Newspapers report that on January 1, 2013, the federal tax bill of the typical household – with yearly income of about $50,000 – will face a tax increase due to the expiring of both President Bush’s tax cuts and President Obama’s stimulus package. As a result, and due to the decade we’ve had of little or no income growth for most people, the real disposable income of the median household could fall to its 1998 level. The conservative Heritage Foundation has estimated the size of the tax increase to be $494 billion in 2013, or about 3 percent of GDP.
what's interesting -- scary -- is that the media seem totally focused on this as a problem of the government's budget deficit being _too large_ when in reality the "taxmageddon" moves toward budget balance (all else constant). What they're missing is that it represents a major "demand shock" that would cause a recession before the US has recovered significantly from the last one. Bernanke calls its a "fiscal cliff" and that there's "absolutely no chance that the Federal Reserve could or would have any ability whatsoever to offset that effect on the economy." That is, monetary policy is impotent, since interest rates are as low as they can go (at least in nominal terms) and so far borrowing hasn't picked up very much considering how low the interest rates have been. It can't prevent the recession within the stagnation. Given the infighting between Obama and the GOPsters, it's hard to imagine the government doing much if anything to prevent a new recession. -- Jim Devine / "An atheist is a man who has no invisible means of support." -- John Buchan _______________________________________________ pen-l mailing list [email protected] https://lists.csuchico.edu/mailman/listinfo/pen-l
