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What Happens To The Economy If The Payroll Tax Cut Expires?
By Pat Garofalo on Dec 19, 2011 at 11:00 am
Yesterday, House Speaker John Boehner (R-OH) threw cold water on a temporary extension of the soon-to-expire payroll tax cut that had passed overwhelmingly in the Senate on Friday. “Well, it’s pretty clear that I and our members oppose the Senate bill,” Boehner said, despite the fact that on Friday he had called it a “good deal” and a “victory.”
House Republicans intend to vote down the Senate’s bill tonight, leaving the issue unresolved. But what happens if the payroll tax cut is allowed to expire? According to several economic analysts, it would severely affect growth and job creation next year:
– According to Macroeconomic Advisers, allowing the payroll tax cut to lapse “would reduce GDP growth by 0.5 percent and cost the economy 400,000 jobs.”
– Barclay’s estimated that letting the cut expire would knock 1.5 percent off of first quarter growth next year.
Meanwhile:
– Ameriprise Financial Services estimated that extending the cut “is likely to add between 750,000 to 1 million jobs.”
– Susan Wachter, a finance professor at the University of Pennsylvania’s Wharton School, calculated that the payroll tax cut “would add 1 percentage point to economic growth and create 1 million jobs next year.”
– Regional Economic Models Inc. estimated that the cut would pump “$120 billion into U.S. households in 2012.”
“If the Europe mess weren’t there, there would be a good case for letting taxes go back up,” said Joel Prakken, the chairman of Macroeconomic Advisers. “But a combination of a big tax increase plus the threat from Europe, when the economy is still in the doldrums — why take that risk?” If the House does vote down the Senate’s bill, the Senate will have to come back into session in order to craft a final agreement.
-------------------- Wise men learn more from fools than fools from the wise. Posts: 3827 | From: beautiful California | Registered: Sep 2008
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one little peice of info to add to the equation when looking at the world economy: DECEMBER 18, 2011, 5:53 P.M. ET
China Property Prices Decline
By OWEN FLETCHER And ESTHER FUNG
BEIJING—Average property prices in Chinese cities saw a second consecutive monthly drop in November, according to government data released Sunday, in a further sign that Beijing's two-year tightening campaign to cool the red-hot property market is having an impact.
Property prices in China are likely to fall further following a series of government tightening measures. Richard Price, Asia-Pacific CEO of CBRE Investments, tells Asia Today why there is still value if you are an investor.
Data on 70 Chinese cities released by the National Bureau of Statistics and analyzed by The Wall Street Journal show average home prices declined by 0.17% in November compared with October, compared with a 0.13% decrease in October and a 0.01% increase in both September and August. Prices rose 2.3% on average in November from a year earlier, moderating from a 3% increase in October.
Prices of newly built homes in 49 of the 70 large and medium-sized Chinese cities that the bureau surveyed fell in November on a sequential basis, up from 34 cities in October.
i think we will lose a full decade here. it seems to me that all of the actions taken to stave off a full blown depression have worked and will continue to work.
i cannot get over how out of touch some of the politicians are....
-------------------- Don't envy the happiness of those who live in a fool's paradise. Posts: 36378 | From: USA | Registered: Sep 2003
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-------------------- It isn't so much that liberals are ignorant. It's just that they know so many things that aren't so. Posts: 6949 | Registered: Apr 2004
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I don't think our laxy daisy media can handle more than one major issue at a time. It surprises me that the European theatre is getting almost all the attention. I've been watching for China to start getting more press on the factory layoffs and slow downs. As Glass' article mentions the housing costs going south I wonder where the bigger news is. Not just China either, the flooding in Thailand that knocked out factories and production that will affect many companies going into next quarter were barely mentioned.
"Im cashcowmoo, and I approve this message." - thats funny, i like that!
-------------------- All post are my opinion. Do your own DD. Who's clicking your buy/sell button!? Posts: 7800 | From: Virginia | Registered: May 2006
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quote:Originally posted by glassman: i think we are in a real Depression- the differnce between now and 1933 is that we are actively managing it.
in effect it's a lost decade rather than what we think of as a Depression like the Great Depression.
what so many people don't understand is that once "wealth" has been created, it don't disapporate into nothing.
somebody somewhere is sitting on MOUNTAINS of cash, and they are keeping themselves well under the radar.
You have mentioned a couple of times now about it being a "lost decade". Are you referring to 2000-2010, or 2011- 2020?
-------------------- It is impossible to make anything foolproof because fools are so ingenious. Posts: 3311 | From: St. Louis | Registered: Feb 2005
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but i am more refering to how Japan suffered a decade of no growth rather than specific time frame... we are three years into it now.
if you go back to '07-early '08 and look at posts by some of the more astute people here (people that i payed closest attention to)? they were calling for 11000 on the DOW when it was at 14000. as we have now seen it spend a long time (about ayear and half?) moslty between 10,000 and 12,000 we are prolly where we should be. if we had "only" 5% unemployment right now? we would be in fair shape..... not good, but not bad with 3% GDP growht... the problem is that there's something fundamentally wrong when you have so many people out of work, and nobody is really addressing the root causes of that yet..
-------------------- Don't envy the happiness of those who live in a fool's paradise. Posts: 36378 | From: USA | Registered: Sep 2003
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quote:Originally posted by glassman: i think it began in '08....
but i am more refering to how Japan suffered a decade of no growth rather than specific time frame... we are three years into it now.
if you go back to '07-early '08 and look at posts by some of the more astute people here (people that i payed closest attention to)? they were calling for 11000 on the DOW when it was at 14000. as we have now seen it spend a long time (about ayear and half?) moslty between 10,000 and 12,000 we are prolly where we should be. if we had "only" 5% unemployment right now? we would be in fair shape..... not good, but not bad with 3% GDP growht... the problem is that there's something fundamentally wrong when you have so many people out of work, and nobody is really addressing the root causes of that yet..
So you are speaking more to Global....than US specific in reference to the "lost decade"? Just trying to get a handle on your thinking...not arguing.
-------------------- It is impossible to make anything foolproof because fools are so ingenious. Posts: 3311 | From: St. Louis | Registered: Feb 2005
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yes global even to China. remember that on July 11 2008 oil hit 147$- that's a global price. That price was an artificial situation created by ( as far as i can tell) a group of traders trying to bust SemGroup and anybody else who was short oil at 120$ which should have been a good bet. Years later, even after Louis Freah (ex FBI cheif) conducted an investigation into it and we still don't have clear answers. I've now read a dozen differnt stories about who did waht to whom in that trade.
Anway that set of trades that beat the shorts are what trigered the Fed to raise overnight rates for fear of infaltion, which then led to all the subprime/ARMs going thru the roof, which triggered the mortgage crisis.
they called it a "perfect" storm, but the people that did it only did it out of greed, and now the banks are all unable to meet their Capital obligations. the banks were all practicing poor business to get themselves into this position, but somebody was on the winning side, and it ain't clear yet (to me) who it was
-------------------- Don't envy the happiness of those who live in a fool's paradise. Posts: 36378 | From: USA | Registered: Sep 2003
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The New York Times had just reported that the nearly 1,000-person tax department of GE managed to achieve a negative corporate income tax rate over a 5-year period, partly by lobbying Congress for more tax loopholes.
Honeywell, despite reporting substantial pretax U.S. profits to its shareholders, paid no federal income tax in 2009 or 2010 (or more precisely, paid less than zero) is that it took advantage of legal tax breaks to wipe out its federal income tax liability.
. Despite earning over $32.5 billion over the last 3 years, Verizon not only paid nothing in corporate income taxes, it actually received nearly $1 billion in tax benefits from the federal government during that time.
corporate tax study found that the financial industry as a whole had an average effective federal income tax rate of 15.5 percent for the 2008-2010 period and Wells Fargo’s rate was -1.4 percent. Wells Fargo also topped the list of companies with the largest tax subsidies, receiving $17.9 billion in tax subsidies over that three-year period.
A significant factor in their low tax rate is the deduction of net operating losses (NOLs) that were bought in the Wachovia acquisition. Tax law normally limits the deductibility of acquired NOLs, in order to keep companies from acquiring other companies just to reduce their taxes, but the Bush Treasury Department gave Wells Fargo a one-time exception from those rules. Congress quickly passed a law to prohibit Treasury from granting those exceptions in the future, but the law does not apply retroactively, which means Wells Fargo continues to enjoy the tax savings from Wachovia’s NOLs.
Duke Energy had profits of $5.5 billion over the 2008-2010 period but received $216 million from the IRS over that period, for a three-year effective tax rate of negative 3.9 percent.
Boeing made $9.7 billion in profits over the 2008-2010 period but received $178 million from the IRS over that period, for an effective corporate income tax rate of negative 1.8 percent.
-------------------- Don't envy the happiness of those who live in a fool's paradise. Posts: 36378 | From: USA | Registered: Sep 2003
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