Transcript 2012 CLIA LEADERSHIP FORUM - Cruise Lines International

2012 CLIA LEADERSHIP
FORUM
1
Howard Frank
Vice Chairman, Carnival Corporation
Chairman, CLIA
2
Christine Duffy
President and CEO, CLIA
3
Ken Kies
Managing Director, Federal Policy Group
4
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
Page 6
Overview
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Federal Fiscal Outlook
Economic Outlook
Debt Ceiling Outcome
Massive Tax Uncertainty
Election Outcome
How Popular is Congress
What Were the Game Changers
Page 7
The Outlook for 2011
Federal Fiscal Outlook
Page 8
Deficit Outlook Under Obama Budget
Annual Budget Deficit
Baseline vs. Obama Budget
$1,800
$1,600
Annual Deficit ($ billion)
$1,413
$1,400
$1,293
$1,300
$1,211
$1,200
$991
$1,000
$800
$661
$595
$615
$600
$576
$543
$578
$604
$627
$400
$200
20
21
20
20
20
19
20
18
20
17
20
16
20
15
20
14
20
13
20
12
20
11
20
10
20
09
$0
Fiscal Year
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
$19.4
$20
$18.5
Publicly Held Debt ($ Trillions)
$17.5
$16.2
$15.4
$15
$13.5
$11.9
$9.9
$10
$5
$0
2008
2009
2010
2011
2012
2013
2014
2015
2016
Fiscal Year
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
Page 12
States in Fiscal Crisis
Page 13
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
Page 14
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, 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
– “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
Page 15
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.
Page 16
 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 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.”
- 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%.
-Commerce Department, September 27, 2012
Page 18
Is the U.S. Recovery in Free Fall?
"US risks tepid recovery turning into recession,
IMF warns"
- The Telegraph, July 3, 2012
Page 19
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."
- 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
Page 21
Tax and Budget Outlook
Massive Tax Uncertainty
Deficit Reduction / Tax Reform
Page 22
Sophisticated Discussion on Tax Reform?
The current tax code “is kind of screwy.”
President Barack Obama, April 6, 2011
Page 23
Expiring Tax Provisions
 January 1, 2013:
– Top individual rate remains at 35% through 2012.
– 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:
– Temporary “patch” extended through 2011.
– Permanent patch at inflation-adjusted 2009 levels would cost $1.9
billion (2013 - 2022).
Page 24
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
Top Rate
in
2011
Top Rate
in
2013
Percent
Change
In Rates
Earned Income
37.9%
43.4%
18.33%
35%
43.4%
27.4%
Qualified Dividends
15%
43.4%
197.3%
Long Term Capital
Gains
15%
23.8%
66.7%
Unearned Income
(except Qualified Dividends
and Long Term Capital Gains)
Page 25
Pending Federal Tax Increases (continued)
Page 26
“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
Page 27
Election Outcome
Page 28
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)
Page 29
National Electoral College Results
2012 Electoral
Map
12
3
7
4
VT 3
3
10
3
3
6
55
10
9
29
16
20
6
5
6
10
20
6
38
11
10
7
5
18
5
13
8
15
11
6
8
4
NH 4
MA 11
RI 4
CT 7
NJ 14
DC 3
DE 3
MD 10
9
6
9
Barack Obama
Romney
Obama
16
(D)
Mitt Romney (R)
29
3
Unknown
Romney
Obama
HI 4
206
29
303
Romney
Unknown
Obama
270 votes
needed to win
Page 30
National Popular Vote Results
2012 Popular Vote Map
55%
55%
VT 67%
58%
54%
56%
53%
67%
58%
52%
53%
69%
73%
57%
55%
52%
52%
61%
52%
57%
51%
53%
NH 52%
MA 61%
RI 63%
CT 57%
62%
60%
54%
67%
57%
54%
50%
DE 59%
62%
61%
51%
MD 61%
DC 91%
Obama
51%
59%
55%
61%
59%
NJ 58%
55%
61%
53%
National Total
• 50% Obama
• 48%
Romney
Romney
62%
173
Romney
HI 72%
Barack Obama (D)
50%
Mitt Romney (R)
Unknown
100%
Page 31
2012 Presidential Election Votes by Demographic
Voted for Obama
Voted for Romney
Women
55%
44%
Men
45%
52%
White (non-Hispanic)
39%
59%
Black
93%
6%
Hispanic
71%
27%
Non-College Graduate
51%
47%
College Graduate
50%
48%
18 to 29 years
60%
37%
30 to 44 years
52%
45%
45 to 64 years
47%
51%
64+ years
44%
56%
Less than $50,000
60%
38%
$50,000 to $100,000
46%
52%
$100,000 or more
44%
54%
Gender
Race
Education
Age
Income
Source: Exit polls results available at http://www.cnn.com/election/2012/results/race/president#exit-polls
Page 32
2012 Election Outcome: Senate
 Democrats pick up Republican seats in ME, MA, and IN
 Republicans pick up Democratic seat in NE
Democrats
Current (112th)
Congress
Incoming (113th)
Congress
53
Republicans
47
(includes one independent
caucusing with D’s)
55
45
(includes two independents
expected to caucus with D’s)
Page 33
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 (112th) Congress
240
190
232*
191*
(figures include 5 vacancies)
Incoming (113th) Congress
*12 seats not yet called
Page 34
How Popular is Congress?
Page 35
Real Clear Politics: 13.8% approve of how
Congress is handling its job while 79.6%
disapprove, Aug 5 – Sept 17
Page 36
How is Congress Doing?
The Bottom of the Barrel
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
Page 37
What Were the Game Changers?
Page 38
Game Changers for 2012
 Euro Zone Meltdown
 Iran Nuclear Activity
 North Korea
 China Economy
 Middle East Unrest
 Natural Disasters
 Terrorist Attack
 Presidential Debates
Page 39
 Fast and Furious
 Solyndra Bankruptcy
 General Services Administration – “It didn’t stay in
Vegas”
 Cartagena - Gate
Page 40
Page 41
Predictions
Page 42
2012 CLIA LEADERSHIP
FORUM
43
CRUISE LINE AWARDS
Ports of San Francisco and
Victoria, BC, Canada
Environmental Awards
American Maritime Safety Inc.
2012 Quality Ship Management
Bureau Veritas
The World’s First Six Golden Pearls
Weekend Weekly
Go Green Award 2012
Most Devoted Go Green Organization
44
CRUISE LINE AWARDS
Make a Wish Foundation
Corporation of the Year
Sustainable Tourism
Education Program (STEP)
Bronze Certification
“e-stewards enterprise”
Basel Action Network
45
CRUISE LINE AWARDS
Ethisphere
World’s Most Ethical Companies
U.S. Coast Guard
Gold 2012 Rear Admiral William M. Benkert
Environmental Protection Award
46
47
Captain Richard Kenin, USCG
Seventh District Chief of Staff
48
U.S. COAST GUARD
PUBLIC SERVICE AWARD
49