cut back on big purchases.

The auto industry has rebounded to drive most of the growth in factory output. Many U.S. auto plants, which depend upon parts from Japan to produce various models, are seeing supply chains flow more freely.

Higher output at auto plants has allowed dealers to stock popular models that were in demand this spring. As a result, October sales were 7 percent higher than the same month last year. Light trucks were the biggest contributor.

A steep drop in gas prices was a key reason the Consumer Price Index dropped 0.1 percent in October, the Labor Department said. Food prices did rise, but at the slowest pace this year.

Excluding volatile food and energy costs, so-called “core” prices rose 0.1 percent.

Slower inflation could give the Federal Reserve more leeway to lower long-term interest rates to help the economy.

Still, oil prices have been climbing in recent weeks and hit $100 a barrel Wednesday for the first time in four months. They have been rising as the economy improves while tensions rise in countries that hold some of the world’s major sources of crude.

If those prices translate into higher gas prices, consumers could pull back on spending and slow economic growth.

Strong consumer spending helped the economy grow at an annual rate of 2.5 percent in the July-September quarter. The October gain in retail sales suggests similar growth in the final three months of the year.

Instability in Europe might also hurt the U.S. economy. A shaky euro would likely strengthen the dollar, making U.S. goods appear more expensive to overseas buyers. And exports to Europe already account for about one-fourth of U.S. corporate revenue, analysts say.

Europe’s economy is barely growing, and sharp government spending cuts might tip it back into recession. If that happens, slowing output by U.S. manufacturers could hinder the broader economic recovery.

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For the second week in a row, the Chinese aren’t coming.

China Cargo has canceled its scheduled Monday freight flight to Lambert-St. Louis International Airport, airport officials said Friday, a move that raises serious concerns about the viability of Lambert’s fledgling cargo hub project.

Last month the airline landed its first Shanghai-to-St. Louis cargo flight to great fanfare, then ran a second on Oct. 19. But now it has canceled the regularly scheduled Monday flight for the second consecutive week.

Lambert officials said they have not been told exactly why, but suspect there are two reasons: one local, one global.

Both cancellations have come since the collapse of the so-called Aerotropolis tax credits, a $60 million program to subsidize air exports from Missouri. It was intended to make cargo flights from Lambert cheaper than from competing cargo hubs like Chicago-O’Hare, but it died in the Legislature last week.

“We believe there is some correlation” between the tax credit demise and the canceled flights, said airport director Rhonda Hamm-Niebruegge.

But perhaps a bigger factor is the global economy.

Demand for air cargo has been weaker than expected this year, and while there’s typically a fall rush ahead of the holidays, this fall it isn’t panning out. International freight flown by Asian-based carriers was down 6.5 percent in September compared with last year, according to the Association of Asia Pacific Airlines quick payday loan. And Chinese aviation officials this week slashed their cargo forecast for the rest of 2011.

“It’s not isolated to St. Louis,” Hamm-Niebruegge said. “The air cargo market out of China is softer than expected and the impact is being felt across the world.”

Still, the timing is tough for St. Louis.

Lambert and local business leaders have been talking with the Chinese for four years and call the hub project a potential game-changer for the region’s economy. They had hoped to start with three flights a week but said they would build from one after the Aerotropolis bill fell apart. Meanwhile, Gov. Jay Nixon spent the week in China on a long-planned trade trip and was set to meet with aviation officials there.

It’s unclear how that meeting went. Nixon canceled a conference call Wednesday with reporters because of scheduling conflicts, and his spokesman hasn’t answered questions about the aviation meeting.

Nor is it clear what happens next. China Cargo has a two-year lease on a building and ramp space at Lambert, at a cost of $14,549 a month, but that doesn’t mean they have to fly planes. As of Friday, Lambert had gotten no word on when the next flight would land.

“It’s going to be a week-to-week thing at this point,” said airport spokesman Jeff Lea.

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China will appeal a World Trade Organization rejection of its curbs on exports of industrial raw materials, the government said Wednesday, in a case that Washington and Europe hope will lead to an easing of its restrictions on rare earths sales.

“We still consider that China practice and China’s policies do not violate WTO rules,” Ministry of Commerce spokesman Shen Danyang at a regular news briefing. “We will appeal,” he said. Shen gave no details of when the appeal would be filed or on what specific grounds.

A WTO panel ruled July 5 that Beijing was improperly protecting its companies by limiting exports of nine materials used in the steel, aluminum and chemical industries.

The case did not mention rare earths, a group of 17 minerals used in mobile phones and other high-tech products. But the United States and the 27-nation European Union say they want China to apply its principles to rare earths and lift export restrictions.

China accounts for 97 percent of rare earths production and has alarmed foreign manufacturers by reducing exports while it tries to develop its own manufacturers of magnets and other products made with the minerals.

A European Union trade envoy, Karel De Gucht, said in July that Chinese officials indicated they might change their rare earths curbs due to the ruling easy payday loans. Chinese officials have not confirmed that.

The WTO ruling in a case brought by the United States, the EU and Mexico, applied to Chinese quotas and taxes on exports of materials including coke, bauxite, zinc and fluorspar. It rejected China’s argument that it was trying to protect the environment and said export restrictions should be removed.

China has about 30 percent of the world’s reserves of rare earths, which also are used in some weapons, flat-screen TVs, batteries for electric cars and wind turbines.

The United States, Canada and Australia have rare earths but stopped mining them in the 1990s as lower-cost Chinese ores flooded the market. Companies are developing mines in North America and elsewhere but the Chinese restrictions have pushed up global prices.

Beijing says it restricted exports to conserve scarce supplies and curb environmental damage caused by mining. But foreign governments complain similar limits were not applied to domestic manufacturers that use rare earths.

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Greece’s finance minister says the crisis-afflicted economy will shrink more than expected this year, putting pressure on the country’s deficit-cutting effort.

Evangelos Venizelos said Monday that the ministry forecasts the economy to shrink between 4.5 percent and 5.3 percent in 2011 _ considerably worse than initially estimated.

Venizelos told a press conference he will discuss the matter with representatives of Greece’s international creditors during talks in Athens this week no fax payday loans.

He said that, provided all austerity measures are fully implemented, the government should meet its target of cutting budget overspending from 10.5 percent of GDP to 7.5 percent this year.

Greece is surviving on rescue loans worth euro220 billion ($317 billion) from its European partners and the International Monetary Fund.

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When a deep-pockets acquirer meets a reluctant target, a few more dollars will often turn “no” into an enthusiastic “yes.”

That’s not the case with Ralcorp, a St. Louis company that has just slammed the door in its suitor’s face for the third time.

ConAgra Foods, the Omaha, Neb.-based maker of Orville Redenbacher popcorn and Peter Pan peanut butter, wants this deal badly. It approached Ralcorp in March with a cash-and-stock offer of $82 a share, which it sweetened to $86 in May and to $94, all in cash, last week. The latest bid values Ralcorp at $5.2 billion.

Ralcorp has refused to even meet with ConAgra, and Chairman William Stiritz sent a letter on Friday saying the two companies “have nothing further to discuss.”

Just saying “no” isn’t usually an effective takeover defense, but Stiritz, when he’s not writing rejection letters, has moved to reshape Ralcorp by spinning off the Post cereal business and acquiring a unit that makes private-label bread dough.

Analysts say the dough deal will add to profits from Day 1, but the spinoff’s success is less certain. Ralcorp is betting that its two parts