Business Tax Breaks in Stimulus Bill
The biggest tax cut for businesses was "all but eliminated" in the compromise agreement to help keep the final economic stimulus package under $800 billion, Bloomberg News reported last week. The provision, a top priority of major business groups, would let companies convert losses into tax refunds.

The $787 billion economic recovery package President Barack Obama will sign today contains planned investments in infrastructure projects and directs aid to states, the unemployed and more than $290 billion in tax provisions, according to estimates from the Joint Committee on Taxation, CNN reported.yesterday.

Of the amount for tax provisions, $23 billion are breaks to encourage companies to invest in equipment or renewable energy initiatives, or to help them secure a cash cushion to get through the downturn and minimize layoffs. Another key provision makes it easier for companies to buy back their own debt without getting hammered with a big tax bill.

"We support the cancellation of indebtedness tax provisions that will encourage businesses to restructure and reduce debt, enabling them to preserve jobs, renew investment, and begin to grow once again," Bruce Josten, the U.S. Chamber of Commerce's executive vice president of government affairs, said to CNN.

Included among the plan's business-related tax breaks:

• Credits for renewable energy production;
• Extension of the bonus depreciation allowance in place last year;
• Delayed recognition of cancelled debt; and
• Broadening of small businesses loss write-offs.

As for the unemployed, the compromise bill will likely include almost $90 billion in additional Medicaid funding to help address states collecting less revenue but needing to support more beneficiaries, MarketWatch adds. "Also, lawmakers appear ready to include about $2.5 billion in additional funds for the Temporary Assistance for Needy Families program, and up to about $20 billion in additional funds for food stamps."

The final stimulus bill is likely to provide an additional 20 weeks of benefits, or 33 weeks in high-unemployment states, and to raise weekly benefits by $25.

GM and Chrysler Submit Restructuring Plans
General Motors Corp. and Chrysler LLC raced to save their place in the American auto industry yesterday, putting the final touches on plans to curb production, cut jobs and pare brands in hopes of securing billions of dollars in additional federal aid, the Washington Post reports.

The two automakers are scheduled to submit their plans to the Obama administration, "due today as a condition of a $17.4 billion federal loan package," according to the Detroit News. However, the recovery plans are not expected to include key money-saving concessions from the United Auto Workers and bondholders.

In its plan, GM will disclose global cost cuts that could include about four new plant closures in Europe, according to the Detroit News. GM also will expand previously announced plans to close nine plants by 2012, eliminate 1,750 dealers, cut up to 31,000 employees and discuss the possibility of a bankruptcy filing.

With an additional $3 billion, Chrysler says it can survive on its own by allowing it to build an alliance with Italy's Fiat SpA. The company also plans more factory capacity cuts and could cut some models, the Detroit News notes. Many analysts, however, don't buy it; they predict Chrysler will not meet the federal standards for survival, and should be wound down gradually, either inside or out of bankruptcy, Detroit Free Press explains.

But it is up to the government to decide the carmakers' viability. The Obama administration will get six weeks to rule on the future of the U.S. auto industry, with a March 31 deadline for deciding whether GM can keep the $13.4 billion and Chrysler the $4 billion lent to them by the government in December, the Detroit paper says.

Car Czar Out, Task Force In
According to the Washington Post, the Obama administration has abandoned the idea of naming a "car czar" to help oversee the U.S. auto industry's restructuring, opting instead to create an inter-agency task force to deal with the issue, according to senior administration officials.

The Presidential Task Force on Autos will be drawn from across the government, including the Departments of Treasury, Labor, Transport, Commerce and Energy. It will have two chairmen, Timothy Geithner, the treasury secretary, and Lawrence Summers, national economic policy adviser, the UK Telegraph reports.

Auto Suppliers in Line for Bailout
The Motor & Equipment Manufacturers Association and its affiliate the Original Equipment Suppliers Association, which represents more than 400 member companies with global automotive sales exceeding $300 billion, have asked the Treasury Department for up to $25.5 billion in emergency aid, Agence France-Presse says. The supplier organizations warn that as many as 1 million jobs could be lost should the supplier base not be supported.

The suppliers asked for federal aid to be directed in three ways:

• $10.5 billion in government guarantees of supplier receivables from GM, Ford Motor Co. and Chrysler;
• $8 billion in government guarantees of commercial loans for supplier companies; and
• $7 billion for the institution of a "quick pay" receivables program to increase supplier liquidity.

In a recent survey, one-third of suppliers said they are "in imminent financial distress" while another third said they will be in distress during the first quarter of 2009. Some 40 major suppliers filed for bankruptcy protection last year and scores more are at risk of collapse.

Ongoing Jobless Claims Hit Record High
The number of initial claims in the week ending Feb. 7 fell 8,000 to 623,000, the Department of Labor reports. Though initial claims decreased, the number is still at a level 84 percent higher than the same period in 2007, MarketWatch notes.

The four-week average of initial claims, which smooths out economic distortions, rose 24,000 to 607,500 — the highest level since November 1982 and up 76 percent from the prior year. For the week ending Jan. 31, the number of Americans receiving state jobless benefits rose 11,000 to a record 4.81 million. The four-week moving average of those continuing claims also reached a record, rising 73,750 to 4.75 million.

The insured unemployment rate, representing the proportion of covered workers who are receiving benefits, remained steady at 3.6 percent.

Eurozone Recession Worsens
The eurozone recession deepened at a record pace in the final three months of 2008, with gross domestic product (GDP) shrinking at a quarterly pace of 1.5 percent in the October to December period, the statistical agency Eurostat reported Friday. The decline was the steepest since records began in 1995, MarketWatch says, adding that the fall exceeded consensus forecasts for a 1.3 percent decline.

Eurozone GDP posted quarterly declines of 0.2 percent in the second and third quarters, meeting the widely used definition of recession of two consecutive quarters of shrinking GDP.

Jennifer McKeown, European economist at Capital Economics, sees another 1 percent decrease in the first quarter, warning that falling global demand and a deteriorating labor market point to further drops in exports and weak consumer spending in coming quarters. "The upshot is that we now expect eurozone GDP to drop by 3 percent this year as a whole," McKeown adds.

Indian Manufacturing Output Expected to Decrease
India's economic growth is expected to slow to 7.1 percent in fiscal year 2009, the Central Statistical Organization (CSO) said on Feb. 9 (via Agence France-Presse). The forecast is down from 9 percent growth in 2007-2008 and would be the slowest growth rate since 2003.

The CSO said growth in manufacturing output was expected to be around 4.1 percent, half the 2007-08 figure, while agricultural output would expand 2.6 percent, down from 4.9 percent.