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(snip)"The points, if I got them all, include:
•A 2% payroll tax reduction (FICA/Medicare.) This is one we simply cannot afford, given the budget. And it's damn expensive - $120 billion a year, more or less.
•All Bush tax rates extend for the next two years. This has no net impact from today. That is, today's deficits will remain as so will the tax rates.
•99-week Unemployment extended for the next year. That's another $60 billion.
•Expensing of all capital expenses. This will be very expensive if you have a profit, but if not, it costs nothing. The price of that is highly-variable and has a lot to do with how much demand it pulls forward. But all this does is pull forward buying into next year from out-years.
The capital expense deal was done during Clinton's years to a limited amount and I took advantage of it. It's a good deal if you have realistic capital expenses you can make that will add to your profitability. But beware, it's not necessarily revenue-positive for the government in the out years. I used mine to buy a call director system and fire our receptionist! Oops.
Estimates are that the package will add $500 billion to the deficit ($900 billion over two years) from where we are now. If that's anything close to accurate we're in big trouble - we're running $1.6 trillion now! I'd hope there are some offsets in there and this isn't the net change - it's difficult at this hour to know - because if it is net change we're going to hit the wall once the market figures this out.
This isn't done yet - there are people who deeply unhappy with the deal on both sides of the aisle. I'll be keeping my ear to the ground and see what I can come up with in terms of a more-accurate idea of costs. I hope I'm wrong on the numbers - but I fear I'm right.
A $2 trillion deficit would put our deficit over 14% of GDP next year, which is higher than the level that triggered the explosion in Greece and Ireland. And there is nothing in this proposal that offsets with spending cuts, so as far as I can tell, it's all going right on the credit card.
I'm all for tax cuts provided we match 'em dollar-for-dollar with spending cuts. Even better is two dollars of spending cuts for a dollar of tax cuts. But of course we didn't get that, which makes this a really bad deal for America all around.
If you were wondering if we were going to run smack into the wall at 100mph and splatter our nation, wonder no more - the answer is YES."(snip)
(snip)Obama was able to extract an agreement from GOP leaders to support an additional 13 months of jobless benefits, a 2 percent employee payroll tax cut and extensions of several tax credits aimed at working families that were included in the stimulus bill.
The deal also would revive the estate tax, but it would exempt inheritances of up to $5 million for individuals and $10 million for couples. Democrats on Capitol Hill are strongly opposed to setting the cap at that high a level and to the 35 percent rate discussed by Obama and Republicans that would apply to the taxable portion of estates."(snip)
While it remains to be seen if this 'compromise' can actually be passed, if it does the short term effect will be to place a few thousand extra after-tax dollars into the hands of America's poor, middle class and rich alike. This will probably translate into America's upper middle class feeling better about discretionary spending, which likely means higher earnings for Tiffany's, Ralph Lauren, and exotic dancers !!!
However, as the mainstream news stories fail to point out, the 'costs' of this compromise will indeed add another 1/2 trillion or so to next year's US federal budget deficit with no guaranteed offsetting tax revenues. This will undoubtedly lead to additional FED money printing thus higher US energy prices, higher US food prices, higher US prices for all imported manufactured goods etc.
This will also accelerate the coming political battle to raise the current federal deficit ceiling somewhere around next February, at which point the US federal gov't may face its own Schwarzennegger moment !!
(snip)"SACRAMENTO (AP) — Gov. Arnold Schwarzenegger has declared a fiscal emergency and is asking lawmakers to meet in a special session to save the state $9.9 billion over the next two years.
Schwarzenegger on Monday unveiled a plan that relies largely on cuts to health care and social services for the poor.
About $7.4 billion of his proposal would come from cuts, include reducing cash assistance to needy families by 15.7 percent in April, then eliminating the entire welfare-to-work program in July.
He is proposing to eliminate vision coverage and increasing monthly premiums for Healthy Families, a program that provides health coverage for children of low-income families.
The governor also is asking the state to limit prescriptions and cap physician visits to 10 a year for Medi-Cal recipients."(snip)
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Enjoy the next couple of months ..... because things could get extremely 'interesting' after that !



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