by | ARTICLES, GOVERNMENT
As I’ve mentioned before on this blog, my friend Don Boudreaux has a great website with a fellow economist, Russ Roberts: www.cafehayek.com. Roberts was recently thinking aloud about the correlation between government spending and job creation. He does a nice job taking to task some of the Keynesian ideas on the topic. Toward the end of his piece, Roberts rightly identifies one of the main reasons for our current sluggish economy:
“The simplest answer is that businesses are not investing. Investment is still very low. I’d like to hear the case of how government spending lots of borrowed money encourages business to invest. It would be a hard case to make. It seems to me that government spending of borrowed money, especially on unproductive stuff, discourages business investment.”
And with the current state of uncertainty in the business world due to Congress’s gross negligence of the tax margins, we can expect that businesses will continue to refrain from real investment for awhile.
http://cafehayek.com/2010/10/does-government-spending-create-jobs.html
by | POLITICS
Robert Higgs published a thoughtful essay a few days ago in the Sacramento Bee. Higgs reminds us of a basic economic lesson that Obama has yet to learn: consumptive spending is not nearly as stimulative as investment spending. Higgs rightly cites a sharp decline in private investment as the reason for the economic downturn. Obama is compounding this cycle by perpetuating a feeling of uneasiness and uncertainty with his plans to raise taxes and regulations on business owners. And with Congress promoting only band-aid stimulus projects as the cure for the economy, we will unfortunately continue to have a long road ahead. Higgs writes,
If politicians truly wish to promote genuine, sustainable recovery and long-term economic growth, they should focus on actions that will contribute to a revival of private investment, not on pumping up consumption. In the most recent quarter, gross private domestic investment was still running at an annual rate more than 20 percent below its previous peak. Net private investment was fully two-thirds below the previous peak.
To bring about this essential revival of investment, the government needs to put an end to actions that threaten investors’ returns or create uncertainty that paralyzes the undertaking of new long-term projects.
Well said. The article in its entirety is a great read.
Read more: http://www.sacbee.com/2010/10/01/3071526/why-stimulus-doesnt-stimulate.html#ixzz11dc1RJCF
by | NEW YORK
Reuters reports a drop in the personal income of NY residents for the first time in 70 years:
“The recession put a 3.1 percent dent in the personal incomes of New York state residents, who endured their first full-year decline in more than 70 years, according to a report released Tuesday. Paychecks or net earnings tumbled 5.4 percent, while dividends, interest and rent slid 8.4 percent, to a grand total of nearly $908 billion, the state comptroller’s report said. Not only did New Yorkers’ personal incomes fall “almost twice” as much as they did in the nation as a whole, but they have yet to recover to pre-recession levels, Comptroller Thomas DiNapoli said.”
The situation is likely to worsen if higher taxes prevail in the next year. NY must cut spending and reconcile the public-private earnings divide if it wishes to see real economic recovery.
http://www.cnbc.com/id/39531849
by | BLOG
I don’t say it very often, but I have it hand it to them Dems. The House vote taken today on whether or not to adjourn the House before deciding on the fate of the Bush tax cuts was a smart one. 39 Dems voted with the Republicans, making it a narrow 210-209 vote but ultimately adjourning.
What they did was take the seats that are on the bubble in this election and have them vote against adjournment. Then those Democrats can go back to their districts and say to their constituents and print in their mailers that they voted to stay in Washington to have a vote on the Bush tax cuts. And with a vote that close, every vote counted.
Not that they’d actually vote for extensions, but this vote leaves it open-ended at the very least. For instance, Freshman Congressman Tom Perriello (VA-5) was one of the 39 Dems who broke rank with his vote, and his seat is THE race to watch in the state of Virginia. But his local newspaper, the Daily Progress, just recently reported that Perriello ultimately plans to end the tax cuts for the uppermost tax bracket.
It’ll be interesting to see how these seats play out on Election Day, and if any incumbents actually do go on to vote for the extension. As I mentioned in an earlier post, if Democrats can be persuaded to extend investment tax cuts, then we are a little closer to the possibility of extending the Bush tax cuts on individual taxes for all citizens–especially the top income earners who bear and pay the lion’s share of tax revenue in this country.
http://thehill.com/blogs/blog-briefing-room/news/121599-boehner-decries-punt-on-tax-cut-vote-
by | BLOG
Now this looks promising as a step in the right direction. The AP is reporting that 47 House Democrats are breaking rank and urging Congress to extend tax cuts on investments. This means keeping the current rates on capital gains and dividends. A letter purportedly sent to House Speaker Pelosi states the following:
“Raising taxes on capital gains and dividends could discourage individuals and businesses from saving and investing,” said the letter, dated Friday and released Tuesday. “We urge you to maintain the current tax rate for both dividend and long-term capital gains taxes.”
These rates are supposed to revert to their old rate of 20% at the end of the year. If this tax cut measure is extended, it is possible that the tax rate for highest income earners could be extended as well. Both would do a wealth of good for economic recovery.
http://news.yahoo.com/s/ap/20100928/ap_on_bi_ge/us_tax_cuts_2
by | BUSINESS, TAXES
In an attempt to placate voters, President Obama signed into law the new $ 30 billion small business bill full of lending and tax credits, which he misleadingly calls tax cuts. This program will only provide some minor and temporary benefits to businesses and will hardly impact our much-needed economic recovery. Unlike politicians who only plan for the next election, businesses engage in long-term planning. The only sensible program would be to extend the Bush tax cuts for the long haul, so that businesses and higher income earners can invest. Unfortunately, our president is unwilling to pursue such a measure.
http://www.reuters.com/article/idUSN2710251620100927
by | ECONOMY, TAXES
The WSJ is reporting this evening that Congress has decided to delay voting on the status of the Bush tax cuts until after the election. While they lay the blame on Republicans, the truth is that the Democrats are running scared in the late stages of election season and incumbents don’t want their vote to go on record.
This further impacts Americans and small businesses who will have to wait to know how their taxes will be affected next year.
Mark Zandi, chief economist of Moody’s Analytics, wrote last week. “The uncertainty of not knowing what tax rates will be just a few months from now is adding to the collective nervousness.” He called the impact on business decision-making, especially hiring, “discernible”.
The Democrats have proven yet again that they are willing to sell out the wealth and health of our nation’s economy for a few Congressional seats.
http://online.wsj.com/article/SB10001424052748703384204575509793142421332.html?mod=WSJ_hpp_LEFTWhatsNewsCollection
by | NEW YORK, TAXES
Seems that El Rushbo was correct when he chose to vote with his feet last year and leave New York City.
Back in early 2009, Limbaugh warned that impending tax hikes on New York City residents would crush a top income earner like himself, and cited these taxes as the reason why he was leaving NYC for good. Now there’s even more proof that’s true. According to a recent study by the Tax Foundation, if Obama’s tax plan is adopted by Congress, “state, local and federal levies would result in a top 50.8 percent rate on high-income New York City residents”.
That’s half of your money– not yours anymore.
The rest of the article is a worthwhile read regarding the impact of Obama’s plan on taxes, deductions, and exemptions in different tax brackets. As a practicing NYC CPA, whose clientele is composed of many of these highest income earners, the news is grim indeed.
http://www.bloomberg.com/news/2010-09-22/new-york-hawaii-top-earners-face-highest-tax-under-obama-plan-study-says.html
