Capital Gains Tax Rates Are Higher Than You Think, and Getting Higher
The President’s State of the Union Address included discussion of the proper level of taxation for investment income. Specifically, the President suggested it was improper for investment income to be taxed at a much lower rate than labor income. This obscures the actual taxation rates faced by investors. Read full post...
Precedential Election: Can Trust Be Maintained in Sovereign CDS Markets?
There is little doubt policymakers both within the EU and without will make sure a Hellenic default is avoided. Perhaps the better question is what precedent will the deal set and how will its impact reverberate throughout global financial markets? Whether considering the first deal proposed in October 2011 or the deal now being formulated at the beginning of 2012, the critical point is whether or not credit default swaps should be triggered. Read full post...
Is Too Much Homeownership a Good Thing?
For generations the assumption among market participants, policymakers, and the general population has been that increased homeownership is a positive for the U.S. economy. An essay out of the Richmond Fed questions this assumption and expands on the risks of subsidizing homeownership. Against the backdrop of the SOTU and the likely inclusion of some new housing policy, the analysis from this essay should be a helpful reminder that there is a lot that we still don’t know about the effects of homeownership and its relationship to the health of the aggregate economy. Read full post...
Washington is Spending Too Much
In the Wall Street Journal, former Chairman of the Council of Economic Advisers, argues that the real budgetary problems are (much further) down the road:
The deficit shot up in basically equal measure from taxes falling and spending rising. Spending rose to 25% of GDP from 20.5% in the recession and soon it will fall back down. Taxes fell to 14.5% of GDP from 18.5% and will also return to more normal levels.
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When A Virtuous Cycle Turns Vicious
The interconnectedness of the global economy has substantially increased its rate of growth. However, that very interconnectedness can allow a local recession spread throughout the globe. A new article in the Financial Times titled “How the Globe Can Grind To a Halt” explains how real a danger we face. It is worth reading in full, but this excellent chart communicates the message clearly.
Read full post...What Will Cordray Do at the CFPB?
The January 4th recess appointment of Richard Cordray as the director at the Consumer Financial Protection Bureau prompted a substantial controversy because the Senate was not actually in recess. Given the important discussions of the substantive legal and political implications of the appointment, less attention has been paid to the policy implications that Cordray’s appointment may have on new regulatory, supervisory, and enforcement responsibilities in 2012. Read full post...
Financial Sector Not The Only One Hit By A European Collapse
It’s obvious to anyone that a financial crisis in Europe would be bad for the American economy. However, most of the coverage surrounds the difficulties for U.S. banks and other holders of European debt. A new chart from the San Francisco Fed helps refocus the concern towards the broader economy. Read full post...
The Payroll Tax: Same Problem, New Year
The White House opened 2012 with deputy press secretary Josh Earnest saying a full extension of the payroll-tax cuts through 2012 was the last “must-do” item left on the president’s congressional agenda heading into November’s election. The conference committee is appointed and will convene when the House returns on January 17th, and much of the political banter will revolve around how to off-set the costs of a payroll-tax extension. However, both liberals and conservatives are starting to question the greater meaning of reducing payroll-tax revenue which is designed with the specific purpose of funding Social Security and the lack of wisdom behind such a reduction. Read full post...
JOBS DAY CHEAT SHEET: Where Are The Workers?
We have seen the glimpse of a jobs recovery over the past several weeks. Unemployment claims have continued to fall below the key 400,000 level, with the most recent 4-week rolling average at 373,000. Likewise, the ADP payroll estimate came in at a robust 325,000 new jobs for December. Read full post...
Not So Easy: ECB Liquidity Measures May Not Be Enough
The stability of economies in the Euro Zone and their financial underpinnings certainly look to be the main threat to a robust 2012 for both the United States and the global economy. The availability of liquidity to European financial institutions is an issue of the utmost importance. As 2011 closed, the European Central Bank took steps to ramp up liquidity, by offering €439 billion in long-term refinancing operations (LTRO) at 1.0% over 3 years. Read full post...
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