The View from Washington and Industry Leadership Joan Woodward, Travelers Executive Vice President of Public Policy and President, Travelers Institute January 4, 2013: CBIA Economic Summit & Outlook 2013 1
Washington Policy and Political Outlook I. 2012 Election Results Presidential Election Governors Races U.S. House of Representatives U.S. Senate II. Major Public Policy Issues in 2013 Deficit Super Committee Failure --- Now What? Fiscal Cliff Healthcare Law Economic Outlook III. The Travelers Institute 2012 and 2013 Initiatives PBS Deficit Documentary 2
2012 Election Results 3
Mitt Romney Shifts Only 2 States in 2012 2008 2012 Electoral Map 2008 Obama: 365 McCain: 173 2012 Obama: 332 Romney: 206 4
President Obama Overwhelmingly Captures the Swing States Romney Unemployment Rate Obama Colorado 47% 7.7% 51% Florida 49% 8.1% 50% Iowa 46% 4.9% 52% New Hampshire 46% 5.6% 52% Nevada 46% 10.8% 52% North Carolina 51% 9.1% 48% Ohio 48% 6.8% 50% Virginia 48% 5.6% 51% Wisconsin 46% 6.7% 53% Source: CNN & Bureau of Labor Statistics 5
Overall Voter Turnout Falls in 2012 5 million fewer people voted in 2012 than in 2008 Percent of eligible voter turnout 2004: 60.4% 2008: 62.3% 2012: 57.5% 93 million eligible citizens did not vote in 2012 Turnout declined in every state except Iowa and Louisiana 7 states set record lows for overall presidential year turnout New York (-21%) & New Jersey (-15.6%) voting rates declined the most, likely due to Hurricane Sandy 74% voted in CT (-4.1%), the 7 th highest turnout in the country 6
Republicans Pick Up One Governor s Seat in 2012 Democrat: 19 Republican: 30 Independent: 1 7
Democrats Pick Up 8 Seats in the House of Representatives Democrats: 201 Republicans: 234 Source: New York Times 8
Democrats Gain 2 Senate Seats, Retain Majority New Democratic Senators Tammy Baldwin Joe Donnelly Martin Heinrich Heidi Heitkamp Mazie Hirono Tim Kaine Chris Murphy Elizabeth Warren New Republican Senators Ted Cruz Deb Fischer Jeff Flake New Independent Senator Angus King Wisconsin Indiana New Mexico North Dakota Hawaii Virginia Connecticut Massachusetts Texas Nebraska Arizona Maine 9
In 2014, Democrats Must Defend 20 of 33 Senate Seats Democrats (20) Republicans (13) Max Baucus - MT Mark Pryor - AR Lamar Alexander - TN Mark Begich - AK Jack Reed - RI Saxby Chambliss - GA Chris Coons - DE Jay Rockefeller - WV Thad Cochran - MS Richard Durbin - IL Jeanne Shaheen - NH Susan Collins - ME Al Franken - MN Mark Udall - CO John Cornyn - TX Kay Hagan - NC Tom Udall - NM Mike Enzi - WY Tom Harkin - IA Mark Warner - VA Lindsey Graham - SC Tim Johnson - SD James Inhofe - OK John Kerry - MA Mike Johanns - NE Mary Landrieu - LA Mitch McConnell - KY Frank Lautenberg - NJ James Risch - ID Carl Levin - MI Pat Roberts - KS Jeff Merkley - OR Jeff Sessions - AL 10
Major Public Policy Issues in 2013 11
2011-2012: Disappointing Years for Fiscal Restraint Debt ceiling default narrowly avoided in 2011 As a result, Standard & Poor s downgrades U.S. Government Treasuries in August 2011 First time in U.S. history Deficit super-committee failure globally embarrassing U.S. Debt Ceiling of $16.39 trillion reached on December 31, 2012 Treasury enacts special maneuvers until late February/early March Moody s and Fitch threaten downgrade if 2013 debt deal not reached 12
Fiscal Cliff Compromise Postpones Tough Spending Decisions First Major Tax Increase in Two Decades ($400k individuals, $450k families) Income Taxes: 35% 39.6% Estate Taxes: 35% 40% ($5 million exemption extended) Cap Gains: 15% 20% Dividend Taxes: 15% 20% Deduction Limits ($250k Individual, $300k Family Threshold) Social Security Payroll Tax Holiday expires First $113,700k in wages 4.2% 6.2% Affordable Care Act Taxes will begin to take effect New 3.8% tax on investment income for those making more than $250k Debt Limit Increase Needed Before March U.S. hit debt ceiling on December 31, 2012 Budget Sequestration Postponed Two Months $110 billion in sequester spending cuts take effect March 1, 2013 13
Fiscal Cliff Compromise Divides Republicans Senate Approves Bill (89-8) Shortly After 2AM on January 1, 2012 8 Senators Voted Against It Tom Harkin (D-Iowa) Tom Carper (D-Del) Michael Bennet (D-Colo) Charles Grassley (R-Iowa) Mike Lee (R-Utah) Rand Paul (R-Ky) Marco Rubio (R-Fla) Richard Shelby (R-Ala) House of Representatives Approves Bill (257-167) Less than 24 Hours Later 151 Republicans voted against the bill, and 85 for it House Republican leadership splits Speaker John Boehner (R-Ohio) House Budget Committee Chairman Paul Ryan (R-Wis) House Majority Leader Eric Cantor (R-Va) Majority Whip Kevin McCarthy (R-Calif) 14
Watch for a Grand Bargain before March 1 Deficit Reduction Last White House Offer $4.0 Tril (Includes previous savings) Last House Republican Offer $4.6 Tril (Includes previous savings) $ Increases $1.2 Tril Tax Increases & Reform (Increases on Income of $400k+) $1 Tril Tax Increases & Reform (Increases on Income of $1Mil+) $ Cuts $200 Bil Stimulus Spending ($400 Bil) Medicare/Health Savings ($130 Bil) Social Security Savings ($200 Bil) Other Entitlement Savings ($200 Bil) Discretionary Spending ($600 Bil) Medicare/Health Savings ($200 Bil) Social Security Savings ($300 Bil) Other Entitlement Savings ($300 Bil) Discretionary Spending Other Raise Debt Ceiling for 2 Years Raise Debt Ceiling for 1 Year 15
More Budget Battles on the Horizon August 21, 2011 Congress Enacts Budget Control Act, Creating Deficit Super Committee November 21, 2011 Super Committee Fails to Propose Deficit Reductions, Defaulting to Fiscal Cliff January 1, 2013 U.S. Goes Over Fiscal Cliff January 2, 2013 Fiscal Cliff Deal Passed by Senate & House January 21, 2013 Inauguration January 29, 2013 State of the Union Address February-March 2013 Debt Limit Exceeded March 1, 2013 Sequester Spending Cuts Take Effect 16
Social Security: 10,000 Baby Boomers to Retire/Day for Next 20 Years Beneficiary Workers 1960 4.9 2000 3.3 2030 1.9 Source: Congressional Budget Office 17
Affordable Care Act s Fate Determined by U.S. Supreme Court U.S. House voted to repeal the Healthcare Law in January 2011: 245-189 Vote Repeal failed Senate: 47-51 Vote The Supreme Court heard oral arguments March 2012 and in June upheld the Affordable Care Act s individual mandate, striking down state Medicaid expansion. John Roberts Sonia Sotomayor Stephen Breyer Ruth Bader Ginsburg Elena Kagan Anthony Kennedy Samuel Alito Antonin Scalia Clarence Thomas Many corporations will be forced to review health benefit offerings 18
1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 Percentage Change Anemic GDP Growth Continues.. GDP Percentage Change Versus Prior Quarter (1980-2012) 10.0 8.0 6.0 4.0 2.0 0.0-2.0-4.0-6.0 Unemployment hit 10.8% during the Reagan Recession First 4 consecutive quarters of negative GDP growth since 1947-8.0 2012 Q2 Growth: 1.3% 2012 Q3 Growth: 3.1% Source: Bureau of Economic Analysis 19
Real GDP (Billions) Economy Underperforming Potential GDP for Prolonged Period Potential Real GDP Actual Real GDP 16000.0 14000.0 12000.0 10000.0 8000.0 6000.0 4000.0 2000.0 0.0 1970 1980 1990 2000 2010 Quarters Sources: Congressional Budget Office & Bureau of Economic Analysis 20
1977 1978 1979 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 Surplus or Deficit U.S. Federal Deficit ($ in Billions) US Budget Surplus or Deficit (in $B) 600.0 300.0 0.0-300.0-600.0 Clinton Surplus Years -900.0-1,200.0 2009 US Budget Deficit Hit $1.4 Trillion -1,500.0 Year Source: Congressional Budget Office 21
2012 Federal Revenues $ (Billions) FY 2012 Revenues $5,000 $4,500 $4,000 $3,500 $2,589 $3,000 $1,475 $2,500 $2,000 $1,500 $1,000 $500 $2,450 $230 $230 $552 $552 $646 $646 $700 $700 $- 2011 Revenues 2011 2020 Defense Other Discretionary Other Mandatory Net Interest Social Security, Medicare, Medicaid Data was obtained from the CBO November 7, 2012 Monthly Budget Review. 22
2012 Federal Revenues/Spending $ (Billions) FY 2012 Revenues FY 2012 Spending $5,000 $4,500 $3,540 $4,000 $3,500 $2,589 Social Security, Medicare, Medicaid $3,000 $2,500 $2,000 $1,500 $1,000 $500 $2,450 $1,481 Net Interest $258 Other Mandatory $230 $550 $552 Other Discretionary $600 $646 Defense $651 $700 $- 2011 Revenues 2011 2020 Defense Other Discretionary Other Mandatory Net Interest Social Security, Medicare, Medicaid Data was obtained from the CBO August, 2012 Baseline Report and the November 7, 2012 Monthly Budget Review. FY 2012 Other Mandatory & Other Discretionary Spending are Travelers estimates based on the two reports. 23
2012 Federal Revenues/Spending & Illustration of Future Spending $ (Billions) FY 2012 Revenues FY 2012 Spending FY 2020 Spending $4,656 $5,000 $4,500 $4,000 $3,500 $3,000 $1,481 $3,540 $258 $550 $2,597 $600 $2,597 $651 $2,500 $2,000 $1,500 $1,000 $500 $2,450 $258 $258 $258 $550 $550 $550 $2,597 $600 $600 $600 $651 $651 $651 $- 2011 Revenues 2011 2020 Defense Other Discretionary Other Mandatory Net Interest Social Security, Medicare, Medicaid Data was obtained from the CBO August, 2012 Baseline Report and the November 7, 2012 Monthly Budget Review. FY 2012 Other Mandatory & Other Discretionary Spending are Travelers estimates based on the two reports. 2020 FY spending, with the exception of Medicare, Medicaid & Social Security, was frozen at the FY 2012 spending level. Medicare, Medicaid & Social Security spending reflects CBO projections for each year. 24
Apr-06 Oct-06 Apr-07 Oct-07 Apr-08 Oct-08 Apr-09 Oct-09 Apr-10 Oct-10 Apr-11 Oct-11 Apr-12 Oct-12 January 1966 = 100 University of Michigan Consumer Sentiment Index 100.0 90.0 80.0 Monthly Index of Consumer Sentiment 3-Month Moving Average of Monthly Index of Consumer Sentiment November 2008: 55.3 August 2011: 55.7 November 2012: 82.7 December 2012: 72.9 70.0 60.0 50.0 25
1980 1985 1990 1995 2000 2005 2010 % Change from Preceding Period Consumer Spending Keeps Economy Afloat Personal Consumption Expenditures (PCE) 10 8 6 4 2 0-2 -4-6 -8-10 Quarter Source: Bureau of Economic Analysis Data Seasonally Adjusted at Annual Rates 26
Unemployment Rate A Jobless Recovery in the U.S. Continues National Unemployment Rate from 01/2007-11/2012 10.0% 9.0% Unemployment Rate in Nov. 2012 was 7.7% 8.0% 7.0% 6.0% 5.0% December 2007: Unemployment Rate: 4.9% -Beginning of Recession Unemployment hit 10.0% in October 2009 Current Unemployment Demographic Data: African American: 13.2% Asian: 6.4% Hispanics: 10.0% W/O High School Deg: 12.2% With High School Deg: 8.1% With College Deg: 3.8% Unemployment Status: 55.4% for more than 15 wks 4.0% Feb 2007 Feb 2008 Feb 2009 Feb 2010 Feb 2011 Feb 2012 Source: Bureau of Labor Statistics 27
Jan-68 Jan-71 Jan-74 Jan-77 Jan-80 Jan-83 Jan-86 Jan-89 Jan-92 Jan-95 Jan-98 Jan-01 Jan-04 Jan-07 Jan-10 Weeks Unemployed Duration of Unemployment has Increased Dramatically Median Weeks Unemployed (Seasonally Adjusted) 30 25 November 2012: 19.0 Weeks 20 15 10 5 0 Month Source: Bureau of Labor Statistics 28
Unemployment Rate (%) State Unemployment: The Best and the Worst Highest & Lowest Unemployment Levels by State November 2012 12 10 8.3 8.8 9.8 10.4 10.8 8 6 4 3.1 3.7 4.4 2 0 North Dakota Nebraska South Dakota New York Connecticut California Rhode Island Nevada Lowest State Unemployment Highest State Unemployment Source: Bureau of Labor Statistics 29
The Travelers Institute 30
What is the Travelers Institute? With Leadership Comes the Responsibility to be Engaged Why was the Travelers Institute Created? Travelers established the Travelers Institute as a means of participating in public policy dialogue on matters of interest to the property casualty insurance sector, as well as the financial services industry more broadly. What does the Travelers Institute Do? The Travelers Institute draws upon the industry expertise of Travelers' senior management and the technical expertise of its risk professionals and other experts to provide information, analysis and recommendations to public policy makers and regulators. 31
Travelers Institute Events & Activities Map Since Inception 32
The Travelers Institute - Initiatives Travelers Coastal Wind Zone Plan Plan promotes long term, free market solutions to coastal homeowners insurance availability and affordability crisis Small Business Big Opportunity Raising awareness of the needs of small businesses with the goal of impacting job growth and creation Completed 8 symposia Disaster Preparedness Work closely with the company s risk control team to develop disaster preparedness, response and recovery measures Produced Documentary on United States Budget Deficit The documentary was released through NETA for distribution on public television stations nationally Premiered in Charlotte, Washington, and New York Launched University Symposia Series at 25 schools across the country for educational purposes 33
Published in March 2012 34 34
Coastal Wind Zone Plan Symposia Series Completed Six Symposia Charleston, SC October 30, 2009 Symposia Partners SC Dept. of Insurance and The Heinz Center Hartford, CT December 7, 2009 IBHS, SC Dept of Insurance, AIR Worldwide Austin, TX May 10, 2010 Winstead PC, Black Diamond Capital Partners Washington, D.C. June 14, 2010 Ceres, IBHS, and RenaissanceRe Mobile, AL October 8, 2010 Habitat for Humanity of Baldwin County, AL Washington, D.C. May 31, 2012 Ceres and IBHS 35
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BY JAY S. FISHMAN JUNE 10, 2012 37
2012 State Rankings for Business-Friendly Policies 1. South Dakota 2. Nevada 3. Texas 4. Wyoming 5. Florida 6. Washington 7. Alabama 8. Utah 9. Colorado 10. Arizona 11. Michigan 12. Virginia 13. Indiana 14. South Carolina 15. Mississippi 16. North Dakota 17. Tennessee 18. Ohio 19. Alaska 20. New Hampshire 21. Georgia 22. Missouri 23. Oklahoma 24. Pennsylvania 25. Louisiana 26. New Mexico 27. Wisconsin 28. Kansas 29. Kentucky 30. West Virginia 31. Idaho 32. Montana 33. Delaware 34. Arkansas 35. Illinois 36. Maryland 37. North Carolina 38.Massachusetts 39. 39. Nebraska Nebraska 40. 40. Minnesota Minnesota 41. Rhode Island 41.Rhode Island 42. Connecticut 42.Connecticut 43. Oregon 43. 44. Oregon Iowa 44. 45. Iowa Hawaii 45. 46. Hawaii Maine 46. 47. Maine New York 47.New 48. Vermont York 48. 49. Vermont New Jersey 49. 50. New California Jersey 50. California Source: Small Business & Entrepreneurship Council 38
Small Business Big Opportunity Symposia Series Completed Eight Symposia Morristown, New Jersey - March 15, 2011 Atlanta, Georgia - May 18, 2011 Los Angeles, California - Oct. 6, 2011 San Francisco, California - Oct. 20, 2011 Dallas, Texas - November 30, 2011 St. Paul, Minnesota - March 22, 2012 Kansas City, Missouri - April 25, 2012 New York, New York - July 17, 2012 Symposia Partners Morristown, NJ Chamber of Commerce U.S. Pan Asian American Chamber of Commerce The Latino Coalition Small Business California Federal Reserve Bank of Dallas St. Paul Chamber of Commerce The Kauffman Foundation New York Stock Exchange 39
Overdraft Premiere Screenings The Travelers Institute is hosting several screenings of Overdraft for an audience of policymakers, business and community leaders, and the media. June 11, 2012: Charlotte, NC July 30, 2012: Washington, D.C. Sept. 19, 2012: New York, NY Nov. 8, 2012: San Francisco, CA 40
Overdraft University Symposia Series Overdraft University Symposia Series Partners Wake Forest University BB&T Center for the Study of Capitalism August 30 & September 12, 2012 University of Connecticut Honors Program October 15, 2012 University of Kansas School of Business November 5, 2012 Central Connecticut State University November 14, 2012 American University Center for Congressional & Presidential Studies February 13, 2013 University of Delaware Lerner College of Business and Economics February 19, 2013 University of Minnesota Carlson School of Management February 27, 2013 Fordham University Spring 2013 University of Pennsylvania Wharton School of Business October 8, 2012 Northwestern University Kellogg School of Management October 30, 2012 Stanford University Institute for Economic Policy Research November 8, 2012 University of Virginia Miller Center December 11, 2012 Trinity College February 19, 2013 City University of New York Baruch College February 21, 2013 Miami University (Ohio) February 28, 2013 Columbia University School of Business Social Enterprise Program Spring 2013 41
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