Big quake follows increase in Oklahoma rumblings (AP)

SPARKS, Okla. – Clouds of dust belched from the corners of almost every room in Joe Reneau's house as the biggest earthquake in Oklahoma history rocked the two-story building.

A roar that sounded like a jumbo jet filled the air, and Reneau's red-brick chimney collapsed and fell into the roof above the living room. By the time the shaking stopped, a pantry worth of food had been strewn across the kitchen and shards of glass and pottery covered the floor.

"It was like WHAM!" said Reneau, 75, gesturing with swipes of his arms. "I thought in my mind the house would stand, but then again, maybe not."

The magnitude 5.6 earthquake and its aftershocks still had residents rattled Sunday.

Two minor injuries were reported from Saturday's quakes by the Oklahoma Department of Emergency Management, which said neither person was hospitalized. And, aside from a buckled highway and the collapse of a tower on the St. Gregory's University administration building in Shawnee, no major damage was reported.

But the weekend earthquakes were among the strongest yet in a state that has seen a dramatic, unexplained increase in seismic activity.

Oklahoma typically had about 50 earthquakes a year until 2009. Then the number spiked, and 1,047 quakes shook the state last year, prompting researchers to install seismographs in the area. Still, most of the earthquakes have been small.

Saturday night's big one jolted Oklahoma State University's stadium shortly after the No. 3 Cowboys defeated No. 17 Kansas State. Fans were still leaving the game.

"That shook up the place, had a lot of people nervous," Oklahoma State wide receiver Justin Blackmon said.

The temblor sent Jesse Richards' wife running outside because she thought their home was going to collapse. The earthquake centered near their home in Sparks, 44 miles northeast of Oklahoma City, could be felt throughout the state and in Arkansas, Kansas, Missouri, northern Texas and some parts of Illinois and Wisconsin.

Richards estimated it lasted for as much as a minute. One of his wife's cookie jars fell on the floor and shattered, and pictures hanging in their living room were knocked askew.

"We've been here 18 years, and it's getting to be a regular occurrence," said Richards, 50. But, he added, "I hope I never get used to them."

Geologists now believe a magnitude 4.7 earthquake Saturday morning was a foreshock to the bigger one that followed that night. They recorded at least 10 aftershocks by midmorning Sunday and expected more. Two of the aftershocks, at 4 a.m. and 9 a.m., were big, magnitude 4.0.

"We will definitely continue to see aftershocks, as we've already seen aftershocks from this one," said Paul Earle, a seismologist with the U.S. Geological Survey in Golden, Colo. "We will see aftershocks in the days and weeks to come, possibly even months."

Brad Collins, the spokesman for St. Gregory's University in Shawnee, said one of the four towers on its "castle-looking" administration building collapsed in the big earthquake and the other three towers were damaged. He estimated the towers were about 25 feet tall.

"We definitely felt it," Collins said. "I was at home, getting ready for bed and it felt like the house was going to collapse. I tried to get back to my kids' room and it was tough to keep my balance, I could hardly walk."

Scientists are puzzled by the recent seismic activity. It appeared the latest quake occurred on the Wilzetta fault, but researchers may never know for sure. Earthquakes that hit east of the Rocky Mountains are harder to pinpoint because the fault systems are not as well studied as major faults like the San Andreas in California.

Arkansas also has seen a big increase in earthquake activity, which residents have blamed on injection wells. Natural gas companies engaged in hydraulic fracturing, or fracking, use fluid to break apart shale and rock to release natural gas. Injection wells then dispose of the fluid by injecting it back into the ground.

There are 181 injection wells in the Oklahoma county where most of the weekend earthquakes happened, said Matt Skinner, spokesman for the Oklahoma Corporation Commission, which oversees oil and gas production in the state and intrastate transportation pipelines.

But natural gas companies claim there is no proof of a connection between injection wells and earthquakes, and a study released earlier this year by an Oklahoma Geological Survey seismologist seems to back that up. It found most of the state's seismic activity didn't appear to be tied to the wells, although more investigation was needed.

"It's a real mystery," seismologist Austin Holland of the Oklahoma Geological Survey said of the recent shaking.

"At this point, there's no reason to think that the earthquakes would be caused by anything other than natural" shifts in the Earth's crust, Holland said.

Earle said he couldn't comment on the relationship between fracking, injection wells and earthquakes.

Most Oklahoma residents still see earthquakes as anomalies in a state more often damaged by tornadoes. Roger Baker, 52, laughed at the idea of buying earthquake insurance, although the weekend quakes left a 6-foot-long crack several inches deep his yard in Sparks.

"It's just a part of life," he said.

Prague resident Mark Treat, 52, was at the Dollar General store Sunday, buying paper towels in bulk, garbage bins and a broom and mop to begin cleaning up his home. He said the quake hit hard enough to knock dishes, lamps and a TV to the ground and overturn a chest of drawers.

"It busted up a lot of stuff," Treat said. "I can't believe is only was a 5.6."

___

Associated Press writer Ken Miller in Oklahoma City and AP science writer Alicia Chang in Los Angeles contributed to this report.

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Obama deficit plan: Is there ever a good time for a tax increase? (The Christian Science Monitor)

New York – Would President Obama's tax-the-rich proposal, part of a plan to raise some revenue for deficit reduction, actually harm the economy?

Critics say it would, but economists suggest a major part of the equation involves the state of the economy itself. By 2013, the earliest Mr. Obama's tax reform policies would go into effect, no one knows if the economy will be humming along, muddling through, or in a recession.

To that, economists suggest it's anyone's guess. Yes, the economic outlook is that uncertain, leaving any analysis of the economic impact of a potential $1.5 trillion in tax hikes equally uncertain. Congress, Greece, and the housing market could all play significant roles – but what those roles might be are yet to be determined, experts say.

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The optimists believe the US housing market, suffering since 2008, will revive, giving the economy a significant boost.

Those who are less optimistic, think the economy will be moving ahead at a snail’s pace – not much different than today.

And the pessimists think the financial problems in Europe could send the US economy back into recession – assuming it’s not there already.

“Next year is probably more uncertain than 2013,” says economist Joel Naroff of Naroff Economic Advisors in Holland, Pa. “If we get through 2012 OK, then 2013 will be good. But if not, then 2013 will be a disaster.”

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What Congress doesSome economists say that Congress could play a significant role in what happens next. It has already agreed to cut spending, but that will actually reduce economic activity, says Mark Zandi of Moody’s Analytics.com.

He estimates the impact of the fiscal austerity will cost the economy 1.7 percentage points of economic activity unless Congress does something such as renewing the reduction in payroll taxes (think Social Security and Medicare taxes). In 2013, the belt-tightening will cost the economy 1.5 percentage points.

It’s also not clear if Congress will agree to any of Obama’s job-creation plans – a combination of some tax reductions, some spending on new schools, and direct grants to the states. If Congress does nothing, it could mean the economy just “muddles along for the next two years,” says economist Richard DeKaser of the Parthenon Group, a Boston-based strategy consulting firm.

What Greece doesThe economy next year could also be adversely affected by events in Europe, says Mr. Zandi. If the Greek government were to default on its loans, he expects Europe will have a mild and short recession. However, if the debt woes were to spread to other countries, he predicts that would drag the US into a recession as well.

If the bankers reach some accommodation on Greece, then the US economy may start to get a lift from the housing market, predicts Mr. Naroff. “A year from now you will have worked off the inventory in the housing market,” he says.

Zandi, also a housing optimist, expects the housing market to increase from a current rate of building 600,000 new homes a year to 1.7 million homes a year. “That is a lot of growth,” he says, “and it begins in 2013 in earnest.”

What the economy doesThe shape of the economy may well have a lot of bearing on what Congress does – if anything. If the economy is suffering, lawmakers are less likely to make any significant changes in tax policy. No one wants to run for reelection right after raising constituents’ taxes. However, if the economy has its swagger back, they might be more inclined to act.

a€?The worst time to raise taxes is during a recession,a€

That’s because tax hikes tend to take money out of the economy at a time when consumers are already in a funk. Ms. Villarreal, who supports some form of tax reform, such as a consumption tax, argues that even tax increases on the wealthy could have an adverse impact on the economy.

“If they have less to invest in job creation that trickles down to the rest of the economy,” she says. “What they do to the top earners will effect the rest of us.”

However, Naroff argues that tax changes on the well-to-do probably won’t change their spending habits. “The Obama proposals are not aimed at people who are likely to dramatically or even at all change their spending behavior,” he says.

Changing the tax codeOne of the biggest battles of the year is likely to be whether to extend the so-called “Bush tax cuts” for high-income earners. Those tax cuts expire at the end of 2012 and Obama has vowed to veto any legislation that extends them again.

“I am assuming the Bush tax cuts expire but are replaced with something else,” says Mr. DeKaser. “Maybe there is a change in the tax brackets, a gradual introduction of a more stringent tax policy.”

If the economy is not a recession, tax changes might be good, argues Zandi. He particularly endorses some form of broadening the tax base, which is usually means shutting down loopholes and making the tax code less complex.

“If tax reform means the flattening of the tax base and it stays that way for a lengthy period of time, the economy could easily digest that and perhaps even benefit from it,” he says. “If you are talking about scaling back many of the deductions and tax credits in the tax code and it becomes less complex, that could be therapeutic.”

No matter what happens in terms of tax reform, Zandi expects it will be phased in. “We could not do it all cold turkey,” he warns. “Households and businesses have made decisions based on those loopholes.”

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Obama unveils sharp increase in auto fuel economy (Reuters)

WASHINGTON (Reuters) – President Barack Obama on Friday formally unveiled standards that would dramatically increase U.S. fuel economy standards for cars and trucks by 2025.

The plan, which is the result of months of negotiations between the Obama administration and auto makers, would require motor company fleets to average 54.5 miles per gallon by 2025.

"This agreement on fuel standards represents the single most important step we've ever taken as a nation to reduce our dependence on foreign oil," Obama said at an event announcing the new standards.

Flanked by top auto maker executives, Obama said the new rules would lower the country's oil use by 2.2 million barrels a day over next 15 years and save U.S. consumers almost $2 trillion in fuel costs.

In addition to lowering oil use, the standards are also expected to cut more than 6 billion metric tons of carbon pollution during the life of the program -- more than the entire amount of carbon the United States emitted in 2010 -- the White House said.

The compromise reached with auto makers is slightly less than the administration's original proposal for corporate average fuel economy, or CAFE, standards.

But it is a major step up from current standards that require auto makers to achieve 35.5 mpg by 2016.

Earlier, the administration had proposed increasing the CAFE target to 56.2 mpg between 2017 and 2025, but that plan ran into opposition from the industry and some lawmakers.

(Additional reporting by Malathi Nayak and Emily Stephenson in Washington and Ben Klayman in Detroit; Editing by Alden Bentley)

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Mortgage applications see biggest increase in 4 months (Reuters)

NEW YORK (Reuters) – Applications for home mortgages surged last week, racking up the biggest increase in four months on a flood of refinancing demand as interest rates remained low, an industry group said on Wednesday.

The Mortgage Bankers Association said its seasonally adjusted index of mortgage application activity, which includes both refinancing and home purchase demand, spiked up 15.5 percent in the week ended July 15. It was the largest increase since early March.

"Ongoing turmoil in the financial markets primarily due to the sovereign debt crisis in Europe has brought mortgage rates back to their lowest levels of the year," Michael Fratantoni, MBA's vice president of research and economics, said in a statement. "Refinance applications have surged in response."

The MBA's seasonally adjusted index of refinancing applications soared 23.1 percent, but the gauge of loan requests for home purchases dipped 0.1 percent.

The refinance share of mortgage activity rose to 70.1 percent of total applications from 65.6 percent the week before.

Fixed 30-year mortgage rates averaged 4.54 percent, easing from 4.55 percent.

(Reporting by Leah Schnurr; Editing by Diane Craft)

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Bernanke: Default on debt would increase deficit (AP)

WASHINGTON – Federal Reserve Chairman Ben Bernanke warned U.S. lawmakers Thursday that they would deliver a "self-inflicted" wound to the nation's economy by holding up efforts to raise the government's borrowing limit.

Republicans have held up increasing the borrowing limit because of concerns of growing spending that has widened the federal deficits.

Bernanke told a Senate panel that a default on the debt would lead to even greater federal deficits. Interest rates would rise, and the government would be forced to pay higher rates on its debt. At the same time, higher rates would slow the economy and an already-weak job market. That would curtail tax revenue.

The government hit its $14.3 trillion borrowing limit in May. The Treasury Department said it will default on its debt if the limit is not raised by Aug. 2.

"I think it would be a calamitous outcome. It would create a severe financial shock," Bernanke told the Senate Banking Committee during his second appearance before Congress this week. "Treasury securities are critical to the entire financial system ... A default on those securities would throw the financial system potentially into chaos."

Bernanke was on Capitol Hill to deliver his semiannual economic report. But his second day of testimony was dominated by questions over borrowing limit impasse.

Republicans are demanding that any increase be accompanied by an equal amount of spending cuts. President Barack Obama and Democrats have insisted that tax increases be a part of any long term deficit-cutting deal, something Republicans have rejected.

On Wednesday, Moody's Investors Service said it will consider lowering the United States' credit rating because of a small but rising risk that the government will default on its debt.

A downgrade would raise interest rates on U.S. treasury bonds, increasing the interest paid by U.S. taxpayers. It would also push up rates for mortgages, car loans and other debts, which are linked to Treasury rates.

The United States pays an average of about 3 percent on its existing debt, according to the Treasury Department. In 2010, that added up to $197 billion in interest payments.

The nonpartisan Congressional Budget Office has forecast that interest payments will rise to $463 billion by 2014. That is under an assumption that the U.S. keeps its top credit rating. A reduced rating would force the government to pay higher interest rates.

The impact of a default would also destabilize U.S. and global financial markets, Bernanke said, which would weaken economic growth

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McConnell, Boehner increase criticism of Obama (AP)

By ANDREW TAYLOR and JIM KUHNHENN, Associated Press Andrew Taylor And Jim Kuhnhenn, Associated Press – 55?mins?ago

WASHINGTON – The top two Republicans in Congress sought Tuesday to put the onus on President Barack Obama for failure to resolve a fight over how to increase the government's borrowing authority. Senate Minority Leader Mitch McConnell said a deal with Obama is "probably unattainable" and House Speaker John Boehner said the specter of default is "his problem."

The unusually blunt and combative language came just hours ahead of another White House meeting aimed at finding an accommodation on a package of spending cuts to accompany an increase the debt limit. It further complicated an already convulsive bargaining environment, with the Aug. 2 debt limit extension deadline fast approaching.

McConnell maintained that White House offers to cut long-term spending amount to "smoke and mirrors" and directly challenged Obama's leadership. After years of discussions and months of negotiations," the Kentucky Republican said, "I have little question that as long as this president is in the Oval Office, a real solution is probably unattainable."

Said Boehner: "This debt limit increase is his problem and I think it's time for him to lead by putting his plan on the table — something that Congress can pass. Where is the president's plan? When's he going to lay his cards on the table?"

McConnell charged in a Senate floor speech that Democrats and the Obama administration were relying on budget gimmicks to give the "appearance of serious belt-tightening."

White House spokesman Jay Carney said the Republican reaction Tuesday "was unfortunate."

"Sometimes there's rhetoric put out there in public that doesn't match what has often been very constructive and respectful conversations in meetings," Carney told reporters. He added: "By fits and starts, the process continues to move forward."

Responding to Boehner's comment, Carney pointed out that it is Congress' responsibility to vote for an increase in the debt ceiling.

"The president doesn't have a vote in this," he said. "It's Congress that has to act." He said Obama will be in office for at least another 18 months, and "the American people expect Congress to work with him."

Obama has been pushing for $4 trillion in a 10-year deficit reduction proposal in hopes of freeing votes to increase the government's borrowing authority. But Boehner, after seeking to forge a deal of that magnitude, told the president that a smaller, $2 trillion to $2.4 trillion deal was more realistic. A deal is essential to win Republican votes to increase the nation's debt ceiling by Aug. 2, or risk a government default.

McConnell said Republicans will "do the responsible thing and ensure the government doesn't default on its obligations."

But he dismissed the cuts the administration and Democrats have proposed. Republicans say Democrats want most of the spending cuts to be concentrated in the later years of a deal. They say that despite promising cuts of $1.1 trillion from Cabinet agency operating budgets, the White House is insisting on a two-year freeze in such spending at the current level of $1.05 trillion.

McConnell's and Boehner's heightened criticisms come as Obama has increasingly used public appearances, including a news conference Monday and a network television interview Tuesday, to take his case to the public. Obama has argued that both Democrats and Republicans need to make politically painful decisions and has portrayed Republicans as intransigent.

As the debate intensified, both sides looked for signs, subtle or otherwise, that negotiations were souring.

In an interview with CBS Tuesday, Obama seemed to back off his unequivocal assurances that the debt ceiling would be raised, thus avoiding a first-ever default.

CBS anchor Scott Pelley asked Obama if he could guarantee that Social Security checks would go out on Aug. 3, the day after the administration says the government would go into default.

"I cannot guarantee that those checks go out on August 3rd, if we haven't resolved this issue.," Obama replied in an excerpt of the interview released by CBS. "Because there may simply not be the money in the coffers to do it."

Earlier, Treasury Secretary Timothy Geithner stressed that no one in government would let a government default occur.

"Let me be clear: the debt limit will be raised," Geithner told a Women in Finance Symposium Tuesday. "Failure is not an option. Both sides understand what is at stake and will come to an agreement."

He said Obama is willing to make spending cuts across the government "as long as they are done responsibly, over time."

Until today, Republicans had so far focused their criticism on Obama's demand for new tax revenues in the final deficit reduction package. But McConnell's tone indicated a new line of attack based on competing versions of how much progress had been made in talks led by Vice President Joe Biden in May and June.

McConnell accused the administration of leaking its proposals for spending cuts to the media without details.

"The lack of detail concealed the fact that the savings they were supposedly willing to support were at best smoke and mirrors," the Kentucky Republican said.

On Monday, House Majority Leader Eric Cantor, R-Va., a participant who left the Biden talks last month because of Democratic demands on taxes, spelled out potential spending cuts that had been identified. But Democratic lawmakers made clear that such a cutting-only approach without tax increases on wealthier Americans would never pass the Democratic-led Senate or the House, where Democratic votes would be needed, too.

Cantor, aides said, outlined up to $2.3 trillion in spending cuts over the upcoming decade, with $1.3 trillion coming from squeezing the day-to-day budgets of Cabinet agencies, including the Pentagon.

Cantor erred on the high end of the savings range in virtually every instance. The White House countered that the cuts really approached $1.7 trillion or so, which would leave negotiators $700 billion short of the $2.4 trillion being sought.

Democratic officials familiar with Obama's private talks with leaders of the House and Senate insist that Congress will not let the government go into default for the first time in American history — and that Republicans, ultimately, would vote to raise the debt limit even if a deficit-cutting package does not come together over the next two weeks.

Republicans say they won't allow a default, but that a major reduction in spending must come as part of the package — and therefore both sides remain in a stalemate on the debt limit.

After Monday's White House meeting, neither side showed any give that might generate hopes for a speedy agreement. Instead, Republicans again took a firm stand against revenue increases while Obama and his Democratic allies insisted that they be part of any equation that cuts programs like Medicare.

"I do not see a path to a deal if they don't budge, period," Obama said on Monday.

At the same time, the president turned up the pressure by announcing he won't sign any short-term debt limit increases.

"We are going to get this done," Obama insisted during a news conference.

Obama's declaration seemed aimed at pressuring lawmakers to continue to strive for the largest deficit reduction plan possible, even though hopes for a "grand bargain" mixing a complete overhaul of the tax code with cuts to benefits programs like Medicare and Social Security fizzled over the weekend.

The Treasury Department says lawmakers have until Aug. 2 to extend the nation's debt limit to prevent a catastrophic government default on its bills. With that deadline fast approaching, the public is growing more concerned about what happens if Congress and the White House can't reach a deal.

Forty-two percent of Americans say they see a greater risk to the economy from not raising the debt limit, according to a Washington Post-Pew Research Center poll conducted last week. That's up 7 points from late May. However, there are still 47 percent of Americans who say they are more concerned about the consequences of raising the debt ceiling.

The business community is also upping the pressure on lawmakers, warning that a failure to increase the nation's borrowing limit could have an immediate impact on the economy recovery.

"An unprecedented default on the nation's bills would have dire consequences for our economy, our markets, and Main Street Americans," said Thomas Donohue, president of the U.S. Chamber of Commerce.

Despite lingering hopes for a larger deal, the goal of the White House talks is to produce spending cuts of at least $2.4 trillion or so over the coming decade. Such cuts wouldn't do enough to address deficits that threaten the economy, but they would represent a down payment on further reductions that would be imposed after next year's elections.

The $2.4 trillion figure would meet the House Republicans' own standard of a debt-cutting package: one that would exceed the size of the increase in the debt limit, and provide enough borrowing room to get the country through 2012.

Obama spent most of his time encouraging lawmakers to reconsider a bigger deal, on the order of some $4 trillion in spending cuts and tax hikes over 10 years. Democrats familiar with the talks said it was clear after the meeting that negotiators are going to have come up with some new ideas in hopes of finding a compromise.

As a measure of the political peril Obama is courting, the president is willing to discuss raising the Medicare eligibility age from 65 to 67 years, provided Republicans would allow Bush-era tax cuts for the wealthy to expire at the end of 2012 and agree to other unspecified demands, according to a Democratic congressional aide.

All the officials familiar with the talks spoke on condition of anonymity to disclose details of the private discussions.

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Associated Press writers Ben Feller, Julie Pace and Erica Werner contributed to this report.

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