Economics

[macrockett]

This link is to a video of Carman Reinhart discussing the impact of the credit crisis on our economy over the next 7-10 years. Reinhart, along with Ken Rogoff are considered to be at the forefront in understanding credit crises and their impact on economies and sovereign debt.

Their book: press.princeton.edu/titles/8973.html

The Bloomberg story and interview with Reinhart, quite sobering: www.bloomberg.com/news/2010-08-27/reinhart-s-outlook-of-seven-more-years-of-high-unemployment-hits-fed-today.html

The paper presented: www.aei.org/docLib/Reinhart-After-the-Fall-August-17.pdf

Part of the Jackson Hole Symposium this past week hosted by the Kansas City Fed

WSJ article summarizing the above:



August 27, 2010, 10:30 AM ET

After Crises, Slow Income Growth and High Unemployment

Economists Vincent and Carmen Reinhart offer a grim tour of the economic landscape after financial crises — one plagued by slow economic growth and high unemployment — in the kickoff paper up for discussion at the Federal Reserve Bank of Kansas City’s annual economic symposium in Jackson Hole.

“GDP growth and housing prices are significantly lower and unemployment significantly higher in the ten-year window following the crisis when compared to the decade that preceded it,” the authors conclude. They look at fifteen post-World War II financial crises in advanced and emerging economies and the three global crises that occurred in the 1930s, the 1970s and the latest financial crisis.

The work builds on research Ms. Reinhart has conducted with Harvard University professor Kenneth Rogoff on the causes and consequences of centuries of financial shocks. The latest piece looks at the long-haul after the shock occurs.

In ten of the 15 cases they looked at, unemployment never returned to its pre-crisis low in the 10-year window after the crisis occurred. In many cases, unemployment has never gotten back to where it was. One example: The unemployment rate in Japan hit a low of 2.1% before its stock market and housing sector busted in 1992. It has not gotten lower then 3.8% since then. Sweden had an unemployment rate of 1.7% before its 1991 crisis; it’s never gotten lower than 3.8% since then. The U.S. unemployment rate hit a low of 4.4% in 2007 and hit 3.9% in 2000, before the tech bubble burst sank the economy.

Moreover, growth in gross domestic product, or GDP, which is a nation’s total output of goods and services, tends to be 1% point slower in the decade after a crisis than it was in the decade before, they say. That means it is hard during these periods for the economy to make up lost ground.

“There is little good news to be found in the result that income growth tends to slow and unemployment remains elevated for a very long time after a severe shock,” the authors say. Policy makers often make matters worse by making policy mistakes in an attempt to get unemployment back to its pre-crisis level. In past crises, they find, “political leaders sometimes grasp for quick fixes that impair, not improve, the situation.”

Ms. Reinhart is a professor at the University of Maryland and former International Monetary Fund economist. Her husband, Mr. Reinhart, is the former head of the Fed’s monetary affairs department and currently a scholar at the American Enterprise Institute.

[macrockett]

Holy state of entitlement, welcome to Europe. Sorry kids, it's all gone.

SEPTEMBER 15, 2010 WSJ

Obstacle to Deficit Cutting: A Nation on Entitlements

By SARA MURRAY

Efforts to tame America's ballooning budget deficit could soon confront a daunting reality: Nearly half of all Americans live in a household in which someone receives government benefits, more than at any time in history.

At the same time, the fraction of American households not paying federal income taxes has also grown—to an estimated 45% in 2010, from 39% five years ago, according to the Tax Policy Center, a nonpartisan research organization.

A little more than half don't earn enough to be taxed; the rest take so many credits and deductions they don't owe anything. Most still get hit with Medicare and Social Security payroll taxes, but 13% of all U.S. households pay neither federal income nor payroll taxes.

"We have a very large share of the American population that is getting checks from the government," says Keith Hennessey, an economic adviser to President George W. Bush and now a fellow at the conservative Hoover Institution, "and an increasingly smaller portion of the population that's paying for it."

The dimensions of the budget hole were underscored Monday, when the Treasury reported that the government ran a $1.26 trillion deficit for the first 11 months of the fiscal year, on pace to be the second-biggest on record.

Yet even as Americans express concern over the deficit in opinion polls, many oppose benefit cuts, particularly with the economy on an uneven footing. A Wall Street Journal/NBC News poll conducted late last month found 61% of voters were "enthusiastic" or "comfortable" with congressional candidates who support cutting federal spending in general. But 56% expressed the same enthusiasm for candidates who voted to extend unemployment benefits.

As recently as the early 1980s, about 30% of Americans lived in households in which an individual was receiving Social Security, subsidized housing, jobless benefits or other government-provided benefits. By the third quarter of 2008, 44% were, according to the most recent Census Bureau data.

That number has undoubtedly gone up, as the recession has hammered incomes. Some 41.3 million people were on food stamps as of June 2010, for instance, up 45% from June 2008. With unemployment high and federal jobless benefits now available for up to 99 weeks, 9.7 million unemployed workers were receiving checks in late August 2010, more than twice as many as the 4.2 million in August 2008.

Still more Americans—19 million by 2019, according to the Congressional Budget Office—will get federal aid to buy health insurance when legislation passed this year is implemented.

The expanding federal safety net has helped shelter many families from the worst of the downturn. Charlene A. Mueller-Holden doesn't fit the stereotype of a person on benefits. Laid off from J.P. Morgan Chase & Co. in January 2008, Ms. Mueller-Holden, 38, drew unemployment for 99 weeks.

The Newark, Del., resident knocked $40 a month off her mortgage payments through the federal Making Home Affordable Program, designed to keep people in their homes by helping them modify or refinance their mortgages. But when her unemployment benefits ran out, Ms. Mueller-Holden and her husband, a government employee, couldn't afford the $1,008 monthly payments.

She turned to the Delaware State Housing Authority which, under a federally subsidized program aimed at helping families with children stay in their homes, gave her $1,000 a month for five months toward mortgage payments. She and her two sons ate lunch for free at the local school this summer, and she has applied for free lunch for one of her sons who will be a first grader this year.

Ms. Mueller-Holden's family earned too little to pay federal taxes last year, and received an extension on their state taxes. "Quite frankly, I don't care about the deficit," says Ms. Mueller-Holden. "It's going to take years upon years upon years to pay this all back," she says, so it's better to focus on job growth now and deal with the deficit later.

Government data don't show how many of the households receiving government benefits also escape federal taxes. But there is certainly some overlap between the two groups, since many benefits are aimed at those earning too little to pay income taxes and at people who don't have jobs, and who thus don't pay payroll taxes.

Cutting spending on these "entitlements" is widely seen as an inevitable ingredient in any credible deficit-reduction program. Yet despite occasional bouts of belt-tightening in Washington and bursts of discussion about restraining big government, the trend toward more Americans receiving government benefits of one sort or another has continued for more than 70 years—and shows no sign of abating.

An aging population is adding to the ranks of Americans receiving government benefits, and will continue to do so as more of the large baby-boom generation, those born between 1946 and 1964, become eligible. Today, an estimated 47.4 million people are enrolled in Medicare, up 38% from 1990. By 2030, the number is projected to be 80.4 million.

The difficulty of restraining benefits when so much of the population depends on them is now on view across Europe, where efforts to rein in deficits are forcing governments to cut popular entitlements. European countries have traditionally provided far more generous welfare benefits than the U.S. has, including monthly allowances for children regardless of income, free college tuition and universal health care. Public retirement programs are also bigger, since the combination of aging populations and low birth rates means fewer workers are paying into the system.

In recent months, political leaders in Europe have struggled to convince voters that change is necessary. German Chancellor Angela Merkel has exempted pensions from her government's planned budget cuts, reflecting the growing power of the retiree vote. French President Nicolas Sarkozy is facing mass protests, including a national strike week, as he tries to raise France's minimum retirement age from 60 to 62. Greece's government had to face down demonstrations this year when it slashed pension benefits, as it was forced to do to get bailout money from other European countries and the International Monetary Fund.

Still, Europe does offer examples that change is possible. Germany slashed benefits for the long-term unemployed in 2004, a step that analysts credit with prompting more Germans to get jobs as well as improving the country's budget balance. Cuts to entitlements are politically possible, says Daniel Gros, director of the Center for European Policy Studies, a nonpartisan think tank in Brussels, "but societies need some time to get used to the idea."

The U.S. government first offered large-scale assistance during Franklin Delano Roosevelt's New Deal. The Social Security Act, passed in 1935, created the popular retirement program as well as unemployment compensation, the early stages of what became known as "welfare" and assistance to the blind and elderly. In the 1940s, the G.I. Bill offered unemployment benefits, education assistance and loans to veterans. That same decade, Washington began offering free or reduced-price lunches to children from low-income families and, a decade later, monthly benefits to the disabled.

Lyndon Johnson's Great Society programs brought food stamps plus Medicare and Medicaid. In the 1970s, Supplemental Security Income was created on top of routine Social Security benefits for the poorest of the elderly and disabled, and so-called Section 8 vouchers began subsidizing rental housing. The earned-income tax credit was launched in 1975 to offer extra cash to low-wage workers, and grew in the 1990s to become one of the government's principle antipoverty programs.

Benefits for children were expanded in 1997 with the State Children's Health Insurance Program during the Clinton administration—and were expanded again in 2009. Shortly after President Barack Obama took office, Congress passed the American Recovery and Reinvestment Act, the stimulus bill, which among other things extended unemployment compensation and offered incentives for states to cover more workers.
[benefits03] Dominic Bracco II for The Wall Street Journal

Robert Letherman, a real estate developer in Elkhart, Ind., says he has struggled through the recession like many others, but doesn't qualify for government assistance.

All this is expensive. Payments to individuals—a budget category that includes all federal benefit programs plus retirement benefits for federal workers—will cost $2.4 trillion this year, up 79%, adjusted for inflation, from a decade earlier when the economy was stronger. That represents 64.3% of all federal outlays, the highest percentage in the 70 years the government has been measuring it. The figure was 46.7% in 1990 and 26.2% in 1960.

When the economy recovers, some—but not all—current recipients of federal aid are likely to lose their benefits, which some say is reason enough to keep them going for now.

"If there became an expectation that government was going to provide over half of the population's well-being to a significant degree without requiring anything of the recipients, there would be reason for concern," says Robert Reischauer, a former Congressional Budget Office director and now president of the Urban Institute, a liberal-leaning think tank in Washington, D.C. "I don't think that's where we are or where we're headed."

The public appears divided on what to do. A new Allstate/National Journal poll found that 35% of voters want the government to make sure future retirees receive all the benefits they've been promised even if it means raising taxes. Another 34% said the government should make retirement programs "financially sustainable" by making some cuts to those benefits and raising some taxes, and 22% said they'd be willing to see benefits cut to restrain the programs' rising costs.

The call for restraining benefits resonates with voters like Robert Letherman. "You name it, someone is lining up to get bailed out, or a handout, courtesy of the hard-working American taxpayer," says Mr. Letherman, 39, a real-estate developer in Elkhart, Ind.

Mr. Letherman says he has struggled through the recession like many others, but doesn't qualify for government assistance. His income has declined 40% since 2007. Some $4 million in development projects percolating in the spring of 2007 have since been shelved.

He supports helping people in need, says Mr. Letherman, but believes many people game the system. Extended unemployment benefits, for example, give some Americans an excuse not to go back to work, he says. If it were up to him, government would be half the size it is now.

He favors eliminating pensions for all government workers, excluding military and intelligence personnel, and would impose a nationwide sales tax to pay off the country's debt. "If we continue down the path of deficit spending, the great recession of 2008 will be nothing compared to what we will face in five, 10, 20 years," he says.

Cutting federal benefits while the economy is still weak would be a mistake, some analysts say, because it could hinder recovery by giving consumers less money to spend.

Paul Hester has relied on government benefits since he lost his job in June 2009. The 54-year-old microbiologist has a master's degree and was earning a salary of $50,000 at the Indiana State Department of Health. He says he regularly looks for jobs, but has landed only two interviews in the past year.

Influenced by the credit wariness of parents who lived through the Great Depression, the Indianapolis resident has always been thrifty. He once watched his dad walk into a dealership, "plop down $10,000 in cash and buy a car." Mr. Hester has one credit card, and before he was unemployed, he tried to pay it off every month.

He lives on $375 a week in unemployment checks and his health-insurance premiums are subsidized by the federal government under a provision in the fiscal stimulus enacted by Congress in February 2009. His daughter, a college sophomore, pays for part of her schooling with Pell Grants, a federal program for low-income students that is set to expand because of new legislation that increased the number and size of grants.

"I don't like taking government money," says Mr. Hester, but "what else is there?"
—Marcus Walker contributed to this article.

[Arch]

99 weeks without finding a job? Pah-fuckin-leez.

Early on, when I got married with a kid on the way, I was working 3 sh!t jobs because 1 wasn't enough, 2 was not enough and taking a handout to sit on my ass wasn't the right thing to do either.

[macrockett]

Bloomberg
U.S. Home Prices Face 3-Year Drop as Inventory Surge Looms
By John Gittelsohn and Kathleen M. Howley - Sep 15, 2010

The slide in U.S. home prices may have another three years to go as sellers add as many as 12 million more properties to the market.

Shadow inventory -- the supply of homes in default or foreclosure that may be offered for sale -- is preventing prices from bottoming after a 28 percent plunge from 2006, according to analysts from Moody’s Analytics Inc., Fannie Mae, Morgan Stanley and Barclays Plc. Those properties are in addition to houses that are vacant or that may soon be put on the market by owners.

“Whether it’s the sidelined, shadow or current inventory, the issue is there’s more supply than demand,” said Oliver Chang, a U.S. housing strategist with Morgan Stanley in San Francisco. “Once you reach a bottom, it will take three or four years for prices to begin to rise 1 or 2 percent a year.”

Rising supply threatens to undermine government efforts to boost the housing market as homebuyers wait for better deals. Further price declines are necessary for a sustainable rebound as a stimulus-driven recovery falters, said Joshua Shapiro, chief U.S. economist of Maria Fiorini Ramirez Inc., a New York economic forecasting firm.

Sales of new and existing homes fell to the lowest levels on record in July as a federal tax credit for buyers expired and U.S. unemployment remained near a 26-year high. The median price of a previously owned home in the month was $182,600, about the level it was in 2003, the National Association of Realtors said.

Fannie Mae Forecast

Fannie Mae, the largest U.S. mortgage finance company, today lowered its forecast for home sales this year, projecting a 7 percent decline from 2009. A drop in demand after the April 30 tax credit expiration “suggests weakening home prices” in the third quarter, according to the report.

There were 4 million homes listed with brokers for sale as of July. It would take a record 12.5 months for those properties to be sold at that month’s sales pace, according to the Chicago- based Realtors group.

“The best thing that could happen is for prices to get to a level that clears the market,” said Shapiro, who predicts prices may fall another 10 percent to 15 percent. “Right now, buyers know it hasn’t hit bottom, so they’re sitting on the sidelines.”

About 2 million houses will be seized by lenders by the end of next year, according to Mark Zandi, chief economist of Moody’s Analytics in West Chester, Pennsylvania. He estimates prices will drop 5 percent by 2013.

‘Lost Decade’

After reaching bottom, prices will gain at the historic annual pace of 3 percent, requiring more than 10 years to return to their peak, he said.

“A long if not lost decade,” Zandi said.

Prices dropped in 36 states in July from a year earlier, CoreLogic Inc., a Santa Ana, California-based real estate and financial information company, reported today. Its housing index showed the biggest declines in Idaho, Alabama and Utah. Maine, South Dakota and California had the largest gains.

Working through the surplus inventory varies by markets and depends on issues such as local employment and the amount of homeowner debt, said Sam Khater, chief economist for CoreLogic. Nevada has the highest percentage of homes with mortgages more than the properties are worth, while New York state has the lowest, according to the company.

8 Million

Douglas Duncan, chief economist for Washington-based Fannie Mae, said in a Bloomberg Radio interview last week that 7 million U.S. homes are vacant or in the foreclosure process. Morgan Stanley’s Chang said the number of bank-owned and foreclosure-bound homes that have yet to hit the market is closer to 8 million.

Sandipan Deb, a residential credit strategist for Barclays in New York, said prices will drop another 8 percent -- to 2002 levels -- before beginning a recovery in 2014.

“On a national level, you have never seen a decline of this sort,” Deb said in a telephone interview. “I would caveat that by saying you also have not seen an increase on a national level like we saw from 2002 or 2003 to 2006.”

In addition to the as many as 8 million properties vacant or in foreclosure, owners of another 3.8 million homes -- 5 percent of U.S. households -- said they are “very likely” to put their properties on the market within six months if there is improvement, according to a survey</a> by Seattle-based Zillow.

“This has the potential to create a sawtooth pattern along the bottom,” Stan Humphries, Zillow’s chief economist, said in a telephone interview. “Homes begin to sell and a few sidelined sellers rush into the marketplace and flood the marketplace.”

Gains Versus Inflation

If the market doesn’t fall to its natural bottom, price gains in the next five to 10 years won’t keep pace with inflation as the difference is made up “on the backend,” said Barry Ritholtz, chief executive officer of FusionIQ, a New York research company. Price increases that fail to at least match inflation are the same as reductions in value, Ritholtz said.

The Obama administration’s effort to help mortgage holders, the Home Affordable Modification Program, or HAMP, is another source of future inventory as owners with new loan terms re- default, Ritholtz said. About half of the modifications done in 2009 were behind in payments by the first quarter of 2010, according to the Treasury Department.

‘Day of Reckoning’

“The belief has been: if we stimulate sales with a tax credit and delay foreclosures with modifications, the market would stabilize,” said Ritholtz, author of “Bailout Nation.” “We’re just putting off the day of reckoning and drawing out the pain by not letting the housing market hit its bottom.”

Government policy contributed to a recent stabilization in prices that may have been an “illusion,” said Zach Pandl, an economist at Nomura Securities International Inc. The S&P/Case- Shiller index of home prices in 20 U.S. cities rose 4.2 percent in June from a year earlier. The measure is a three-month moving average, which means data in the month were still influenced by transactions that may have benefited from the tax incentive.

Even if modifications fail, keeping foreclosures off the market is worth the risk of a delayed recovery, Pandl said.

“It’s too painful and too damaging to let it happen all at once,” Pandl said from New York.

Owners of about 11 million homes, or 23 percent of households with a mortgage, owed more than their property was worth as of June 30, according to CoreLogic. Another 2.4 million borrowers had less than 5 percent equity in their houses and probably would lose money on a sale after paying broker fees and closing costs, CoreLogic said Aug 25.

Nevada, New York

In Nevada, 68 percent of homes were underwater in July, with mortgage loans statewide totaling 120 percent of home values, according to CoreLogic. Only 7.1 percent of properties in New York state were underwater, with the total loan-to-value equivalent of 50 percent, the company said.

Brandi Miner, director of marketing for the Georgia Association of Realtors, is holding back on selling her one- bedroom condominium in Atlanta’s Buckhead district because she has an underwater mortgage. She paid $155,000 for the property in 2005.

“I’m stuck,” Miner said. “I thought it was a stepping stone to a house.”

Miner pays about $1,100 a month for her mortgage plus $225 in condo dues, a higher price than she would spend for a three- bedroom house in a good Atlanta-area neighborhood at today’s prices, she said. Selling now would cost her $10,000 to $15,000, Miner estimated.

“I’m not $200,000 in the hole, thank God,” she said. “But the quarter of the country that’s underwater -- that’s me.”

Positive Equity

Detroit, Las Vegas and Fort Myers, Florida, will take until at least 2020 to return homeowners to positive equity, CoreLogic said in a March report that compared prices in 10 metro areas. Atlanta, Dallas and California’s Riverside and San Bernardino counties will need until 2016. The Washington, D.C., area will take the least amount of time, with negative equity disappearing around 2015, CoreLogic said.

The slide in values and record-low interest rates may offer some bargains for property hunters. Prices have returned to historically affordable levels, said Karl Case, professor emeritus of economics at Wellesley College in Wellesley, Massachusetts, and co-creator of the S&P/Case-Shiller index. He estimates a bottom for prices in six months.

“It doesn’t take a tremendous number of people to turn the housing market, because only about 5 percent of the stock trades in a given year,” Case said in a telephone interview. “There’s still a lot of people who are employed, many of whom have been looking for the opportunity to buy.”

Cooperstown A-Frame

Case is an example of a homeowner waiting to sell because of low demand. He’s seeking to sell the A-frame on 15 acres near Cooperstown, New York, that he bought for $190,000 in 2005.

“I want to keep it if I can’t get what I want,” he said. “It’s a terrific little getaway and I’m not going to give it away.”

Some indicators show the real estate market has begun to turn a corner. Pending sales of existing houses increased 5.2 percent from June to July, the National Association of Realtors reported Sept. 2. Economists had estimated a 1 percent decline, according to the median of 37 forecasts in a Bloomberg survey.

“The market is starting to show some signs of stabilization,” Nicolas Retsinas, director emeritus of Harvard University’s Joint Center for Housing Studies, said during an Aug. 31 interview on Bloomberg Television’s “InsideTrack.” “But a robust recovery is a long time away.”

Fewer Foreclosures

The number of U.S. homes in default or foreclosure fell to 7.04 million as of July 31 from a high of 8.12 million in January, Lender Processing Services Inc., a Jacksonville, Florida-based mortgage servicing company, reported Sept. 2.

Defaulted mortgages as of July took an average 469 days to reach foreclosure, up from 319 days in January 2009. That’s an indication lenders -- with the help of the government loan modification programs -- are delaying resolutions and preventing the market from flooding with distressed properties, said Herb Blecher, senior vice president for analytics at LPS.

“The efforts to date have been worthwhile,” Blecher said in a telephone interview from Denver. “They both helped borrowers stay in their homes and kept that supply of distressed properties on the market somewhat limited.”

To contact the reporter on this story: John Gittelsohn in New York at [e-mail]; Kathleen M. Howley in Boston at [e-mail].

CNBC video discussing the same issue: www.cnbc.com/id/15840232?video=1593102234&play=1

[macrockett]

Chances of a double dip? One person's opinion: www.ritholtz.com/blog/2010/09/58967/print/

In reading this, take special note of "Chart 8, Average Compensation". Compare public sector comp and benefits to private sector.

[macrockett]

UK Proposes All Paychecks Go to the State First
BRITAIN, UNITED KINGDOM, TAXES, HMRC, CENTRALIZED
Posted By: Robin Knight | CNBC Associate Web Producer
CNBC.com
| 20 Sep 2010 | 07:57 AM ET

The UK's tax collection agency is putting forth a proposal that all employers send employee paychecks to the government, after which the government would deduct what it deems as the appropriate tax and pay the employees by bank transfer.

The proposal by Her Majesty's Revenue and Customs (HMRC) stresses the need for employers to provide real-time information to the government so that it can monitor all payments and make a better assessment of whether the correct tax is being paid.

Currently employers withhold tax and pay the government, providing information at the end of the year, a system know as Pay as You Earn (PAYE). There is no option for those employees to refuse withholding and individually file a tax return at the end of the year.

If the real-time information plan works, it further proposes that employers hand over employee salaries to the government first.

"The next step could be to use (real-time) information as the basis for centralizing the calculation and deduction of tax," HMRC said in a July discussion paper.

HMRC described the plan as "radical" as it would be a huge change from the current system that has been largely unchanged for 66 years.

Even though the centralized deductions proposal would provide much-needed oversight, there are some major concerns, George Bull, head of Tax at Baker Tilly, told CNBC.com.

"If HMRC has direct access to employees' bank accounts and makes a mistake, people are going to feel very exposed and vulnerable," Bull said.

And the chance of widespread mistakes could be high, according to Bull. HMRC does not have a good track record of handling large computer systems and has suffered high-profile errors with data, he said.

The system would be massive in terms of data management, larger than a recent attempt to centralize the National Health Service's data, which was later scrapped, Bull said.

If there's a mistake and the HMRC collects too much money, the difficulty of getting it back could be high with repayments of tax taking weeks or months, he said.

"There has to be some very clear understanding of how quickly repayments were made if there was a mistake," Bull said.

HMRC estimated the potential savings to employers from the introduction of the concept would be about £500 million ($780 million).

But the cost of implementing the new system would be "phenomenal," Bull pointed out.

"It's very clear that the system does need to be modernized… It's outdated, it's outmoded," Emma Boon, campaigner manager at the Tax Payers' Alliance, told CNBC.com.

Boon said that the Tax Payers' Alliance was in favor of simplifying tax collection, but stressed that a new complex computer system would add infrastructure and administration costs at a time when the government is trying to reduce spending.

There is a further concern, according to Bull. The centralized storage of so much data poises a security risk as the system may be open to cyber crime.

As well as security issues, there's a huge issue of transparency, according to Boon.

Boon also questioned HMCR's ability to handle to the role effectively.

The Institute of Directors (IoD), a UK organization created to promote the business agenda of directors and entreprenuers, said in a press release it had major concerns about the proposal to allow employees' pay to be paid directly to HMRC.

The IoD said the shift to a real-time, centralized system could be positive as long as the burden on employers was not increased. But it added that the idea of wages being processed by HMRC was "completely unacceptable."

“This document contains a lot of good ideas. But the idea that HMRC should be trusted with the gross pay of employees is not one of them," Richard Baron, Head of Taxation at the IoD, said in the release.

A spokesperson for Chancellor of the Exchequer George Osborne was not immediately available for comment.

© 2010 CNBC.com

URL: www.cnbc.com/id/39265847/

[macrockett]

www.chicagotribune.com/news/opinion/editorials/ct-edit-benefits-20100921,0,6172020.story
chicagotribune.com
Entitlement nation
More are living off tax revenues, and fewer are providing them

7:07 PM CDT, September 21, 2010
Advertisement

When Congress and President Clinton embraced welfare reform in 1996, the goal was to move away from what was called a "culture of dependency." That effort succeeded. But today, there is a different specter: a broader culture of dependency that could eventually undermine our economic and political system.

Reports The Wall Street Journal, "Nearly half of all Americans live in a household in which someone receives government benefits, more than at any time in history" (our emphasis). In 2008, that group encompassed 44.4 percent of the U.S. population, and the weak economy has undoubtedly increased the number as people are thrown onto unemployment benefits, early retirement and food stamps.

This is a major change. A generation ago, less than a third of Americans lived in households getting government benefits. The expansion helps to explain why it has gotten harder than ever to restrain federal spending on entitlements: too many oxen would be gored.

As if that trend were not worrisome enough, it coincides with another one: The number of households that pay taxes to finance all that assistance is declining. The Tax Policy Center says that in 2005, 39 percent of households paid no federal income tax. Today, it's 45 percent. Most of those do contribute to Social Security and Medicare, but not all: 13 percent of households pay neither income nor payroll levies.

Justice Oliver Wendell Holmes Jr. once said taxes are "the price we pay for a civilized society." But in recent years, they've become the price that a lot of us don't pay for a civilized society.

At the rate we're going, that group may soon constitute a majority of the population. But then, so may the group composed of people getting federal benefits. So a minority of Americans may be taxed to provide support for the majority.

One problem is that as more people get benefits and fewer pay for them, the democratic pressures to contain federal spending weaken. The Journal notes that payments to individuals of one kind or another now account for 64 percent of all outlays, up from 47 percent in 1990. And people who don't pay income taxes may be more inclined to raise them on people who do.

Robert Reischauer, head of the liberal Urban Institute, says he is not worried: "If there became an expectation that government was going to provide over half the population's well-being to a significant degree without requiring anything of the recipients, there would be reason for concern. I don't think that's where we're headed."

Actually, that is exactly where we are headed. It's up to Congress and the president to change direction before it is too late.

Copyright © 2010, Chicago Tribune

[macrockett]

A little deja vue. So what happened in Maryland when they passed that millionaire tax in 2008?

MAY 27, 2009

Millionaires Go Missing
Maryland's fleeced taxpayers fight back.

Here's a two-minute drill in soak-the-rich economics:

Maryland couldn't balance its budget last year, so the state tried to close the shortfall by fleecing the wealthy. Politicians in Annapolis created a millionaire tax bracket, raising the top marginal income-tax rate to 6.25%. And because cities such as Baltimore and Bethesda also impose income taxes, the state-local tax rate can go as high as 9.45%. Governor Martin O'Malley, a dedicated class warrior, declared that these richest 0.3% of filers were "willing and able to pay their fair share." The Baltimore Sun predicted the rich would "grin and bear it."

One year later, nobody's grinning. One-third of the millionaires have disappeared from Maryland tax rolls. In 2008 roughly 3,000 million-dollar income tax returns were filed by the end of April. This year there were 2,000, which the state comptroller's office concedes is a "substantial decline." On those missing returns, the government collects 6.25% of nothing. Instead of the state coffers gaining the extra $106 million the politicians predicted, millionaires paid $100 million less in taxes than they did last year -- even at higher rates.

No doubt the majority of that loss in millionaire filings results from the recession. However, this is one reason that depending on the rich to finance government is so ill-advised: Progressive tax rates create mountains of cash during good times that vanish during recessions. For evidence, consult California, New York and New Jersey (see here).

The Maryland state revenue office says it's "way too early" to tell how many millionaires moved out of the state when the tax rates rose. But no one disputes that some rich filers did leave. It's easier than the redistributionists think. Christopher Summers, president of the Maryland Public Policy Institute, notes: "Marylanders with high incomes typically own second homes in tax friendlier states like Florida, Delaware, South Carolina and Virginia. So it's easy for them to change their residency."

All of this means that the burden of paying for bloated government in Annapolis will fall on the middle class. Thanks to the futility of soaking the rich, these working families will now pay Mr. O'Malley's "fair share."

MARCH 12, 2010

Maryland's Mobile Millionaires
Income tax rates go up, rich taxpayers vanish.

Illinois Governor Pat Quinn is the latest Democrat to demand a tax increase, this week proposing to raise the state's top marginal individual income tax rate to 4% from 3%. He'd better hope this works out better than it has for Maryland.

We reported in May that after passing a millionaire surtax nearly one-third of Maryland's millionaires had gone missing, thus contributing to a decline in state revenues. The politicians in Annapolis had said they'd collect $106 million by raising its income tax rate on millionaire households to 6.25% from 4.75%. In cities like Baltimore and Bethesda, which apply add-on income taxes, the top tax rate with the surcharge now reaches as high as 9.3%—fifth highest in the nation. Liberals said this was based on incomplete data and that rich Marylanders hadn't fled the state.

Well, the state comptroller's office now has the final tax return data for 2008, the first year that the higher tax rates applied. The number of millionaire tax returns fell sharply to 5,529 from 7,898 in 2007, a 30% tumble. The taxes paid by rich filers fell by 22%, and instead of their payments increasing by $106 million, they fell by some $257 million.

Yes, a big part of that decline results from the recession that eroded incomes, especially from capital gains. But there is also little doubt that some rich people moved out or filed their taxes in other states with lower burdens. One-in-eight millionaires who filed a Maryland tax return in 2007 filed no return in 2008. Some died, but the others presumably changed their state of residence. (Hint to the class warfare crowd: A lot of rich people have two homes.)

A Bank of America Merrill Lynch analysis of federal tax return data on people who migrated from one state to another found that Maryland lost $1 billion of its net tax base in 2008 by residents moving to other states. That's income that's now being taxed and is financing services in Virginia, South Carolina and elsewhere.

States like Florida and Texas have no personal income tax, so the savings for a rich person who stops paying taxes in Baltimore or Montgomery County can be in the hundreds of thousands of dollars each year. Montgomery County, outside of Washington, D.C., is Maryland's wealthiest and was especially clobbered, losing nearly $4 billion in taxable income in 2008, with some 80% of those lost dollars from high-income returns.

Thanks in part to its soak-the-rich theology, Maryland still has a $2 billion deficit and Montgomery County is $760 million in the red. Governor Martin O'Malley's office tells us he wants the higher rates to expire "as scheduled at the end of 2010." But there are bills in both chambers of the legislature to extend the surcharge. The state's best hope is that politicians in other states are as self-destructive as those in Annapolis.

[southsidesignmaker]

EPI: Rising China trade deficit costs U.S. a half-million jobs
Published: Wednesday, September 22, 2010, 8:22 AM Updated: Wednesday, September 22, 2010, 8:23 AM
Jackie Headapohl Jackie Headapohl

www.mlive.com/michigan-job-search/index.ssf/2010/09/epi_rising_china_trade_deficit_costs_us.html

Currency manipulation by the Chinese is costing the United States jobs, according to a report from the Economic Policy Institute.

Growing China trade deficits will displace between 512,000 and 566,000 U.S. jobs in 2010, according to an issues paper from the Economic Policy Institute, a nonprofit think tank that receives support from U.S. labor unions and industrial associations.

The U.S trade deficit with China has increased 18 percent this year, the report states, and has contributed to the weak performance of the U.S. job market this year.

8
0
19Share
Much of the trade deficit can be blamed on currency manipulation, which makes U.S. goods more expensive for Chinese purchasers and makes Chinese goods artificially cheaper in the United States.

Ending currency manipulation would would help rebuild demand for U.S. manufactured goods, could create more than 1 million U.S. jobs, stimulate U.S. GDP growth and reduce the U.S. budget deficit by up to $500 billion over the next six years, the report states.

The report recommends that Congress "get tough" on currency manipulation. "It is time for Congress to act and force the hands of the administration and Chinese currency manipulators," the report says.

The House Ways and Means Committee, led by Michigan Democrat Sander Levin, held a hearing last week on possible currency manipulation legislation. The bill, the Currency Reform for Fair Trade Act (H.R. 2378), would invoke trade remedies for undervalued currencies and allow the United States to apply a kind of tariff on Chinese goods.

So far, the committee hasn't made any decision yet, although some sources say that the committee could vote on the bill as early as Friday.

A vote on the bill could increase tension between the U.S. and China. Reuters reports that China's foreign ministry "told the United States to stop pointing its finger at Beijing over the yuan and focus instead on fixing its fragile economy."

____________________________________________________________________________



Remember Walmart is saving the average consumer over $3000.00 per year.... One can only wonder how much of the $aving$ is Made In China.

Our nation is consumer driven, maybe the consumer will wake up and start to read labels.

[macrockett]

Sept 23, 2010 19:09:25 GMT -6 southsidesignmaker said:

EPI: Rising China trade deficit costs U.S. a half-million jobs
Published: Wednesday, September 22, 2010, 8:22 AM Updated: Wednesday, September 22, 2010, 8:23 AM
Jackie Headapohl Jackie Headapohl

www.mlive.com/michigan-job-search/index.ssf/2010/09/epi_rising_china_trade_deficit_costs_us.html

Currency manipulation by the Chinese is costing the United States jobs, according to a report from the Economic Policy Institute.

Growing China trade deficits will displace between 512,000 and 566,000 U.S. jobs in 2010, according to an issues paper from the Economic Policy Institute, a nonprofit think tank that receives support from U.S. labor unions and industrial associations.

The U.S trade deficit with China has increased 18 percent this year, the report states, and has contributed to the weak performance of the U.S. job market this year.

8
0
19Share
Much of the trade deficit can be blamed on currency manipulation, which makes U.S. goods more expensive for Chinese purchasers and makes Chinese goods artificially cheaper in the United States.

Ending currency manipulation would would help rebuild demand for U.S. manufactured goods, could create more than 1 million U.S. jobs, stimulate U.S. GDP growth and reduce the U.S. budget deficit by up to $500 billion over the next six years, the report states.

The report recommends that Congress "get tough" on currency manipulation. "It is time for Congress to act and force the hands of the administration and Chinese currency manipulators," the report says.

The House Ways and Means Committee, led by Michigan Democrat Sander Levin, held a hearing last week on possible currency manipulation legislation. The bill, the Currency Reform for Fair Trade Act (H.R. 2378), would invoke trade remedies for undervalued currencies and allow the United States to apply a kind of tariff on Chinese goods.

So far, the committee hasn't made any decision yet, although some sources say that the committee could vote on the bill as early as Friday.

A vote on the bill could increase tension between the U.S. and China. Reuters reports that China's foreign ministry "told the United States to stop pointing its finger at Beijing over the yuan and focus instead on fixing its fragile economy."

____________________________________________________________________________



Remember Walmart is saving the average consumer over $3000.00 per year.... One can only wonder how much of the $aving$ is Made In China.

Our nation is consumer driven, maybe the consumer will wake up and start to read labels.

Walmart also sells products made by many American companies SSSM. The consumer has the right to choose whether they step inside Walmart, Target or any other store. China buys our products, especially heavy equipment, food commodities and consumer goods. I do agree the currency manipulation is an important issue concerning China, not only for the United States but also for Europe and even Asian countries.

Our future is in creating cutting edge technology in all fields of science imo. The days we produced basic clothing, small appliances and even TVs and such is long gone. Even at minimum wage, compensation in the US is much higher than China, India, and the most recent populous country coming on line, Indonesia.

There are no easy answers when the world is getting smaller and there are about 6.6 billion people.

I tell my kids if they want a bright future they must understand they face competition from all side and, therefore, must take charge of their lives. In the end, I tell them, no one else can do more to make their lives better than they can so . . . take charge.

[doctorwho]

Sept 23, 2010 19:09:25 GMT -6 southsidesignmaker said:

EPI: Rising China trade deficit costs U.S. a half-million jobs
Published: Wednesday, September 22, 2010, 8:22 AM Updated: Wednesday, September 22, 2010, 8:23 AM
Jackie Headapohl Jackie Headapohl

www.mlive.com/michigan-job-search/index.ssf/2010/09/epi_rising_china_trade_deficit_costs_us.html

Currency manipulation by the Chinese is costing the United States jobs, according to a report from the Economic Policy Institute.

Growing China trade deficits will displace between 512,000 and 566,000 U.S. jobs in 2010, according to an issues paper from the Economic Policy Institute, a nonprofit think tank that receives support from U.S. labor unions and industrial associations.

The U.S trade deficit with China has increased 18 percent this year, the report states, and has contributed to the weak performance of the U.S. job market this year.

8
0
19Share
Much of the trade deficit can be blamed on currency manipulation, which makes U.S. goods more expensive for Chinese purchasers and makes Chinese goods artificially cheaper in the United States.

Ending currency manipulation would would help rebuild demand for U.S. manufactured goods, could create more than 1 million U.S. jobs, stimulate U.S. GDP growth and reduce the U.S. budget deficit by up to $500 billion over the next six years, the report states.

The report recommends that Congress "get tough" on currency manipulation. "It is time for Congress to act and force the hands of the administration and Chinese currency manipulators," the report says.

The House Ways and Means Committee, led by Michigan Democrat Sander Levin, held a hearing last week on possible currency manipulation legislation. The bill, the Currency Reform for Fair Trade Act (H.R. 2378), would invoke trade remedies for undervalued currencies and allow the United States to apply a kind of tariff on Chinese goods.

So far, the committee hasn't made any decision yet, although some sources say that the committee could vote on the bill as early as Friday.

A vote on the bill could increase tension between the U.S. and China. Reuters reports that China's foreign ministry "told the United States to stop pointing its finger at Beijing over the yuan and focus instead on fixing its fragile economy."

____________________________________________________________________________



Remember Walmart is saving the average consumer over $3000.00 per year.... One can only wonder how much of the $aving$ is Made In China.

Our nation is consumer driven, maybe the consumer will wake up and start to read labels.

I agree with Mac in that consumers have the right to go where they want, but I agree with you that they need to be better educated about the reality of the situations ( hmm..sounds like the voters in a certain SD).
What bothers me most about the Bentonville empire is that they do more flag waving than any other company --look at the side of their semi trucks...while they thrive from predatory practices-- treat their workers badly in an industry known for that , they still send out.

Undervalued currency is a huge issue and will become moreso when the products start to include even bigger ticketed items like automobiles.

The sad thing is that even non-union areas we cannot compete with off shore countires where an MBA runs you $600/mo. because that goes far where they are..no health care costs and subsidies on buildings...the overhead becomes almost a non issue-- people here couldn't live on wages that are paid to those in those locations..it stinks but is reality

[macrockett]

Jack Welch, former CEO of GE on current administration:

www.cnbc.com/id/15840232?video=1598089972&play=1

[macrockett]

Didn't we do this between 2004 and 2007? How'd that turn out?

Lawmaker plans blanket mortgage modification bill

WASHINGTON | Tue Sep 28, 2010 12:44pm EDT

WASHINGTON (Reuters) - As many as 30 million homeowners would be able to refinance their mortgage at record low interest rates regardless of their income, credit history or loan-to-value ratio under a plan to be unveiled on Tuesday by a Democratic lawmaker.

The legislation would allow for blanket 30-year, fixed-rate mortgages at the prevailing market rate, now around 4.3 percent, for anyone seeking to refinance a government-backed loan, Representative Dennis Cardoza told Reuters on Tuesday.

The plan would help a wide swath of borrowers and is much more comprehensive than the narrowly targeted efforts President Barack Obama has tried to date.

(Reporting by Corbett B. Daly; Editing by Neil Stempleman)

[southsidesignmaker]

Big Mac,


"The legislation would allow for blanket 30-year, fixed-rate mortgages at the prevailing market rate, now around 4.3 percent, for anyone seeking to refinance a government-backed loan, Representative Dennis Cardoza told Reuters on Tuesday."


______________________________________________________________________________


Now this statement is government at it's best. First we give anyone with a pulse a mortgage, fast forward 4 years when the "poo- poo" is really hitting the fan. Now we are going to reset the interest clock and reward all the "piss poor behavior" by bring their mortgages down to historically low rates and send them on their way with a 30 year mortgage.


Maybe a look at net worth and value of the property mortgaged would be a better plan. Then let market determine the rate that should be charged.

If the federal government wants to do a favor for the average consumers that are "up side down", offer a 15 year mortgage at below market rates for those that qualify.

[Arch]

The goal isn't to get you to finally own your own home... it's to get you to keep paying interest.