The Poor Get Screwed by the Obama-McConnell Plan

The Poor Get Screwed by the Obama-McConnell Plan – Guess who would see their taxes increase as a result of the Obama-McConnell plan? Well: The wealthiest Americans will also reap tax savings from the proposal’s plan to keep the cap on dividend and capital gains taxes at 15 percent, well below the highest rates on ordinary income…..In fact, the only groups likely to face a tax increase are those near the bottom of the income scale — individuals who make less than $20,000 and families with earnings below $40,000.  Contrast this with who gets new tax cuts–this is not keeping the Bush cuts, but adding a whole new set of cuts: An individual who earns $10,000 a year would lose half of the $400 he or she received in 2010 under Making Work Pay. Every family earning less than $20,000 a year would end up losing money under the proposal, according to Williams. On the other hand, taxes will drop dramatically for those earning $95,000 a year or more, who made too much to qualify for the Making Work Pay credit, said Williams. The $400 credit under Making Work Pay starts phasing out for individuals more than $75,000 a year and disappears above $95,000; but under the proposed payroll tax cut, all earners get a 2 percent tax cut, no matter what their total income, up to a maximum per-family credit of $4,362.

President Obama Gets Leading Proponent of Social Security Privatization and Bubble Economy to Tout Budget Deal – Dean Baker – That could have been the lead of a front page Washington Post news story reporting on a press conference in which former President Bill Clinton touted the budget deal that President Obama negotiated with the Republicans. Remarkably, President Clinton’s record on these issues was never mentioned in the article. As many former aides have acknowledged, President Clinton had been considering a variety of options for partially privatizing Social Security in the beginning of 1998 when the Lewinsky scandal exploded. With his presidency in jeopardy, Clinton had to rely on his core constituencies — labor, the African American community, women’s organizations — all groups that would have been infuriated by an effort to privatize Social Security. As a result, Clinton was forced to abandon this effort. President Clinton also set the economy on a path of bubble led growth, touting the stock market bubble that drove growth in the late 90s. He also pushed for the financial de-regulation that helped clear the way for the abuses of the housing bubble era. In addition, he also actively promoted the high dollar policy that led to the enormous trade deficit, which was another major imbalance distorting the economy’s growth path.

Disregard Bill Clinton’s Favorable View of Obama’s Tax Deal – Robert Reich – Bill Clinton seems the perfect validator for Barack Obama — which is why the President is utilizing the former president for selling his tax deal. After all, the economy boomed when Clinton was president and 22 million net new jobs were created. What’s more, Bill Clinton was reelected — even though he lost both houses of Congress in the 1994 midterms. Bill Clinton presided over an economic boom engineered by Fed chair Alan Greenspan, who felt confident he could drop interest rates far lower than anyone expected without risking inflation. The result was 4 percent unemployment in many parts of America, as well as the best jobs recovery in history. But the economy’s underlying structure remained as it had been before, including stagnant wages for most Americans. Within a few years the middle and working class was treating their homes as ATMs, borrowing trillions of dollars in order to maintain their standard of living, and at the same time demand enough goods and services to keep almost everyone in jobs. Those days are over. The Democratic Party can no longer ignore critical investments in the productivity of average workers. Nor can it ignore the increasing concentration of income and wealth at the very top, and the inability of America’s middle and working class to get the economy moving again.

 

QE2 Pushing Interest Rates Up and Not Down – US mortgage rates have risen by 0.85 per cent since the Federal Reserve first signaled its intension to go for a second round of quantitative easing three months ago. And this week the yield on 10-year US treasuries is up 0.35 per cent to 3.3 per cent in a widespread global sell-off of T-bonds.This is not supposed to be how QE2 works. The whole point of this $600 billion exercise is to squeeze interest rates down, and keep them down to give the US economy breathing space to recover. The tax deal this week added $1 trillion of stimulus over two years, reckon BNP Paribas.  Analysts said America’s budget deficit will now stay around 10 per cent for the next two years. Public debt of 110 per cent is close to debt spiral levels – when a country’s debt starts to expand because the interest is not being fully paid.  The US can only hope to get away with this because the dollar is the reserve currency of the world. But the Fed now has to raise around $100 billion in treasury bond sales a month to keep this show on the road.

Evaluating QE2 – On November 3, the Federal Reserve announced some new monetary policy measures that have been popularly (if perhaps inaccurately) referred to as a second round of quantitative easing, or QE2. What effects, if any, does QE2 seem to have had so far? Measures like those announced by the Fed have the potential to lower long-term interest rates. What we’ve observed since the Fed’s announcement has instead been an increase in the 10-year yield of about 60 basis points. In my view, the mechanism by which QE2 could potentially have an effect on interest rates is by changing the maturity composition of the outstanding supplies of Treasury securities held by the public. In my research we found evidence that changes in the maturity composition have historically been associated with changes in the slope of the yield curve, and that policies like QE2 had the potential to lower long-term rates even when the overnight rate was stuck near zero. QE2 as it’s actually being implemented by the Fed turns out to be something a little different. The Fed is buying very little in the way of bonds of 10 years or longer maturity, and is concentrating its purchases instead on securities between 2-1/2 and 10 years

What Does Cutting-Edge Macroeconomics Tell Us About Economic Policy for the Recovery? –  You see, Say(1803) (lovely way to express this, by the way) was very nearly right. Suppose we start in equilibrium, then there’s a sudden desire to stop buying newly-produced goods and buy land instead. Either the price of land rises to equilibrium or it doesn’t. If the price of land rises to equilibrium, then people stop wanting to buy land and return to buying newly-produced goods. If the price of land stays fixed (it’s sticky, or whatever) people cannot buy land because nobody is willing to sell. So they have to buy something else with their income instead, or else hoard money. Ultimately there are only two things an individual can do with his income, if everybody else is trying to do the same thing: buy newly-produced goods, where there are plenty of willing sellers in a general glut; or hoard money, by not buying things, which nobody else can stop you doing.

A Secretive Banking Elite Rules Trading in Derivatives – On the third Wednesday of every month, the nine members of an elite Wall Street society gather in Midtown Manhattan.  The men share a common goal: to protect the interests of big banks in the vast market for derivatives, one of the most profitable — and controversial — fields in finance. They also share a common secret: The details of their meetings, even their identities, have been strictly confidential.  Drawn from giants like JPMorgan Chase, Goldman Sachs and Morgan Stanley, the bankers form a powerful committee that helps oversee trading in derivatives, instruments which, like insurance, are used to hedge risk.  In theory, this group exists to safeguard the integrity of the multitrillion-dollar market. In practice, it also defends the dominance of the big banks. The banks in this group, which is affiliated with a new derivatives clearinghouse, have fought to block other banks from entering the market, and they are also trying to thwart efforts to make full information on prices and fees freely available. 

Foreclosure Fraud – Simple BofA Refi Turns Into Foreclosure Nightmare – Homeowner says Bank of America refinanced her mortgage, then stopped taking her payments. Next, it threatened to seize her condo. Barely a week goes by without someone contacting me to say that a bank is trying to steal their home. Often, this “theft” is the result of unpaid mortgages that have resulted in foreclosure. But every so often, I hear from someone who seems to have become genuinely entangled in a banking system that is both rigid in its dealings with customers and deaf to legitimate pleas for help.That’s the case with Lana Ashford, who faces the loss of her Marina del Rey condo to Bank of America because of what turned into the refi from hell.

GMAC Can Sell Foreclosed Homes in Maine After Court Ruling – GMAC Mortgage, after defeating a bid by homeowners in Maine who sought a federal court order blocking sales and evictions, can sell foreclosed homes in the state.  The judge said his decision hinged on the power of federal courts to stop proceedings in state courts, where foreclosures take place. He said individual homeowners who face losing their homes in a foreclosure sale can go to state court to stop the sales, he said.  “This decision is based on the limited authority federal courts have,” Hornby said.  The Maine case, filed in state court in October and moved to federal court by GMAC in November, involves five homeowners who are suing GMAC, claiming the company relied on defective court documents in seizing homes. The plaintiffs are seeking to represent Maine homeowners who are facing foreclosure by GMAC or who lost their homes in a GMAC foreclosure during the past six years and whose case relied on false documents, according to court documents.  Maine Attorney General Janet Mills is considering joining the GMAC lawsuit, Assistant Attorney General Linda Conti said in an interview yesterday. The office is also considering filing its own lawsuit against GMAC, she said.

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