Giving tax breaks to the rich will add to the deficit

Giving tax breaks to the rich will add to the deficit – This sentence is given as an example of "obfuscation through language distortion," in a column by Kathleen Parker. She goes on to say: "Pardon? How does money in someone’s own pocket add to another’s debt?" Umm, is this one really hard? I owe my bank $200,000 for my mortgage. I don’t pay the money. Is it hard to understand that my decision to keep the $200,000 in my own pocket adds to the bank’s financial woes? More practically, the deficit is the difference between spending and tax collections. Anything that reduces tax collections adds to the deficit just as anything that increases spending adds to the deficit. We all may not like certain taxes just as we don’t like some areas of spending, but that doesn’t change this accounting identity.

Oil Consumers Wary as Some in OPEC Target $100 Crude Before Cairo Meeting – Oil importers are growing wary of the impact of prices near two-year highs as some OPEC members foresee a further rally to the $100-a-barrel level and Arab oil ministers gather for a meeting in Cairo.  Japan’s economy minister said today the government needs to keep an eye on climbing prices while the deputy governor of the Chinese central bank said inflation pressures are rising.  Shokri Ghanem, chairman of Libya’s National Oil Corp., was the latest OPEC official to forecast $100. Iran and Venezuela have also said that represents a fair price while Saudi Arabia, the group’s biggest exporter, said it prefers prices centered on $75, a level that oil has traded above since September.

The share of annual sales that hobby, toy and game stores record during November and December. As the holiday shopping season draws to a close, the apparent strength this year is good news for retailers who make a disproportionate amount of their sales during November and December. Though the two months make up just a sixth of the year, sales during the holiday season account for about 20% of all retailers’ annual sales, and that number is even higher for some specialty sectors. Unsurprisingly, toy stores top the list with more than a third of their annual sales recorded during November and December. Jewelry stores come in second with about 31% of their sales coming in the final two months of the year. Department stores also rely on the holiday season for about a quarter of their annual sales.

Fees, Volume and Spending at Medicare –  My post last week on Medicare’s payment of physicians ended with the observation that from 2000 to 2009, Medicare raised physician fees only 7 percent (an average of 0.75 percent a year), while the Medicare Economic Index (or M.E.I.), which tracks costs incurred by medical practices, rose  34 percent (an average of 3.3 percent annually). Even so, Medicare’s spending on physician services per beneficiary rose 61 percent, an average annual compound rate of 5.4 percent a year. The difference between the tiny increases in physician fees and the large increase in spending on physician services reflected, of course, a sizable increase in the volume of physician services per Medicare beneficiary. It grew by 46 percent over the period, at an average annual compound rate of 4.3 percent a year. As is shown in the chart below, the growth in the volume of services varied considerably by type of service.

 

About that 90% drop in home prices…One of the few things that Stoneleigh and I occasionally disagree on -and there really are but a few- is the rate at which real estate prices will decline. I proudly and steadfastly maintain that it will be 80+%, while she insists it will be 90%. Once you do the math, it’s obvious that’s no basis for a healthy disagreement. We basically even agree on this one. Bummer! The reactions to the fact that Stoneleigh mentioned her 90% prediction in her latest interview with Max Keiser are amusing. Not least of all Max’ own immediate one, jokingly suggesting the segment may need to end up on the cutting room floor for being too extreme. Mostly, though, I’ve seen tons of people say that Stoneleigh is a loony doomer who has no idea what she says. Thing is, that would make me a loony doomer as well, and no, you ain’t getting away with that one.  Of course we see where people are coming from; no-one who hasn‘t thoroughly thought this through could possibly see an 80-90% drop in home prices, and most who have can’t either. However, that’s where the Big Picture enters, stage left in five.

Drama needed to jolt Americans into tackling debt  – Why has Britain managed to boldly go into fiscal territory which the US has hitherto ducked? That is the $800bn question hanging in the air in New York this weekend, after George Osborne, chancellor, visited the city. As he schmoozed he was greeted with emotions ranging from respect to rapturous applause. What provokes respect is the way London has not only created a multi-year fiscal reform plan, entailing a striking £110bn worth of adjustment – but, more importantly, started to implement it. After all, in the US – like the UK – national debt is surging. And a bipartisan commission recently produced some sensible medium-term proposals to reduce this debt by almost $4,000bn, using a policy mix similar to the UK’s. But last month these bipartisan US proposals were in effect shot down amid political gridlock; and last week President Barack Obama was forced to cut an $858bn deal with Republicans to extend the Bush-era tax cuts. That threatens to increase the US debt burden again. To jaded New Yorkers, the contrast with the UK could hardly be more stark.

 

State of the Union to Include “Focus on Deficit” – We’re getting our first indication of how the President will use the State of the Union address. With Speaker John Boehner behind him, President Obama will address a solidly Republican House of Representatives and a Senate with a 53-47 Democratic split. In his press conference yesterday he alluded to his persistence and unfinished business on a variety of issues, particularly surrounding the federal budget, the first wave of which will need to be completed by March to avoid a government shutdown. According to spokesman Robert Gibbs, the State of the Union will have a focus on the budget and deficits. Gibbs made the statement on Twitter, where he was taking reader questions Thursday, in response to a question about whether Obama would push the recommendations from his fiscal commission during the State of the Union speech: Yes – POTUS will use both SOTU & budget 2 talk about priorities & focus on our deficit/debt – team looking thru deficit comm recs 2 @mwfreel. Gibbs said the speech would come in late January:

 

Mortgage lending to hit 30-year low in 2011 from a £110bn-a-year peak down to just £6bn – The mortgage freeze will continue next year, with net lending expected to slump to its lowest level in 30 years, the Council of Mortgage Lenders warned yesterday. It predicts that net mortgage lending will hit a low of only £6billion, a paltry amount compared with the peak year of 2006 when £110billion was handed out. Net lending is the total amount lent by banks and building societies after subtracting the money paid back by homeowners. The lending slump means that millions of first-time buyers will continue to find it very difficult if not impossible to get a mortgage at a reasonable interest rate. Homeowners wanting to remortgage will face similar problems. Only the rich, the well-paid or those with generous parents happy to put down a deposit are able to get a loan at an affordable rate.

Saudi Aramco LPG exports to fall 24% in 2011 to 6.5 million mt  – Saudi Aramco’s LPG export for 2011 will slump 23.5% to anywhere between 6 million mt and 6.5 million mt as it diverts product to meet local demand, term customers and trade sources said Tuesday. The Middle Eastern oil giant is expected to close 2010 with total exports of anywhere between 8 million mt and 8.5 million mt, in line with the volumes it shipped out in 2009.  "The reduction in export volume is led by the need to meet domestic demand, particularly, from Saudi Kayan Petrochemical Company," Kayan’s steam cracker complex located in Jubail Industrial City, centers around a naphtha- and LPG-fed steam cracker, which has a nameplate capacity of 1.33 million mt/year of ethylene. Saudi Aramco produces around 18 million mt/year of LPG of which, the lion’s share — that is not shipped out — finds use in the domestic petrochemical industry.

Republican House Rules Makes It Harder to Increase Debt Limit, Raise Taxes – The new Republican House rules proposal is out, and people are rightly guffawing about the vow to read the Constitution on the House floor at the beginning of the session. But if silliness like this is the worst that the GOP House can do, we’ll all be happy to get out of the next two years intact. The actual threats come from things like this: House Republicans set to release their recommended rules changes Wednesday will change the names of several committees and repeal a rule making it more difficult to raise the debt ceiling. They will also require that all bills be posted online three days before a vote […] The draft rules would repeal the “Gephardt Rule” that allows the House to raise the debt limit automatically when a conference report on the budget is approved. If the rule is repealed, a separate vote on raising the debt ceiling must be held.

Schneier on Security: Recording the Police – Allison’s predicament is an extreme example of a growing and disturbing trend. As citizens increase their scrutiny of law enforcement officials through technologies such as cell phones, miniature cameras, and devices that wirelessly connect to video-sharing sites such as YouTube and LiveLeak, the cops are increasingly fighting back with force and even jail time­and not just in Illinois. Police across the country are using decades-old wiretapping statutes that did not anticipate iPhones or Droids, combined with broadly written laws against obstructing or interfering with law enforcement, to arrest people who point microphones or video cameras at them. Even in the wake of gross injustices, state legislatures have largely neglected the issue.

Here’s The Triple Threat That Could Spin The Globe Into A Deeper Recession – For now, major governments such as the US and EU have been able to continue to borrow and spend licentiously to fend off the threat of deflation and keep their economies stimulated (the US is by far the greater offender). But three surprising and powerful changes threaten the viability of a long-promised "exit strategy." First, international investors are beginning to become net sellers of sovereign debt. Second, the credit agencies, stung by their failure to warn investors about the banking crisis, are now emboldened enough to threaten the triple-A ratings of member states within the EU, and even of the United States itself – now the largest debtor in the world. Third, there is considerable and growing political pressure on governments to cut spending. There is a growing awareness among Western voters that government largesse can’t be maintained forever, and that it will likely cost the next generation if not the present. Many pet spending programs, including defense, healthcare, welfare and even public pensions, are getting ready for haircuts – if not scalpings.

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