Obama: Slash corporate tax breaks
After more than a year in the making, the Obama administration on Wednesday released its plan to overhaul the corporate tax code.
The main proposal would slash the corporate tax rate to 28% from 35% and pay for the reduction by eliminating "dozens" of business tax breaks. There are currently more than 130 on the books.
The Obama administration's plan is in sync with Republicans in terms of wanting to lower the top rate. But Republicans want to lower the corporate rate even further to 25%.
There are also many other differences between their plans, and with Congress stuck in election-year gridlock, the odds of passage of any corporate tax reform plan this year are long.
Tax experts generally recommend that lawmakers lower the top rate to boost U.S. competitiveness. The United States has one of the highest nominal corporate tax rates in the world -- a factor that may reduce business investment.
Today, however, thanks to the bevy of tax breaks available to them, most of the largest corporations end up with effective tax rates far below 35%. Indeed, in many cases, they may pay far less than 25%.
The administration said a 28% U.S. corporate tax rate would be in line with the average rate among other advanced economies.
U.S. companies' abroad: A key goal of the administration's plan is to discourage companies from moving their assets abroad and parking their profits there for years on end.
To that end, the administration wants to impose a new minimum tax rate on the foreign profits of U.S. multinational companies, although it did not offer a target for what that rate should be.
Currently, U.S. companies with foreign subsidiaries may reduce their federal tax bill in a variety of ways, including by deferring the federal tax they owe on their foreign-made profits until they bring that money back to U.S. shores.
By contrast, the administration's proposal would require companies with foreign income in low-tax countries to pay the minimum U.S. tax rate on that income when it's earned. If the company pays income tax to the host country on those profits, it will get a foreign tax credit.
For example, if the U.S. minimum tax rate is set at 20% and a company pays 8% to the host country, it will have to pay the 12% difference to Uncle Sam.
It's not clear how profits that U.S. companies have kept abroad for years would be treated under the minimum-tax rule.
Obama's plan would also remove the tax deduction for moving expenses that U.S. multinationals get when they move operations abroad. Conversely, U.S. multinationals that move operations back to the United States would get a 20% tax credit.
Manufacturers: The plan would seek to ensure that the effective tax rate paid by manufacturers does not exceed 25%. Currently, the average tax rate for manufacturers is 26%, according to senior administration officials.
A company's effective tax rate is generally the net amount it pays in federal taxes as a percentage of its income.
The plan would reduce manufacturers' effective rate by reforming the deduction companies get for manufacturing goods in the United States. As the tax break is currently used, the term "manufacturing" may be interpreted very broadly to include things like the making of fast food hamburgers.
The administration wants to increase the value of the deduction but focus it more narrowly on actual manufacturing.
It would also reform and make permanent the research and experimentation credit, which has been on the books for years but is still considered "temporary."
Likewise, it would make permanent and consolidate temporary tax incentives to invest in clean energy.
Small businesses: The administration says it wants to reduce and simplify taxes for small businesses, which devote nearly 2 billion hours and spend up to $16 billion on tax compliance, according to the Treasury Department.
Among other things, the president's plan would let small businesses permanently write off up to $1 million in investments. It would also allow small businesses to use a simpler form of accounting than so-called accrual accounting, which requires them to recognize future cash receipts and costs on their income taxes.
Timing of reform: The last time the United States embarked on major tax reform was in 1986, when the economy, international trade and technologies were vastly different.
"The current tax code was written for a different economy in a different era. It needs to be reformed and modernized," Treasury Secretary Tim Geithner said on Wednesday.
He noted that the administration's plan is intended "to begin a process of building a bipartisan consensus" for tax reform. To that end, he said, he will be meeting with the chief tax writers in the House and Senate next week.
Indeed, given the lack of numbers and other specifics, the administration's proposals can only be a starting point for discussion.
A top Republican lawmaker on tax issues, House Ways & Means Committee Chairman Dave Camp, welcomed the administration's proposal, especially its call for lowering tax rates and closing loopholes. But he also said that policy differences remain, notably how the Obama plan would treat multinationals and small businesses that file under the individual tax code.
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AGs have 'strong concerns' about Google privacy rules
The top government lawyers from three dozen states sent a letter to Google on Wednesday, expressing "strong concerns" with the privacy policy the Web giant intends to roll out soon.
"On a fundamental level, the policy appears to invade consumer privacy by automatically sharing personal information consumers input into one Google product with all Google products," reads the letter sent to Google CEO Larry Page and signed by 36 state attorneys general.
Last month, Google announced the new policy, which spells out how the company will collect and compile information to create a profile of users based on their activity across all of its various sites and tools. That includes Google search, Gmail, the Google+ social site and phones running its Android operating system.
Privacy advocates objected to the policy -- which is set to go into effect March 1. Eight members of Congress, both Democrats and Republicans, wrote their own letter to Page, asking for clarification about the changes.
In Wednesday's letter, the state attorneys called the policy "troubling for a number of reasons," saying that users should be able to use one product without having its information shared with others.
"Consumers have diverse interests and concerns, and may want the information in their Web History to be kept separate from the information they exchange via Gmail," they said. "Likewise, consumers may be comfortable with Google knowing their Search queries but not with it knowing their whereabouts, yet the new privacy policy appears to give them no choice in the matter, further invading their privacy."
Google said Wednesday it's willing to discuss the policy with government officials, but that its intention is to make using its products easier and more transparent.
"Our updated Privacy Policy will make our privacy practices easier to understand, and it reflects our desire to create a seamless experience for our signed-in users," a Google spokesman said in a written statement. "We've undertaken the most extensive notification effort in Google's history, and we're continuing to offer choice and control over how people use our services services. Of course we are happy to discuss this approach with regulators globally."
In a blog post when the policy was announced, Google's Betsy Masiello noted that many of Google's products, including YouTube and search, don't require users to be signed in to use them. Other tools allow for "incognito" modes and there are other privacy tools that can be used, she said.
A later post from Google Public Policy Director Pablo Chavez said that the company's privacy policies, but not its privacy controls, are changing.
They are "trying to make them simpler and more understandable, which is something that lawmakers and regulators have asked technology companies to do," he wrote. "By folding more than 60 product-specific privacy policies into our main Google one, we're explaining our privacy commitments to users of those products in 85% fewer words."
That wasn't enough for the attorneys general. They singled out users of Android phones, which make up about 50% of the U.S. smartphone market, saying they won't be able to "opt out" without buying a new phone.
"No doubt many of these consumers bought an Android-powered phone in reliance on Google's existing privacy policy, which touted to these consumers that 'We will not reduce your rights under this Privacy Policy without your explicit consent,' " the letter said.
"That promise appears not to be honored by the new privacy policy."
The letter asks Google to meet with representatives of the attorneys general before the policy goes into effect "to work toward a solution that will best protect the privacy needs of those who use Google's products."
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Home prices at lowest point in more than 10 years
Home prices fell to their lowest point in more than a decade in January, which helped to lift the pace of home sales, according to a report from an industry trade group.
The National Association of Realtors reported that the median home price in January fell 2% from December to $154,700. That's the lowest price reading since November 2001, before the run-up in home prices that became known as the housing bubble.
The median price is the point at which half of homes are sold for a higher price, and half are sold at a lower price.
Serving as a drag on existing home prices is a large inventory of homes in foreclosure. Distressed home sales, which includes homes in foreclosure and so-called short sales in which the home is sold for less than what is owed on the mortgage, made up 35% of sales in January.
"Prices will continue to fall through the first half of 2012 due to the high share of distressed sales," said Stuart Hoffman, chief economist with PNC Financial. "The recent agreement between the big mortgage servicers, state attorneys general and the Obama administration will also result in more homes going to foreclosure over the next few months, adding to downward pressure on prices."
But the pace of sales rose to the highest level since May of 2010, helped by the low prices and rock-bottom mortgage rates. The seasonally-adjusted annual sales pace of 4.57 million homes was up slightly from the revised 4.38 million in December. The last time homes sold at that pace, buyers were rushing to qualify for an $8,000 homebuyer's tax credit that was about to expire. The latest reading was roughly in line with the expectations of economists surveyed by Briefing.com.
"The uptrend in home sales is in line with all of the underlying fundamentals -- pent-up household formation, record-low mortgage interest rates, bargain home prices, sustained job creation and rising rents," said Lawrence Yun, chief economist for the Realtors.
The housing market has been showing signs of recovery in recent months. The combination of low mortgage rates and a decline in home prices means homes are more affordable than they've been in decades. PNC's Hoffman agreed that the report is a further sign of recovery in the market, although he cautioned "it will remain a long process."
New home starts by builders have been rising, along with their confidence and customer traffic, according to an industry survey.
The supply of existing homes on the market tightened slightly in the Realtors' latest report, slipping 0.4% to 2.3 million homes, roughly a 6 month supply. That is down 20% from the supply of homes a year ago.
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Stocks end lower as market takes a breather
U.S. stocks drifted lower Wednesday amid doubts over the latest bailout for Greece and concerns about global economic growth.
The Dow Jones industrial average fell 27 points, or 0.2%, to end at 12,939. The S&P 500 lost 4 points, or 0.3%, to 1,358. The Nasdaq sank 15 points, or 0.5%, to 2,933.
"It seems the market is taking a breather and waiting for its next catalyst after the strong run we've had," said David Levy, a portfolio manager at Kenjol Capital Management in Austin, Texas. "A period of consolidation or even a slight pullback wouldn't be surprising given the overbought market conditions."
On Tuesday, the Dow briefly rose above 13,000 -- a level not seen since mid-May 2008 -- before falling back. So far this year, the Dow is up 6%, the S&P 500 is up over 8% and the Nasdaq is up 13%.
Stocks were pressured early Wednesday by news that an index of business activity in the eurozone contracted in January. That came after a reading on China manufacturing showed a slow pace of growth.
Meanwhile, investors remain skeptical about the latest bailout for Greece, which eurozone finance ministers approved Tuesday after weeks of negotiations and market speculation.
While the agreement suggests Greece will avoid a default in the near term, analysts warn that the nation will eventually need more support. Greece's fate also depends on whether private-sector investors agree to a historic debt-reduction plan.
"The new bailout and restructuring deal is a welcome short-term reprieve," said John Praveen, chief investment strategist of Prudential International Investments Advisers. "However, it is unclear how successful it will be over the longer term in addressing the debt problem."
Fitch Ratings downgraded Greece by two notches Wednesday morning, pushing the country's rating further into junk territory. The downgrade suggests that a "default is highly likely in the near term."
On Tuesday, U.S. stocks stumbled at the close, shaking off a modest morning rally ignited by news of the Greek bailout.
World markets: European stocks closed lower. Britain's FTSE 100 slipped 0.1%, the DAX in Germany dropped 0.8% and France's CAC 40 edged 0.4% lower.
The Markit Eurozone PMI Composite index, a survey of purchasing managers in the manufacturing and services sector, slid to 49.7 from 50.4 in February.
Asian markets ended higher. The Shanghai Composite gained 0.9%, while the Hang Seng in Hong Kong added 0.3% and Japan's Nikkei jumped 1%.
China's preliminary HSBC Purchasing Managers' Index, a measure of manufacturing activity in the world's second-largest economy, rose to a 4-month high of 49.7 in February. While the index improved, it is still below 50, meaning that manufacturing activity continues to contract in China.
Companies: After the market closed, Hewlett-Packard reported first-quarter earnings that beat analysts' expectations, although sales growth was weak and the company issued a cautious outlook.
HP's results came on the heels of disappointing results from rival computer maker Dell late Tuesday.
On Wednesday, Luxury homebuilder Toll Brothers posted a $2.79 million loss Wednesday, compared to a $3.42 million profit last year. The company's revenues declined and missed expectations.
Apple was also in focus, as the tech giant faced Chinese company Proview International in a Shanghai courtroom on allegations that it does not own rights to the iPad trademark in China.
Netflix's stock continued to lose ground after Comcast said that it is working on a new subscription video-on-demand competitor, named "Streampix." But the streaming service will only be available to those who also subscribe to Comcast cable.
Shares of Johnson & Johnson edged higher after the company announced late Tuesday that CEO Bill Weldon will step down in April.
Chinese Internet giant Alibaba, which has been in the headlines lately for its tussles with stakeholder Yahoo, wants to take its publicly traded Web portal private.
Economy: Existing-home sales rose 4.3% in January to a seasonally adjusted annual rate of 4.57 million, according to the National Association of Realtors.
Economists were expecting a sales rate of 4.5 million, according to consensus estimates from Briefing.com.
Currencies and commodities: The dollar rose against the euro, the British pound and the Japanese yen.
Oil for April delivery slipped 27 cents to $105.98 a barrel.
Gold futures for April delivery rose $12.80 to end at $1,771.10 an ounce.
Bonds: The price on the benchmark 10-year U.S. Treasury rose, with the yield slipping to 2.04%.
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Mitt Romney's plan to cut your taxes
In a switch to a more aggressive tax plan, Mitt Romney said Wednesday that he now favors cutting marginal tax rates for individuals by 20%.
The candidate had previously said he would "maintain current tax rates on personal income" as president before moving to a "fairer, flatter, simpler tax structure" in the future.
Now Romney appears to be accelerating that timetable, announcing a move that would reduce the current top rate paid on income from 35% to 28%, with similar reductions across all tax brackets.
For example, Americans in the lowest bracket would pay 8% instead of 10%. Americans closer to the middle would pay 20% instead of 25%.
"Obviously this is a bigger step," said Roberton Williams, a Tax Policy Center scholar who has been analyzing the 2012 candidates' tax plans. "It's a substantial cut and quite the switch."
The tax cuts will be offset by limits placed on deductions, exemptions and credits currently available to top-level income earners.
"The right way forward is a flatter, fairer, simpler tax system that generates the revenue we need to fund a smaller government that is restrained to its historical size," Romney said in a statement.
In a conference call with reporters, Romney economic adviser Glenn Hubbard said that the tax plan, even with rate cuts for individuals, should be revenue neutral.
Hubbard also said Romney was willing to examine the tax treatment of carried interest, a provision that allows fund managers to pay the 15% capital gains rate on portions of their income.
Should he become president, Hubbard said Romney would instruct his Treasury secretary to study the issue to determine if a higher rate was appropriate.
The candidate is expected to reveal more details in a speech to the Detroit Economic Club on Friday.
The policy change comes as Rick Santorum, once considered a long shot, sits at the top of national polls and is neck-and-neck with Romney in the latest surveys in Arizona and Michigan -- which both hold primaries Tuesday.
The candidate's initial economic plan -- released in September -- was billed by the Romney campaign as "the most detailed plan for economic growth and job creation of any presidential candidate."
But it fell flat with some influential conservatives, including the Wall Street Journal editorial board, which labeled the proposals "surprisingly timid and tactical."
The Tax Foundation, a think tank that generally advocates for lower tax rates, said that Romney's initial plan for the individual code "really takes no step toward fundamental reform."
The updated plan, released by the campaign, reiterates other proposals that were first laid out in September, including provisions that would eliminate taxes on interest, dividends and capital gains for taxpayers who make less than $200,000.
It also calls for the elimination of the estate tax, and a reduction in the tax rate paid by corporations from 35% to 25%.
On corporate taxes, Romney still favors higher rates than his competitors.
Romney's 25% proposed rate carries a less aggressive reduction than that of Gingrich (12.5%), Rick Santorum (17.5%) or Ron Paul (15%).
Romney had previously hinted at changes in his tax plan that would include lower marginal tax rates on income.
During a debate in January, Romney suggested he would lower the top rate to 25% or even 20% when asked to identify the highest rate any American should pay.
"More than 25%, I think, is taking too much out of our pockets," Romney said.
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Consumer bureau targets overdraft fees
The new consumer bureau said Wednesday that it plans to target a kind of bank fee that makes customers see red: Overdraft protection penalty fees on checking accounts.
The Consumer Financial Protection Bureau, in announcing the inquiry, is also seeking public input on a new sample disclosure text on checking account statement.
The disclosure would highlight exactly what the fee is and how much the account was overdrawn to incur it. That information would appear in a so-called "penalty fee box."
"Overdraft practices have the capacity to inflict serious economic harm on the people who can least afford it," said the bureau's chief, Richard Cordray. "We want to learn how consumers are affected, and how well they are able to anticipate and avoid paying penalty fees."
Bureau officials had suggested last September that they planned to target overdraft fees.
Banks say they offer overdraft protection plans to spare customers the embarrassment of having their purchases denied because they have overdrawn their account. The purchase goes through, with a hefty fee ranging between $30 and $35, according to the consumer bureau.
Consumer advocates say overdraft protection is what can cause a $3 latte to cost close to $40 when customers overdraw their accounts and start racking up penalty fees.
The Federal Deposit Insurance Corp. found in 2008 that consumers who overdrew 20 or more times per year paid an average of $1,610 in overdraft fees. That report spurred anger in Congress and among consumers and helped spur the Federal Reserve to make the first big changes to overdraft plans in 2010.
All banks now must ask customers to opt in to overdraft protection plans for ATM and most debit card transactions, instead of automatically enrolling them.
The consumer bureau plans to review those opt-in plans, especially the marketing material that promotes them.
The bureau said it will also look at the bank practice of clearing large purchases first. That practice, especially for a bank account close to being overdrawn, often makes it more likely that customers trigger more fees for more smaller purchases.
The bureau will also look at whether consumers know how to avoid overdraft fees and clearly understand the terms of the fees.
Finally, the probe will cover why overdraft fees hit so many low-income and younger customers. The 2008 FDIC study found that 46.4% of young-adult bank customers were hit with overdraft fees, and of those, 15% recorded more than 10 overdrafts in one year.
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Economy in recovery? Not so fast
Employers are hiring, manufacturing is revving up and stocks are rallying. It looks like the recovery could finally be taking hold.
Sound familiar?
The recent momentum of the American recovery feels a lot like early 2011, when many of the same green shoots were driving optimism.
But things went awry last spring when oil prices starting rising and Japan's earthquake sent economic shockwaves rippling throughout the world. The European financial crisis escalated and the debt ceiling debate in the United States weighed on confidence.
By June, even Federal Reserve Chairman Ben Bernanke was admitting the economy was hitting a "soft patch."
Are we finally on the path to a sustained recovery, or will it peter out all over again in 2012?
The answer all depends on a few key challenges:
Tension with Iran poses perhaps the greatest risk to not just the U.S. economy, but the world. About 20 percent of the world's oil passes through the Strait of Hormuz, and Iran's threat to close the critical shipping lane has recently driven a rise in oil prices.
Add recently improving economic data -- which often leads oil speculators to forecast greater demand for fuel -- and lower supply and higher demand are a recipe for a potential spike in gas prices this spring.
Gas prices are already at their highest levels ever for this time of year, and some analysts predict they'll hit a national average of $4 a gallon in May. Some regions are even expected to see $5 gas by Memorial Day.
That's going to hit consumers hard, just as it did last year. Consumer spending slumped in the summer, dragging on economic growth. Job creation soon slowed to a trickle.
"This year, the recovery is largely on the backs of consumers, so anything that undermines consumer spending would pose a risk to the economy," said Carl Riccadonna, senior U.S. economist with Deutsche Bank.
Because it's happened before, he doesn't see $4 gas as a major risk, but anything higher than $4.60 a gallon could be worrisome.
"Four-dollar gas doesn't scare me, but if the Strait of Hormuz gets shut or bombs start falling on Iran, that would certainly be troubling for the markets and could lead to an oil price spike," he said.
Government job cuts, especially by states and localities, are likely to continue -- and while they're expected, the impact is not to be taken lightly. The government is the largest employer in the country.
Meanwhile, as companies look ahead to the future, a big question mark hangs in the air: What will happen after the Bush tax cuts expire at the end of the year?
January 2013 also triggers $1.2 trillion in automatic budget cuts, as well as the start of many of President Barack Obama's health care reform provisions.
Hope for further clarity is waning, as Congress isn't expected to make much progress on any major issues until election season winds down.
"There's going to be significant uncertainty about fiscal drag," Riccadonna said, estimating government cuts and uncertainty around fiscal issues could shave as much as two percentage points off economic growth in 2013.
These issues are certainly not a surprise, so employers are likely to weigh them into their hiring and investing decisions in advance.
Last year's shocks came in the form of revolutions in the Middle East, the earthquake in Japan and Europe's escalating debt crisis.
While those issues still linger, new problems, including Iran, are brewing around the globe in 2012.
"We've removed several key dampening factors, but Iran remains the wild card," said Beata Caranci, vice president and deputy chief economist for TD Bank. "When we look at the big risks emanating for the U.S., they're mostly occurring outside U.S. borders."
Meanwhile, the fastest growing economies in the world, often called emerging markets, are starting to show signs of losing momentum. China, the world's second largest economy, has recently shown signs of slowing down.
India's government has predicted its economy could grow less than 7 percent this fiscal year -- its slowest growth since the financial crisis in 2008.
While both governments are starting to take efforts to support economic growth, the jury is still out on the results.
"Given our experience, often times it's really hard for some of these countries to control their slowdowns," said John Silvia, Wells Fargo chief economist. "The Asian slowdown could be faster and quicker than expected."
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Obama to offer corporate tax reform plan
The Treasury Department will unveil President Barack Obama's corporate tax reform plan Wednesday -- a framework that would reduce the overall rate paid by corporations, a senior administration official told CNN.
The president's tax plan is intended to "enhance American competitiveness by simplifying the tax code and eliminating dozens of tax loopholes and subsidies, incentivizing job creation and investment here at home and lowering the business rate while broadening the tax base," the official said.
The proposal calls for lowering the overall corporate tax rate from 35 percent to 28 percent, and the effective rate for manufacturing to 25 percent.
The official, who laid out the plan's broad framework for CNN, said the proposal is essential to fixing a system that is "uncompetitive, unfair, and inefficient."
The official told CNN the lower rate would be largely funded by eliminating dozens of tax loopholes and subsidies, and broadening the business tax base.
The package would also encourage more research and development, and the production of clean energy. It would establish a new minimum tax on foreign earnings to discourage companies from shifting production or profits overseas.
The tax plan would also cut taxes and simplify the tax code for small businesses and entrepreneurs, the official said, while not adding to the U.S. deficit.
The Obama administration has been talking about unveiling a plan to fix the corporate tax system for well over a year.
In the State of the Union address and in subsequent speeches, Obama has called for ending tax breaks for companies that outsource jobs overseas and lowering rates for U.S. businesses that create jobs at home.
"Right now, companies get tax breaks for moving jobs and profits overseas," Obama said in his address to Congress in January. "Meanwhile, companies that choose to stay in America get hit with one of the highest tax rates in the world. It makes no sense, and everyone knows it. So let's change it. "
Obama also said that it was time to end subsidies and tax breaks for the oil industry, which "rarely has been more profitable," while increasing tax credits for developing alternative energy sources.
Last year, the pressure for a corporate tax system fix heated up with news of General Electric's zero tax rate in 2010 due to profits overseas and losses at its financial unit. General Electric CEO Jeffrey Immelt is the chief of Obama's Council for Jobs and Competitiveness.
The current top corporate tax rate, among the highest in the world, has long been bemoaned by business leaders and tax experts. They say it discourages foreign investment in the United States and hinders the ability of U.S. companies to compete internationally. The bottom rate is 15 percent.
The Obama administration is expected to talk about lowering the top rate while axing some of the more than 130 business corporate tax breaks currently on the books and limiting companies' ability to shift profits to nations where tax rates are lower.
Treasury Secretary Tim Geithner told a Senate panel last week the plan will be an effort to find "common ground" on broad principles between Republicans and Democrats on Capitol Hill.
"We want to maximize the chance we can take advantage of that (common ground) to build consensus on something that's going to work," Geithner told the Senate Finance Committee.
"In short, it will help level the playing field for businesses and allow the government to collect needed revenue while promoting economic growth," Geithner said in his written statement to the Senate panel.
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Greece gets reprieve, but crisis not over
Once again, Greece appears to have been snatched back from the brink of default with the promise of more bailout money.
The 130 billion Eruo rescue package, which was backed by European finance ministers early Tuesday, should enable Greece to make a 14.5 billion Eruo bond payment next month, assuming a crucial agreement with private sector investors is approved.
But many experts say the second bailout will not resolve Greece's long-term debt problems and the nation will eventually need more support. They argue that focusing on austerity and debt reduction does more harm than good by further stunting the already shrinking Greek economy.
"The European authorities seem more intent on punishing Greece than helping the economy recover," said Mark Weisbrot, economist and co-director of the Center for Economic and Policy Research. "For two years now they have been pushing the Greek economy into recession, and there's still no light at the end of the tunnel."
To qualify for the bailout, the Greek government passed a deeply unpopular package of austerity reforms and agreed to increased oversight by officials from the European Union, International Monetary Fund and European Central Bank, known as the troika.
In what some see as a compromise of national sovereignty, Greece will be required to amend its constitution by introducing a provision that gives priority to "debt servicing payments" ahead of other national obligations.
Greece also agreed to set aside enough money to pay off three months worth of debt in a "segregated" account that will be overseen by the troika.
The stringent terms demanded by the EU, IMF and ECB stem from the lack of progress made on the structural reforms that are a condition of Greece's first bailout. As a result, some of the eurozone's strongest members, including Germany, have been reluctant to provide more bailout money without additional assurances.
"It is undeniable that the country needs to go though structural reforms to achieve sustainable growth rates in the long term," said IHS Global Insight economist Diego Iscaro. "However, structural reforms will take time to bear fruit and it is increasingly clear that, without a growth strategy in the short term, the economy will remain in the doldrums for a significant period."
The Greek economy, which has been in recession for years, shrank 6.8% in 2011. Looking ahead, economist expect the recession to deepen as austerity measures take their toll.
Reforms have already sparked violent protests in Athens, and will likely dominate the political debate in Greece as the nation prepares to elect a new government later this year.
The challenges facing Greece were spelled out in a "debt sustainability analysis" prepared by troika officials. It shows that, under a worst case scenario, Greece's debt load could remain at 160% of gross domestic product by 2020.
That's in stark contrast to the target set out in the bailout program, which seeks to reduce Greece's debts to 120.5% of GDP.
Under the "tailored downside scenario," Greece would fail to make the reforms necessary to revive its economy, resulting in higher unemployment and a deeper recession, according to the analysis. The scenario also assumes that Greece would backtrack on its austerity program and further postpone the sale of state assets.
This would prevent Greece from returning to the private credit market and make the nation more dependent on bailout funds.
"Given the risks, the Greek program may thus remain accident-prone, with questions about sustainability hanging over it," the analysis states.
Meanwhile, the overall program is contingent on banks and investors agreeing to a historic restructuring of Greece's private sector debts.
The writedown, which would result in losses of 75% for the private sector, would erase €107 billion of Greek debt, according to the Institute of International Finance.
In addition, eurozone governments agreed to lower the interest rates on Greece's existing bailout loans. And some eurozone central banks have agreed to transfer future profits on their Greek bonds to Athens.
While these measures should help address the nation's immediate debt problems, Greece will ultimately need more support, said Carl Weinberg, chief economist at High Frequency Economics.
"We have a new band-aid on an old wound," said Weinberg. "But we are sure the saga is not yet over."
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More Americans plan to save, not spend, their tax refund
Americans are going to be a lot more tightfisted with their tax refunds this year, with more people planning to save the cash they get back from Uncle Sam instead of spending it.
Of those expecting a refund, 44% said they plan to stash some of it in savings, up from 42% last year, according to a survey of more than 8,700 consumers by the National Retail Federation. That marks the highest percentage in the survey's nine-year history.
"After a rocky few years, consumers are now more vigilant about how they spend their money and the importance of preparing for future financial stability," NRF President and CEO Matthew Shay said in a statement.
About two-thirds of taxpayers are expecting a refund this year, the NRF said. Last year, the average refund was more than $3,000.
Nearly 40% said they will use some of the money to pay down debt and 28.7% will spend it on everyday expenses. Just 12% said their refund would go toward a major splurge like a new television, down from 13% last year. Only 11% plan to spend the money on a vacation, which was also down from a year earlier.
"I will never use my tax refund as spending cash again," said Celeste Simmons, 39, a single mother in Kennesaw, Ga. "I realized I was behind so I started saving 100% of it four years ago and now I've accumulated enough for a down payment on a house."
Simmons, who said she typically receives $8,000 to $10,000 back from the government, said tax time is her only opportunity during the year to make a big contribution to a savings account. "There is no other time of year that I have to get ahead," she said.
And most taxpayers, like Simmons, are also eager to get a jump on their savings. This year, 64.4% of Americans will have filed their taxes by the end of February, the highest percentage since 2006, the survey said. Only 14% said they will wait until the last minute.
More taxpayers are also filing their taxes themselves this year and fewer are planning to use an accountant or tax preparation service than in previous years.
In a separate survey by TD Ameritrade, an even larger percentage of respondents -- 63% -- said they plan to save or invest at least part of the money they get back. About half, of the more than 1,000 respondents polled said they will use some of the money to pay down debt, while 48% said it will go toward necessities like food or utility bills. Similarly, just 14% of those surveyed said they would use the money to splurge on a big-ticket item or trip.
Tax season is a good time to check your financial health, said Lule Demmissie, managing director of retirement at TD Ameritrade.
"Coming into a large chunk of change at a time when you are gathering important information about yourself becomes an opportunity to sit down and see whether you are meeting your financial goals," she said.
Demmissie recommends stashing those refunds in a tax-deferred savings account like an IRA or Roth IRA.
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