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  • Taxmageddon Is Slowing the Economy Now

    The uncertainty caused by Taxmageddon—the one-year $494 billion tax increase that looms on January 1, 2013—is strong enough to slow the economy months before it actually strikes. In fact, it is already doing so.

    Highly knowledgeable and highly influential market observers have been warning Congress of this for weeks. Their goal is to get Congress to do its summer job and stop Taxmageddon.

    The first warning came from Mohammed El-Erian, CEO of Pimco, the world’s largest bond fund. Writing in The Washington Post, he bluntly told Congress that the longer they wait to stop Taxmageddon, the more likely it is that markets will start to slow.

    Then Jamie Dimon, CEO of JP Morgan Chase, echoed El-Erian almost verbatim during his recent testimony to the Senate Banking Committee. He said Congress should not wait until year’s end, because markets will react well before December 31 if they see Congress failing to stop Taxmageddon.

    Congress didn’t heed El-Erian’s or Dimon’s warnings, and now it looks like it waited too long.

    Eminent economist Irwin Kellner writes that the recent spate of bad economic data—everything from low consumer sales to weak consumer sentiment—is a tell-tale sign that the economy is slowing. And he pins the blame on the uncertainty caused by Taxmageddon.

    The uncertainty is slowing the economy because businesses, investors, and entrepreneurs can’t plan for the near future. They can’t because they don’t know what their taxes are going to be in just a few months. If they don’t know what their taxes will be, there is no way for them to determine if their potential job-creating investments would be profitable. Without being able to make that vital calculation, there is no way they can move forward on projects that would speed growth and create much needed jobs. So they’re sitting back, waiting for Congress to provide some certainty.

    Congress needs to provide that certainty and stop Taxmageddon as soon as possible. Or risk that its own inaction will cause a return to recession.

    Posted in Featured [slideshow_deploy]

    3 Responses to Taxmageddon Is Slowing the Economy Now

    1. PaulE says:

      The issue isn't Congress in general, it's the Democrats and President Obama continuing to play politics with the American economy for the sake of trying to sway voters ahead of this November's elections. The endless attempts at class warfare, divide and conquer envy politics is putting no only the nation at risk of another significant recession, but much of the rest of the world as well. We have to start talking plainly to the American people about who is causing the problems and why they are doing it. Political correctness has to end.

      The entire threat of Taxmageddon could be ended tomorrow, if only the Democrats and the President acted liked adults and simply agreed to a one year extension of all existing tax cuts for everyone. That one year extension would be so the new Congress and President could enact REAL tax reform, i.e. a flat 15 percent tax for everyone. The only negotiation point would be at what income level the tax would start. I've seen calls for the starting point being everything from dollar one to $50,000. Somewhere in that range is what the negotiations will revolve around. This is a solvable problem.

      Oh by the way, the tax should be indexed to inflation to avoid the intentional error Congress committed when they enacted the much-hated AMT. Hopefully there is a learning curve in Congress.

    2. Paul in MN says:

      If today's RINO House would show the backbone of Gingrich's House (1995-7), then perhaps we'd have a chance. Otherwise, it's no better than Nixon's era when he uttered "We're all Keynesians now."

      It's time to ride the Tea Party Grassroots Groundswell, to overturn 80 years of nearly continuous liberal Keynesian deficit spending, to eliminate 80 years of ever-increased socialist welfare state spending.

    3. James Smith says:

      In my view, Obama does not want to save the US economy, but instead he is dedicated to destroying it with the intent to rebuild it in the mold of a Marxist-Socialist state-run economy. We are seeing the Cloward-Piven strategy being implemented: overload the welfare system to excessively expand the welfare rolls to help deplete the already-dry Treasury, thus adding to the need to print more money, driving the dollar's value lower & causing the price of goods and services to rise; overload the healthcare system so that the number of Doctors is totally inadequate to handle the load imposed (which will lead to rationing of health care to the most vulnerable : the very young and the old); overload the banking system with regulations that ultimately will cause massive failures, leading to further government takeover of the largest banks; cripple the energy system by imposing regulations and restrictions that ultimately will force the price of energy to rise, as if the weakened dollar will not suffice to accomplish this; etc.
      Along with this ghastly policy, Obama employs the techniques of Alinsky in which the desired end justifies any any and all means used to achieve it: repeatedly tell the gullible how well-off they are under his rule; isolate and vilify any opposing voices; deceive the gullible by telling half-truths or outright lies, and repeat them often enough (personally and through his Propaganda Ministry – the so-called mainstream media) that they eventually become "fact"; etc.
      Finally, Obama employs the techniques of Marx and Lenin to promote class envy and eventually class warfare; by-pass or disable the existing government structure if it does not cooperate (i.e., the totally impotent and dysfunctional Senate and the helpless House); etc.
      Obama, in my view, is totally incapable of having an original thought, relying instead on his knowledge of the thoughts and philosophies of the above-mentioned three sources of his "ideas". His evident ego is so great and his intransigent arrogance so strong, that any new idea that is counter to his indoctrination simply cannot penetrate his closed mind. Yet with all this evidence of his intentions that can be gleaned from his words and his actions, there remains the danger that he could be re-elected for another four years: the worst fate our country, and our very way of life, could ever be asked to endure.

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