economic growth

Obama calls for tax hikes in tough economic times

As sure as the sun rises in the east and sets in the west, President Barack Obama wants to raise taxes. At the White House yesterday, Obama again repeated his call to extend current tax rates for anyone making under $250,000, but taxpayers making over that amount would, under his proposal, see their taxes go up to pre-2001 levels:

In a White House statement delivered while people described as working Americans stood behind him, Obama said his proposal would provide the certainty of no tax increase next year for 98% of Americans.

Noting that Republicans seek to maintain all of the Bush tax cuts enacted in 2001 and 2003, Obama said both sides therefore agree on extending the lower rates for middle-class families.

“Let’s agree to do what we agree on, right?” Obama said to laughter and applause in the East Room. “That’s what compromise is all about.”

The White House also let it be known that President Obama would veto an extension of all current tax rates, which is what House Republicans prefer and will likely pass in the coming weeks. Sorry, but the White House is not compromising. And while Obama is determined to raise taxes, some Senate Democrats, particularly those in tough bids for re-election, may not be willing to go along with his plan. Obama is essentially hanging them out to dry here.

WSJ: Mitt Romney has no idea what he’s doing

Since the Supreme Court’s ruling on ObamaCare, Mitt Romney’s campaign has engaged in mixed messaging as they struggle to find out what exactly the believe or, at the very least, what they think Americans want to hear. The editoral board at the Wall Street Journal isn’t pleased and is pushing Team Romney to get its act together:

Appearing on MSNBC, close Romney adviser Eric Fehrnstrom was asked by host Chuck Todd if Mr. Romney “agrees with the president” and “believes that you shouldn’t call the tax penalty a tax, you should call it a penalty or a fee or a fine?”

“That’s correct,” Mr. Fehrnstrom replied, before attempting some hapless spin suggesting that Mr. Obama must be “held accountable” for his own “contradictory” statements on whether it is a penalty or tax. Predictably, the Obama campaign and the media blew past Mr. Fehrnstrom’s point, jumped on the tax-policy concession, and declared the health-care tax debate closed.

For conservative optimists who think Mr. Fehrnstrom misspoke or is merely dense, his tax absolution gift to Mr. Obama was confirmed by campaign spokeswoman Andrea Saul, who tried the same lame jujitsu spin. In any event, Mr. Fehrnstrom is part of the Boston coterie who are closest to Mr. Romney, and he wouldn’t say such a thing without the candidate’s approval.

Manufacturing report prompts concerns of recession

Economic problems in Europe, which is experiencing record high unemployment in addition to sovereign debt crises, have caused a lot of concern in markets across the globe. And while our own economic growth in the United States has been less than pleasing, we haven’t felt the brunt of the Europe’s problems — though they are certainly offering a preview of what we can expect.

But there have been concerns that the United States may be slowly slipping into another recession, no doubt made worse by a dismal manufacturing report released yesterday:

The ISM manufacturing index for June came in at 49.7, lower than expected and signaling manufacturing activity has fallen back into contraction territory. That won’t help stocks much.

New orders crashed last month, falling to 47.8 from 60.1, and that’s probably a large part of why the index contracted, given that other measures looked better. As factory activity is often a leading indicator of overall economic momentum, this report is not a good sign for the outlook.

Federal Reserve lowers economic outlook

The main news out of yesterday’s press confernce with Federal Reserve Chairman Ben Bernanke was the extention of Operation Twist. But the central bank also announced that growth forecasts for the rest of the year had been revised downward, painting a less than rosy picture for Americans weary of tough economic times:

The Federal Reserve has sharply lowered its outlook for U.S. economic growth and thinks the unemployment rate won’t fall much further this year.

In its updated quarterly forecast, the Fed lowered its prediction for growth in 2012 to 2.4 percent, a half percentage point weaker than its previous forecast in April.

That isn’t much better than the economy’s tepid 1.9 percent annual pace of growth in the first three months of the year.

The Fed also downgraded its outlook for unemployment. It thinks the unemployment rate will fall no lower than 8 percent by year’s end. That’s more than its prediction in April that the rate could be as low as 7.8 percent at year’s end.

The unemployment rate is now 8.2 percent.
With job growth weaker and the unemployment rate still high, consumers have pulled back on spending. Retail sales have fallen for the past two months. Part of that is due to falling gas costs. But even excluding gas sales, spending barely rose in May and fell in April.

Businesses also appear less confident about the economy. They are placing fewer orders at factories, which has slowed manufacturing output. A measure of companies’ investment spending has dropped for two straight months.

Another study warns of slower economic growth with higher taxes

The Congressional Budget Office (CBO) warned back in May that failing to extend the 2001 and 2003 tax cuts would, in these very tough economic times, lead to yet another recession. Higher taxes would, according to the CBO, “discourage people from working and saving, further reducing output and income.” That would seem to most like a basic understanding of economics. Unfortunately, President Barack Obama is unconcerned and is leaving no one to believe that he is willing to make a deal to keep this from happening.

But another study shows that if taxes aren’t kept at current rates, that it will slow economic growth, taking the economy down a tumultuous path:

A new study released Friday shows that letting any of the Bush-era tax cuts expire will weigh heavily on economic growth and lead to millions of job losses, likely plunging the economy back into recession.

The report by the American Council for Capital Formation (ACCF) 

shows that if Congress fails to take any action and to address the so-called fiscal cliff, a combination of expiring tax provisions and automatic spending cuts, the economy will lose $855 billion from gross domestic product, more than 1 million jobs next year and up to 3 million in 2014 along with an average of $1 trillion in lost consumer spending.

Economic growth would drop by 2.6, 3.3 and 0.5 percentage points from 2013 through 2015.

Wall Street pessimistic about economic growth, Carville warns Obama

With the economy still struggle to keep up the pace, James Pethokoukis notes that Wall Street is cutting growth forecasts for the year, further adding to worries that we may be heading into yet another recession:

Back in August 2010, Treasury Secretary Timothy Geithner wrote the following New York Times op-ed: ” … a review of recent data on the American economy shows that we are on a path back to growth.”

The piece was titled ”Welcome to the Recovery.”

And, indeed, the White House thought the economy had shifted into high gear. GDP had expanded at an average pace of 3.8% over the previous three quarters. And the road ahead looked just as promising. In the Economic Report of the President in February of that year, the Obama economic teams predicted the economy would grow 4.3% in 2011, 4.3% in 2012, 4.2% in 2013 and 3.9% in 2014. Welcome to the Boom.

But Geithner and the White House economic team were dead wrong. In the seven quarters since, the U.S. economy has grown at an average annual clip of just 2.1%, including just 1.7% last year.

And right now, 2012 looks like more of the same. GDP expanded at a mere 1.9% pace in the first quarter.

And after a weak retail sales number today, Wall Street economists have been slashing their second-quarter GDP forecasts:

– Goldman Sachs cut its forecast to 1.6% from 1.8%.

– Bank of America/Merrill Lynch cut its forecast to 1.9% from 2.4%.

– Macroeconomic Advisers cut its forecast to 1.8% from 2.0%.

– CIBC World Markets cut its forecast to 2.0% from 2.3%.

Estonian president takes on Paul Krugman

Paul Krugman may have picked a fight with the wrong country. Desparately trying to show that austerity doesn’t work, Krugman posted a graph showing stale GDP growth in Estonia, a tiny Eastern European country, during the worldwide recession. This caught the eye of Estonian President Toomas Hendrik Ilves, who blasted Krugman on over four separate tweets earlier this week:

Let’s write about something we know nothing about & be smug, overbearing & patronizing: after all, they’re just wogs:

Guess a Nobel in trade means you can pontificate on fiscal matters & declare my country a “wasteland”. Must be a Princeton vs Columbia thing [Ilves went to Columbia for undergrad.]

But yes, what do we know? We’re just dumb & silly East Europeans. Unenlightened. Someday we too will understand. Nostra culpa.

Let’s sh*t on East Europeans: their English is bad, won’t respond & actually do what they’ve agreed to & reelect govts that are responsible.

The problem with Krugman’s conclusion is that Estonia is actually one of the few Eurozone countries that is doing quite well; a point that Dan Mitchell, an economist at the Cato Institute, noted yesterday:

Clinton urges extension of tax cuts

On January 1st, taxpayers will see a heavy tax increase, which some are calling “Taxmageddon.” This significant contraction could have negative effects on our economy. In fact, the Congressional Budget Office (CBO) said last week that raising taxes would send the economy back into a recession. And now even former President Bill Clinton says that the tax cuts should be extended, at least temporarily:

Former President Bill Clinton on Tuesday jumped into the debate over how to handle the looming expiration of historically low tax rates paid by nearly every American, putting him somewhat at odds with fellow Democratic President Barack Obama.

Clinton, speaking on the cable television program CNBC, said Congress may have to temporarily extend all of the low tax rates that expire at the end of the year to give lawmakers more time to come up with a plan to cut deficits.
The remarks came as the Obama campaign was trying to raise doubts about Romney’s record in the private sector.

The tax cuts were first put in place under former President George W. Bush. Obama extended the rates for two years at the end of 2010, after Democrats suffered huge losses in congressional elections.

Now, Obama and Democrats want to let some of the lower tax rates expire for the wealthiest Americans. Clinton’s comments could undercut that position.

“They will probably have to put everything off until early next year,” Clinton said on Tuesday.

Obama to Americans: Buy a “thingamajig”

On Friday, Americans were given another dose of bad economic news as the Bureau of Labor Statistics announced that the economy created only 69,000 jobs in May, far below the consensus of 150,000 jobs. While there is some silver-lining in the report thanks to number of people actively seeking works rising slightly, the news itself is still painful given that the pace of the recovery has been so dreadfully slow and far below predictions given by the White House when the stimulus bill was passed in 2009.

Locked in a increasingly tough bid for re-election with Mitt Romney, President Barack Obama has a leg up in swing states, which are doing better than the rest of the nation. But the bad economic news in the rest of the nation will no doubt carry over to these states if the pace of the recovery remains tepid and job creation doesn’t pick up.

But President Obama also doesn’t seem to quite understand the economic problems facing Americans. During a recent campaign stop, he said that his economic plan is to help them by “thingamajigs”:

Obama doubles down on Bain Capital attacks

Last week, I noted that the President Barack Obama’s attacks on Mitt Romney over Bain Capital may well backfire given his own failures on the economy — everything from four straight years of trillion dollar budget deficits, the every increasing national debt, and a still-high unemployment rate.

However, during a press conference yesterday, President Obama said that Romney’s time at Bain Capital will be a significant part of the narrative during the campaigndoubling down on rhetoric:

President Obama on Monday declined to back down from his campaign’s attacks on Mitt Romney’s record at Bain Capital despite criticism from some Democrats.

Asked at a press conference in Chicago about criticism from Newark Mayor Cory Booker regarding his campaign’s attacks on Romney’s work in private equity, Obama defended the tactic and said it’s fair game in a race where Romney has played up his business credentials.

“This is not a distraction,” Obama said. “This is what this campaign is going to be about.”

“If the main basis for him suggesting he can do a better job is his track record as the head of a private equity firm, then both the upsides and the downsides are worth examining,” Obama said.

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