Obama signs order triggering spending cuts

NEW YORK (CNNMoney)

Known officially as sequestration, the president's order canceled $85 billion in federal funding over the next seven months.

As required, the White House budget office also sent to Congress a report detailing the magnitude of cuts that federal agencies will have to make.

In aggregate, defense spending must be cut by 13% over the next seven months and nondefense programs must be cut by 9%. Those percentage cuts will apply to all non-exempt programs, projects and activities.

(Related: 4 myths about the cuts)

In dollars, the spending reduction must be split evenly between defense and nondefense -- as a result, each category will lose nearly $43 billion in funding.

Some key areas of spending will be protected from the budget ax -- most notably military personnel, Medicare and Social Security benefits, as well as Medicaid and food stamps.

The funding reductions would come primarily from what's known as discretionary accounts, which make up the smallest part of the overall federal budget, accounting for a little over a third of all spending.

Discretionary spending supports a vast array of federal agencies from the FBI to the FDA to the National Transportation Safety Board, as well as education programs across the country.

The actual dollars cut from these and other areas varies widely since their normal funding levels do as well.

Navy operations and maintenance, for instance, will take a nearly $3.5 billion hit. National Science Foundation research funding will drop $290 million. The Nuclear Regulatory Commission will lose $52 million. And the Affordable Housing Program will see its budget cut by $10 million.

Few would dispute Obama's characterization of the cuts. In fact, it's one of the few things about the so-called sequester that Democrats and Republicans agree on. They failed to agree on how to replace them, however.

Both chambers of Congress passed the sequester as part of the deal that put an end to the ugly fight over the debt ceiling in 2011.

(Related: When the cuts will really bite)

The cuts were designed to be so distasteful that they would spur lawmakers to approve a smarter approach to deficit reduction. But they've failed to do so.

The cuts will result in many if not most federal workers furloughed for some period of time. And federal contracts and grants will be curtailed or not renewed. That, in turn, will create delays in services, travel hassles, less border security, fewer food inspections, interrupted medical research and less disposable income that has buoyed local communities.

Such ramifications will deliver a blow to economic growth, but not a fatal one -- a point the president acknowledged Friday.

"Even with these cuts in place, folks all across this country will work hard to make sure that we keep the recovery going. But Washington sure isn't making it easy," Obama said.

(Impact: IRS furloughs to spare tax season)

Congress will get another chance to forge an agreement over replacing the cuts this month, as lawmakers duke it out over spending levels for the rest of this fiscal year. They have until March 27 to approve a new funding bill. If they don't, the government will shut down, with the exception of essential services.

If they succeed in replacing the cuts by then, the disruption caused by the sequester may be limited, since its ramifications will unfold over several months as opposed to a few weeks.

First Published: March 1, 2013: 8:50 PM ET

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Medicare doctors' pay to be cut

Automatic spending cuts will trigger a 2% cut in Medicare reimbursement -- a reduction that experts say could make it harder for some patients to get care.

NEW YORK (CNNMoney)

Under the so-called sequester, Medicare payments to health care providers, health care plans and drug plans will be reduced by 2% starting April 1, according to the Centers for Medicare & Medicaid Services.

The bottom line is that doctors who treat Medicare beneficiaries will only be reimbursed 98 cents on every dollar for a vast array of services. Reimbursement for low-income beneficiaries is exempt.

Overall, the cut will mean $11 billion less for doctors, hospitals and other providers in 2013. Last year, the agency doled out more than $500 billion in such payments.

A 2% cut may not seem large, but Medicare payments to doctors have been lagging, said Dr. Jeremy Larazus, president of the American Medical Association.

Related: Doctors: Why we can't stay afloat

"Over the last 12 years, Medicare payments to physicians have increased by only 4%, while the cost of providing care has jumped 20%," said Lazarus.

The cuts could make it harder for patients to get care, Lazarus added. "One in five Medicare patients already is facing difficulties in finding a doctor to take them. If you cut their pay, this access problem will only get worse."

The threat of payment cuts isn't new for doctors who treat the nation's 47 million Medicare patients.

Federal law already triggers annual Medicare cuts to keep the program financial sound. But Congress has stepped in and blocked those cuts -- which now stand at 29% -- from happening more than two dozen times over the past decade.

Related: Doctors going broke

Dr. David Wilt is an internist at a primary care group practice in Kansas City. About 60% of patients treated at his practice are Medicare beneficiaries.

Wilt agrees with Lazarus that Medicare patients are having a tougher time finding doctors. It's happening at his practice, which has already stopped seeing Medicaid patients because of "abysmal reimbursement rates."

"At some point, we will do what we have to if it means keeping the practice afloat," said Wilt. "This includes reducing the number of patients whose payments are too low for us to run our business."

Dr. Jeffrey Cain, president of the American Academy of Family Physicians, is concerned that the 2% cut will catch on with private insurers, too.

Related: Military town in trouble

"Most private insurers base their payment rates on Medicare. We anticipate that they will also reduce reimbursement by 2%," he said

If this happens, Cain said doctors with small practices will take a greater hit.

"Small practices, especially in rural areas, are small businesses that run on razor thin margins," he said. "These cuts will force them to make a choice. Do we keep seeing the elderly or do we keep our practice afloat."

First Published: March 2, 2013: 7:40 AM ET

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Dish: CBS made 'Big Bang Theory' star delete Hopper tweet

Kaley Cuoco, star of 'The Big Bang Theory,' tweeted that the Dish Hopper was 'amazing.' The tweet was later deleted.

NEW YORK (CNNMoney)

The latest drama comes after Kaley Cuoco, star of CBS's hit show "The Big Bang Theory," sent a sponsored tweet on Wednesday about the Dish Hopper DVR. Dish (DISH, Fortune 500) had paid her to tweet that the Hopper was "amazing" and "awesome."

CBS (CBS, Fortune 500) and many other broadcasters are currently locked in a legal battle with Dish over Hopper's ad-skipping technology.

Cuoco's tweet has since been deleted, and Dish sent out a press release calling attention to that.

"It's disappointing that CBS -- once the exemplar of editorial independence and innovation -- continues to use its heavy hand to hold back progress from consumers," Dish CEO Joe Clayton said in a statement.

CBS shot back with its own strongly worded denial: "Once again, Joe Clayton demonstrates his dubious gift for hyperbole and hucksterism. No demands were made, but it's clear that Dish's culture of fabrication is alive and well."

A CBS spokesman said separately that the company did not contact Cuoco "at all."

The Cuoco kerfuffle comes a few weeks after CBS-owned tech site CNet put the Hopper on an awards shortlist. CBS stepped in, forcing CNet to remove the Hopper from consideration -- and banning the site from reviewing "products manufactured by companies with which we are in litigation with respect to such product."

Dish is also mired in lawsuits with Comcast's (CMCSA) NBC, News Corp.'s (NWS) Fox, Disney's (DIS, Fortune 500) ABC and other networks over the Hopper, which lets users record up to six channels at once and automatically skip commercials for primetime network shows.

"The Big Bang Theory" is produced by Warner Bros. Television, a subsidiary of CNNMoney parent company Time Warner. (TWX, Fortune 500)

First Published: March 1, 2013: 12:35 PM ET

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State Department sees no environmental red flags on Keystone route

NEW YORK (CNNMoney)

If the company behind the pipeline, TransCanada, follows all the rules, its "construction and normal operation" of the pipeline should pose no major risks, the State Department said in its draft environmental impact statement. That statement is now open for a 45-day public comment period. The Obama administration will make its decision about the pipeline later this year, likely in mid-summer.

The project was delayed last year because of concerns about how it would affect Nebraska's sensitive Sand Hills region. The Obama administration -- which needs to approve the project because it crosses an international border -- turned down those plans, forcing TransCanada to draft a new proposed route.

The pipeline has touched off an intense debate in the United States. Supporters like it because it will carry 830,000 barrels a day of oil from Alberta, Canada, to the U.S. Gulf Coast, potentially reducing imports from other, more volatile areas. Its construction will create an estimated 5,000 jobs, according to the State Department. TransCanada forecasts even higher job growth.

Related: America has an energy boom. Now what?

Opponents hate it because oil from Canada's oil sands region produces 5% to 30% more greenhouse gases than other types of conventional crude. Extracting oil from the sands also uses massive amounts of water and can result in deforestation. Transporting it runs the risk of spills.

The State Department report did take into account the environmental impact of the sands' heavy oil, which it said is 17% dirtier than the average barrel of oil used in the United States. However, it also said that not building the pipeline would not significantly limit oil sands development, or U.S. consumption of heavy oil.

If Keystone is not constructed, that oil would be still be extract and used, State believes. It would simply be transported to buyers by rail or other means instead of through the pipeline.

The report was not well-received by environmentalists.

"It's a good thing this is a draft," said Susan Casey-Lefkowitz, international director at the Natural Resources Defense Council. "Certainly the public is going to have a lot to say in response."

First Published: March 1, 2013: 5:28 PM ET

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Obama signs order triggering spending cuts

NEW YORK (CNNMoney)

Known officially as sequestration, the president's order canceled $85 billion in federal funding over the next seven months.

As required, the White House budget office also sent to Congress a report detailing the magnitude of cuts that federal agencies will have to make.

In aggregate, defense spending must be cut by 13% over the next seven months and nondefense programs must be cut by 9%. Those percentage cuts will apply to all non-exempt programs, projects and activities.

(Related: 4 myths about the cuts)

In dollars, the spending reduction must be split evenly between defense and nondefense -- as a result, each category will lose nearly $43 billion in funding.

Some key areas of spending will be protected from the budget ax -- most notably military personnel, Medicare and Social Security benefits, as well as Medicaid and food stamps.

The funding reductions would come primarily from what's known as discretionary accounts, which make up the smallest part of the overall federal budget, accounting for a little over a third of all spending.

Discretionary spending supports a vast array of federal agencies from the FBI to the FDA to the National Transportation Safety Board, as well as education programs across the country.

The actual dollars cut from these and other areas varies widely since their normal funding levels do as well.

Navy operations and maintenance, for instance, will take a nearly $3.5 billion hit. National Science Foundation research funding will drop $290 million. The Nuclear Regulatory Commission will lose $52 million. And the Affordable Housing Program will see its budget cut by $10 million.

Few would dispute Obama's characterization of the cuts. In fact, it's one of the few things about the so-called sequester that Democrats and Republicans agree on. They failed to agree on how to replace them, however.

Both chambers of Congress passed the sequester as part of the deal that put an end to the ugly fight over the debt ceiling in 2011.

(Related: When the cuts will really bite)

The cuts were designed to be so distasteful that they would spur lawmakers to approve a smarter approach to deficit reduction. But they've failed to do so.

The cuts will result in many if not most federal workers furloughed for some period of time. And federal contracts and grants will be curtailed or not renewed. That, in turn, will create delays in services, travel hassles, less border security, fewer food inspections, interrupted medical research and less disposable income that has buoyed local communities.

Such ramifications will deliver a blow to economic growth, but not a fatal one -- a point the president acknowledged Friday.

"Even with these cuts in place, folks all across this country will work hard to make sure that we keep the recovery going. But Washington sure isn't making it easy," Obama said.

(Impact: IRS furloughs to spare tax season)

Congress will get another chance to forge an agreement over replacing the cuts this month, as lawmakers duke it out over spending levels for the rest of this fiscal year. They have until March 27 to approve a new funding bill. If they don't, the government will shut down, with the exception of essential services.

If they succeed in replacing the cuts by then, the disruption caused by the sequester may be limited, since its ramifications will unfold over several months as opposed to a few weeks.

First Published: March 1, 2013: 8:50 PM ET

04.32 | 0 komentar | Read More

What's your risk tolerance for investing?

When assessing your risk tolerance, think seriously about how much you could watch your savings drop before you panic.

NEW YORK (Money Magazine)

Considering how often the term "risk tolerance" is bandied about in the investment world, you'd be surprised how much confusion surrounds it.

Many people believe that your appetite for risk rises and falls -- that is, you're more willing to take on risk during bull markets, less so during bears.

Not true, says Geoff Davey, director of FinaMetrica, an Australian firm that creates risk-profiling systems.

You have a set amount of risk that you're comfortable with. When you feel the urge to bail after a meltdown, your temperament didn't change; you misjudged the risks you were taking.

"People underestimate risk when markets are booming and overestimate it when there's a bust," says Davey.

So how can you get a better handle on this crucial concept and develop an investing strategy?

For starters, think seriously about how much you could watch your savings drop before you panic.

From the market's 2007 peak to the 2009 trough, stock values plunged more than 50%, while intermediate-term government bonds rose roughly 6%. A portfolio of 90% stocks and 10% bonds fell 45%; a fifty-fifty mix was down about 22%.

Related: 3 steps to creating a retirement plan

If you think 20% or so is the most heat you could stand, a 50% stock stake is probably close to your upper limit, even though that's far less than what's often suggested for someone your age.

You could also fill out one of the many risk-tolerance questionnaires available online. The problem is, most tend to focus on how much risk you ought to take with your investments, not the swings you're prepared to handle.

A notable exception is FinaMetrica's questionnaire (Cost: $45), which gives you a numerical risk-tolerance score on a scale of 1 to 100 that corresponds to the percentage of risky assets that's appropriate for someone like you.

You may, however, discover a gap between the amount of risk you can tolerate and the amount you must embrace to reach your goals.

Say you prefer a fifty-fifty stock/ bond split but, given what you're saving, you need upwards of 70% in stocks to generate the necessary returns. You could buy more stocks in hopes of higher gains, but investing too far outside your comfort zone could backfire. You could end up selling at a big loss during a downturn.

Related: Are you saving enough for retirement

The better option: Adhere to a portfolio you can handle and make other adjustments, such as saving more, working longer, or scaling back your retirement lifestyle.

Finally, most people become less tolerant of risk as they age. But even if you're okay with the same stock-heavy mix at 65 that you had in your thirties, you'll probably still want to dial back. The same loss you shook off in your youth could so deplete your nest egg in retirement that it might never recover.

First Published: March 1, 2013: 6:14 AM ET

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Spending cuts threaten military town's businesses

Government contracts related to Peterson Air Force Base in Colorado helps spur thousands of area businesses.

NEW YORK (CNNMoney)

The general uncertainty facing federal agencies has trickled down to the companies that rely on federal contracts.

"Small businesses are telling us that their government contracts are either frozen, not being renewed or canceled in anticipation of budget cuts," said Kelly Manning, state director of the Colorado Small Business Development Center network.

Colorado Springs is dominated by military installations. These include Fort Carson -- the third-largest army base in the country -- Peterson Air Force Base and the United States Air Force Academy.

Related: When spending cuts will really bite

About half of the area's nearly 20,000 small businesses are subcontractors, contractors or vendors that work on military and other federal and state contracts.

Shelley Pearson's company, American Wiping Rags, is one of them. Her small business makes disposable cotton rags. Peterson has been her customer for the last six years.

"They use our rags in airplanes and hangers," she said. Business to Peterson and other government orders account for about 20% of her business.

She typically supplies 400 pounds of rags, two or three times a year, to the Air Force base.

But she hasn't got a new order from Peterson in more than five months. "I spoke with their purchasing agent a month ago about an order. I usually get the order in three weeks after a call," she said.

Pearson, whose company has three employees and makes about $90,000 a year in sales, said she can't wait much longer before her business starts hurting. So she's thinking about looking for new private sector customers.

Another area small business, Navsys Corporation, is also on pins and needles. The firm makes GPS systems and other navigation and communication systems for military and commercial use.

About 60% of Navsys' business comes from Department of Defense contracts, said Alison Brown, founder and CEO of Navsys. The company logs $3 million in annual sales and has 25 employees.

"We normally get a few small government contracts every year. These contracts are our bread and butter. Since last year, we're just not being awarded contracts," said Brown.

By May, Navsys should finish work on any ongoing contracts. "After that it will really hurt us if we don't get new government work," she said.

Like Pearson, Brown is trying to mitigate the risk by diversifying the business to commercial clients.

Andrew Merritt, chief defense industry officer with the Colorado Springs Regional Business Alliance, said businesses are adjusting in other ways, too. "In some cases, they've had to let people go, he said.

But lack of new contracts isn't the only threat facing local businesses, he said. Civilian workers who get furloughed because of budget cuts will have less money to spend.

"Furloughed individuals will see a pay cut. They may decide to delay buying a car, a house. They might not go to the movies or restaurants as much. This will also hurt our businesses," he said.

First Published: March 1, 2013: 6:22 AM ET

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Once a campsite, now a luxury desert ranch

NEW YORK (CNNMoney)

"I wasn't in the market for anything," said Hoffman, a lawyer-turned restaurateur.

He was out riding a horse near his central Tucson home, when he stumbled upon a YWCA campsite with a "For Sale" sign.

"I happened to see it, fell in love with it and thought I might be able to steal it," he said.

The 10-acre property was in Northwest Tucson and featured an original farmhouse from 1906. He purchased the property for $280,000 soon after and then spent the next two decades renovating and building additions.

"It was pretty rough," he said. "The roads weren't paved and there was no grass."

But Hoffman saw potential in this desert hideaway surrounded by about 5,500 acres of national forest and state land.

Related: $19.9 million Atlanta mansion offers lush Hollywood life

With the help of a crew of skilled workers, he turned an old barn into the "Copper Room," an indoor event space where he and his wife Molly could host corporate events as a source of income. He also built himself a "Boys Club" for cigar smoking and TV watching.

Outside, he planted two and a half acres of grass and big eucalyptus trees, built a waterfall and erected a mock Western town, with fake storefronts to hide a gymnasium he built for his wife.

The Hoffmans have used the property to host events for big companies like American Express, BMW and Caterpillar.

Related: Inside a huge Aspen winter estate

Now, Hoffman has listed the property for $8 million. They say it's time to scale down and travel more.

"It's going to be very tough to leave here," said Hoffman.

More Unique Homes:

The car collector's ultimate garage

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First Published: March 1, 2013: 6:25 AM ET

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Boeing apologizes for Dreamliner fiasco

LONDON (CNNMoney)

Raymond Conner, head of the commercial aircraft division at Boeing (BA, Fortune 500), said the incidents that led to the grounding of the entire fleet of Dreamliner 787 planes were "deeply regretful".

"On behalf of the Boeing Company and the 170,000 people which I represent today, I want first to apologize for the fact that we've had two incidents with our two very precious customers, ANA and JAL," he told reporters in Tokyo.

Between them, All Nippon Airways and Japan Airlines operate nearly half the 50 Dreamliners delivered to customers so far.

The Dreamliner has sold well in Asia and the Middle East, where airlines depend on long-range flights for much of their business and can benefit most from the improvements in fuel economy the lighter-weight plane promises.

Related: Boeing's latest problem: Strike threat

The grounding last month due to fires linked to the use of lithium-ion batteries has forced Japan's airlines to cancel hundreds of flights, costing millions in lost revenue. Boeing has warned customers of delays to deliveries, although it continues to make the plane.

The new plane is at the heart of ANA's strategy, and if it remains out of service for an extended period of time, the damage to the airline could be significant. ANA has already said it will seek compensation from Boeing.

Conner said Boeing had hundreds of engineers working with external experts on the battery technology to come up with a solution that addresses all the possible causes of the incidents that led to the grounding.

"What we did today was discuss the solutions that we are looking at that could be the final solution to get airplane back in air flying again," he said.

The problems with the new battery technology have already prompted Boeing's European rival Airbus to revert to standard nickel-cadmium batteries in its A350 plane, designed to compete with the Dreamliner and due to make its first test flight in the middle of this year.

First Published: February 28, 2013: 5:59 AM ET

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Europe to cap bankers' bonuses

U.K. bankers' bonuses will be capped by new EU rules.

LONDON (CNNMoney)

The measure, which could take effect as early as January 2014, will limit bonuses to the level of annual salary, or twice salary given the approval of a majority of shareholders. The cap will apply globally to European Union banks, and to international banks operating within the EU.

"This is the objective of the cap, to stop short term risk taking," European Commissioner Michel Barnier said at a news conference.

The cap is part of a broader package of rules requiring banks to hold higher amounts of capital to protect them from future shocks, set aside more funds to ensure liquidity in times of crisis and to be more transparent about their businesses.

"This overhaul of EU banking rules will make sure that banks in the future have enough capital, both in terms of quality and quantity to withstand shocks," said Irish finance minister Michael Noonan, who helped broker the deal between representatives of EU states and the European Parliament. "This will ensure that taxpayers across Europe are protected into the future."

A majority of the 27 European Union states must back the provisional agreement for it to become law and further changes may yet be negotiated.

The U.K. has resisted the cap on bonuses, worried that it may drive bankers out of London, Europe's financial capital.

Banks have already been forced to change the way they structure bonuses, paying them out over a longer period of time and adding claw-back arrangements. Some responded by increasing base pay, saying they risked losing top performers.

But this is the first EU cap on bonus size and reflects political frustration that big banks continue to pay millions to some employees while many incomes are dropping as governments and firms are forced to tighten their belts.

A series of high-profile scandals -- including market rigging, money laundering and mis-selling of products -- has fueled public anger at the apparent lack of restraint in setting bonuses for top bankers.

Related: Barclays CEO: I don't deserve a bonus

Businesses argue that markets should be allowed to determine levels of pay, and that companies should be treated no differently than the movie industry or sports clubs that pay top dollar for top talent.

The Confederation of British Industry, a business lobby group, has warned that an EU bonus cap could translate into higher levels of base pay, weakening the link between performance and reward -- the opposite of the desired effect.

The CBI has also warned that capping the variable element of bankers' pay would limit banks' ability to reduce costs in response to weaker markets.

But the new rules may do little more than reflect the reality for many now working in financial services. Bonuses have fallen due to a sharp drop in activity and employment.

Related: Wall Street CEOs: Who's paid the most?

The Center for Economics and Business Research estimates that bonuses in London totaled about £1.6 billion in the latest round, down from £11.6 billion in 2008.

Wall Street bonuses have also fallen since the bumper years of 2008 and 2009, when New York bankers enjoyed a share of $22 billion each year, but they are rising again. Average cash bonuses rose by 9% last year to nearly $122,000, and the total pot was up 8% at $20 billion.

First Published: February 28, 2013: 4:02 AM ET

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