It was only a matter of time with the economy so weak. Federal tax recreipts are starting to fall when viewed on a year-over-year basis. They're still up versus last year, but starting to drop.
This suggests two things: a) the deficit will rise and b) when they go negative year-over-year the economy will have hit bottom. (Automatic stabilizers kicking in to support output.)
11 comments:
except what if those auto stabs aren't so auto anymore?
Good point!
But what I'm saying, really, is that the total tax take from the private sector will have fallen below prior-year levels and that's usually a sign that the economy will stabilize.
by stabilize you mean bottom out? This is not good news it seems to me.
Right. It means that, all else being equal, it won't get any worse.
But it's the "all else being equal" part that you're alluding to. If spending cuts really start to ramp up, then it CAN and WILL get worse.
exactly. not good.
But it's the "all else being equal" part that you're alluding to. If spending cuts really start to ramp up, then it CAN and WILL get worse.
Since the House won't pass tax hikes and the Senate won't pass entitlement cuts, The budget committee discretionary spending auto-cuts won't begin until FY '13, which begins next October 1.
Just in time for November's election! There's going to be hell to pay because the Pentagon is rather methodical about spreading defense spending into as many congressional districts as possible.
"spending level for 2013... would be reduced by as much as 15 to 25 percent, depending on whether the president exempts military personnel funding... Pentagon would almost certainly have to furlough large numbers of its civilian workers, curtail training, reduce forces and dramatically cut weapons purchases."
http://www.boston.com/news/nation/articles/2011/09/23/report_further_cuts_devastating_to_military/
If congressional Democrats had any sense, they'd tie a high income surtax and/or financial transaction fee to national defense with every dollar allocated to the Pentagon to put Republican congressmen (as General Sherman would say) on the horns of a dilemma. Personally, I'd want to stay on the sunny side of the military-industrial complex.
brilliant idea Beowulf!!
They do say many a lawyer becomes a politicians B!!! hint, hint ;)
and then there are the cuts in FICA that are supposed to kick in right away... for employers and employees if they pass the Obama proposals... businesses with payrolls below $5M.
Ive looked at that preliminarily and that should result in about 10B per month of immediate fiscal stimulus (will do blog if it passes).
Ive seen no news on where Obamas proposals stand wrt these FICA tax cuts...
If they pass these FICA tax cuts, defer all spending cuts to the future, and now they have effectively 1.7T of debt ceiling in front of them it looks like the best scenario (we can reasonably hope for with morons in control) for stocks for the next 12 months?
And as it looks like the Feds "twist" is another case of focus on quantity and not price, that should at least act to cap (if not cause a sell off) the bond rally here similar to QE2 ....
European chaos being an external "wildcard"....
it looks like the best scenario (we can reasonably hope for with morons in control) for stocks for the next 12 months?
Hopefully Tsy and the Fed can work out some kind of mortgage refi plan. But the devil's in the details on that one. I'll be curious to see if Dean Baker's "work sharing plan" stays in the Jobs Act. Dean explains how it works here:
http://www.cepr.net/index.php/press-releases/press-releases/statement-american-jobs-act-worksharing
What's interesting about Dean's plan is that its funded as unemployment benefits-- one the auto-spend entitlement programs. Assuming Congress doesn't put a separate budgetary cap on it (big assumption with this crowd), it could pump a lot of new spending into the economy and save a lot of jobs.
Along the same lines, I've read that only 27% of the unemployed actually qualify for unemployment benefits (UB). The Jobs Act's Georgia workfare training plan would be much improved if it was open to everyone and not just those who are already getting UB. You could call it, hmmm... oh yes, a jobs guarantee.
that should at least act to cap (if not cause a sell off) the bond rally here similar to QE2 ....
perhaps...I was thinking that maybe investors would get in front of the Fed's buying and go long bonds. And if stocks tank b/c people view any Fed action as "bad news", then bonds would be the next best place. Perhaps after QE2, PIMCO decided to talk to Marshall on how to properly position themselves this time around? LOL
I'm still curious to see how santa clause effects stocks this year. Last year it's what pulled in the bucks if you recall. I am not so sure about this year, but with the hair pin turns the media can pull off you never really know these days! LOL
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