Archive for July 27th, 2010

Most Americans want the Bush tax cuts made permanent …

July 27, 2010

According to IBD /TIPP …

  • 51% percent of Americans favor making the Bush cuts permanent vs. 28% who didn’t.
  • Republicans were more than 4 to 1 and Independents more than 2 to 1 in favor.
  • Only Democrats were opposed, but only by 40% to 38%.

The cuts also proved popular among all income groups — despite the Democrats’ oft-heard assertion that Bush merely provided “tax breaks for the wealthy.”

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As of midnight Dec. 31 , if the Bush tax cuts aren’t extended …

  • The death tax returns — at a rate of 55% on estates of $1 million or more.
  • The lowest bracket for the personal income tax moves up 50% — to 15% from 10%.
  • The next lowest bracket — 25% — will rise to 28%, and the old 28% bracket will be 31%.
  • At the higher end, the 33% bracket is pushed to 36% and the 35% bracket becomes 39.6%.
  • The marriage penalty makes a comeback … e.g. the standard deduction for couples is fixed at the same level as it is for single filers.
  • The capital gains tax will jump 33% — to 20% from 15%.
  • The tax on dividends will go all the way from 15% to 39.6% — a 164% increase.
  • Other tax hikes include: halving the child tax credit to $500 from $1,000

Source IBD: The Tax Tsunami On The Horizon, 07/21/2010
http://www.investors.com/NewsAndAnalysis/Article.aspx?id=541131

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The “Paradox of Thrift”… explains a lot.

July 27, 2010

Here’s why much of Stimulus has been ineffective in actually stimulating the economy …

The meltdown occurred largely because consumers (and businesses) were over-leveraged. That is, they were carrying too much debt – way too much debt.

When asset values plummeted (think home prices) panic understandably set in.

So, any “free cash” that flows in (think gov’t rebate checks) goes to retiring debt (i.e. deleveraging) instead of consumption.  That’s good for balance sheets, but doesn’t stimulate the economy.

Economists call it the “paradox of thrift.”

^ ^ ^ ^ ^

Excerpted from Minyanville.com: Why There’s No Case for Healthy Economic Growth, Jul 23, 2010

The consumer is simply carrying too much debt.

In the US, consumption represents 70% of GDP, but the consumers’ debt/GDP ratio, which spurted from 100% in 2001 to more than 135% in 2008, still stands at 126%, nearly three years after the recession began.

Much of the nine-percentage-point decline is due to financial institution write-offs as opposed to debt repayment, so it appears that the consumer has a long way to go to even get back to the 100% ratio. The next healthy economic upswing must await the healing of household balance sheets.

Unfortunately, to get a healthy consumer balance sheet, savings must increase to repay the debt, which leaves less for consumption.

Lower consumption means slower economic growth with all the attendant implications for employment.

This is known in the economics profession as “the paradox of thrift.”

Unfortunately, the politicians are promoting ill-conceived schemes that wind up only prolonging the agony — like “Cash for Clunkers” and the “homebuyer tax credit.” These programs promote more debt which will have to be reduced in the future

The need to work off debt together with the loss of retirement income by the baby boomers will cause them to put off retirement for several years.

This will trickle down to the younger generation who will find it increasingly difficult to find satisfactory employment.

We’ll see the U6 unemployment measure (which counts the underemployed) continue to stay high – very high.

Full article:
http://www.minyanville.com/businessmarkets/articles/overconsumption-economy-consumers-finance-investors-economcy/7/23/2010/id/29290

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Policy dispute results in 50,000 cattle guards being fired …

July 27, 2010

This is being internet-blasted  … unlikely, but funny …

* * * * *

A few months ago, President Obama received a report that there were over 100,000 cattle guards in Colorado .

Colorado ranchers had protested some proposed government imposed changes in grazing policies, so the President ordered the Secretary of the Interior to fire half of the “cattle guards” immediately!!

Before the Secretary of the Interior could respond and presumably try to straighten him out, Vice-President, Joe Biden, intervened with a request that … before any “cattle guards” were fired, they be given six months of retraining.

At least they didn’t file a lawsuit against the Colorado cattle.

* * * * *

For those of you who have never traveled to the west, or southwest, cattle guards are horizontal steel rails placed at fence openings, in dug-out places in the roads adjacent to highways (sometimes across highways), to prevent cattle from crossing over that area. For some reason the cattle will not step on the “guards,” probably because they fear getting their feet caught between the rails.

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