Employers are getting hit with a massive tax hike at a time when they can least afford it.Companies in at least 35 states will have to fork over more in unemployment insurance taxes this year, according to the National Association of State Workforce Agencies.
The median increase will be 27.5%. And employers in places such as Hawaii and Florida could see levies skyrocket more than ten-fold.
Many of these hikes happened automatically as prolonged joblessness triggered state laws governing their unemployment insurance systems. But at least seven states voted to raise their taxable wage bases, the level of income subject to unemployment tax. And another 10 are looking at upping the wage bases or tax rates.
When you raise the cost of employing workers, do you think businesses will employ more of them, or fewer? The answer is obvious, right? Well, not for lawmakers:
When lawmakers [in Florida] approved an increase in unemployment taxes a year ago, they didn’t realize what the impact would be, said Rep. Dave Murzin, who heads the state’s Economic Development & Community Affairs Policy Council. The state’s unemployment rate was 7.6% at the end of 2008, versus 11.8% in December.
If there is a rule with no exceptions, it’s the law of unintended consequences of government decisions. Especially when the people making the decisions are as dim as those Florida lawmakers.
A recession is a bad time to get divorced — especially if your home has sunk in value along with the rest of the housing market.
Last year, the divorce rate in the U.S. fell 4% after rising 7% in 2007, according to a report released recently by the National Marriage Project. Although the news might cheer family advocates, it suggests something else to project director W. Bradford Wilcox: that couples with depreciated home values might be waiting to split until the market rebounds.
As I write this, President Obama is presiding over what he’s calling a “jobs summit.” This is just a colorful way of describing a bunch of federal and state politicians, economists, business people and labor leaders getting together at the White House to jaw about putting people back to work.
Now, at the risk of sounding extremely disrespectful, this jobs summit is truly laughable. Not that the nation’s 10.2% unemployment rate is any laughing matter, far from it. In fact, the sad state of employment in this country is something that makes my blood boil.
But what makes me even more furious is that the federal government has decided to take the lead in job creation, as if the government were the ultimate arbiter on jobs. . . .
You see, the hubris here is that the government can come up with some new magic policy prescriptions and/or new government programs that will rescue the nation from the ravages of unemployment. They act as if creating jobs were somehow as mysterious as physicists’ quest for a theory of everything. But really, isn’t the formula for job creation pretty well-known by now? . . .
You see, job creation really is no mystery. It’s largely a matter of tax cuts to encourage investment, entrepreneurship and risk-taking. It’s also a matter of reducing regulatory constraints on freedom and removing disincentives for expanding and starting businesses.
As David Malpass, an economist and the president of Encima Global LLC, recently wrote in Forbes.com, “The U.S. knows more than any country about how to create millions of jobs, having done it in the 1960s and again in the 1980s and 1990s. The answer lies in small businesses that take advantage of freedom, a sound currency and low tax rates. Anytime those three things are available, they hire like crazy.”
Once again, this is just another way of saying that capitalism is the real, and only, solution to job creation.
For some, though, the immense unemployment crisis is a golden opportunity to enact more government-dependency programs:
In a recent New York Times editorial, columnist and Nobel Prize-winning economist Paul Krugman said, “…it’s time for an emergency jobs program.” And his solution? “…the federal government could provide jobs by … providing jobs. It’s time for at least a small-scale version of the New Deal’s Works Progress Administration, one that would offer relatively low-paying (but much better than nothing) public-service employment.”
It’s 1 a.m., November 23, 2011, and President Obama and Treasury Secretary Geithner are discussing the causes of the 2011 financial crisis. It doesn’t take them a lot of searching to see what, when and why went wrong.
How much of your money does the government need to spend to fund a rebate that doesn’t exceed $4500 per car? Try $24,000, because that’s how much Cash for Clunkers cost the taxpayers per sale achieved. Of course, the folks who figured this out are just a bunch of experts who analyze the auto market for a living, so what do they know compared to the real experts - Obama and his czars?
The U.S. government is calling its Cash for Clunkers program a big success, with nearly 690,000 vehicles sold in July and August. But a report by automotive Web site Edmunds.com says the program actually cost taxpayers $24,000 per car sold.
Only 125,000, or 18%, of the sales were incremental, according to Edmunds.com – the remaining 82% of sales would have happened regardless of the program.
The $24,000 is the price for the sales of vehicles that were a direct result of the program, Edmunds.com said.
The clunkers program gave car buyers rebates of up to $4,500 if they traded in less-fuel-efficient vehicles for new vehicles that met certain fuel-economy requirements. The government set aside $3 billion for those rebates.
Edmunds.com looked at the sales trend for luxury vehicles and other models not included in program, and it applied the historic sales volumes of those vehicles and those in the program and estimated what the sales figures would have been without the program. The analysts then divided the $3 billion by their 125,000-vehicle number to get an average of $24,000 per vehicle.
But the czars will do much better when they start running your health care. Just trust them.
And now the Democrats are pushing to greatly expand the “affordable housing for unqualified poor persons of color” legislation that is at the root of the financial crisis.
If you are one of the 53% of Americans who still pay income taxes so the other 47% don’t have to, your services are about to be requested again:
Want to buy a house with just 3.5% down and high monthly payments? Talk to the Federal Housing Association, which still backs loans on terms that private lenders would never go for.
And now, the FHA is having so many problems that it may need a taxpayer bailout, reports the New York Times. Doesn’t take a rocket scientist to see a disaster in the making here.
FHA head David Stevens is trying to downplay the issue, saying his agency will not need a bailout. But at the same time, he admits that 20% of the loans the FHA insured last year are facing foreclosure or other serious problems, according to The New York Times.
The FHA wasn’t meant to turn out like this. It was created to facilitate home purchases for lower-income and first-time buyers with government-backed loans.
But now, many banks are asking for 20% down, or they have other strict lending requirements. And so the FHA has become a place to turn for people that don’t have that kind of cash. That has left the FHA insuring about 6,000 loans a day, the Times reports.
A government agency insuring mortgages for Democratic voters needs a bailout? Consider it done.
Increasingly, homeowners with good credit and no late payments are making what appears to be a strategic decision to walk away when their home’s value falls below what’s owed.
“The American consumer has had a long-held taboo against walking away from the home, and this crisis seems to be eroding that,” concludes a report on research by Experian, the credit agency, and Oliver Wyman, a management consultant company.
The better their credit rating, the more likely homeowners were to default. The trend is most pronounced where prices have fallen furthest: Florida and the West, especially California.
The finding — that 588,000 borrowers appear to have strategically defaulted in 2008, a 128% increase from the year before — surprised the researchers. . . .
Strategic defaulters stand out among the 14 million to 15 million “underwater” mortgages, the researchers said, because they:
Pay all their bills consistently and on time until abruptly stopping mortgage payments with no attempt to get current again.
Keep current on other debts after defaulting on the mortgage.
Keep up payments on home equity lines of credit, sometimes drawing out cash, before defaulting on both the first mortgage and credit line.
This “sophisticated” combination of moves and timing suggests borrowers are employing foreclosure as a calculated financial strategy, said [the researchers].
They conclude that 18% of the borrowers with mortgages 60 days past due in the fourth quarter of 2008 were acting strategically, up from 3% — “barely noticeable,” the report says — in late 2004. Most defaults, however, are driven by financial distress. Defaults due to troubled finances grew from 31% to 51% of loans in the same time frame. . . .
From 2005 to 2008, strategic defaults rose by 68 times in California, by 46 times in Florida and by three to 18 times in other regions. Strategic default was seven times more common among mortgages originated in 2006 than those begun in 2004.
After the government has taken your money to bail out the banks, will you feel obliged to keep your end of the mortgage deal with the bank when it stops making financial sense for you?
Guess which political party is pushing to expand the Community Reinvestment Act – Jimmy Carter’s gift to the nation that forces banks to make trillions in housing loans to poor minorities with bad credit histories. This is the legislation that was a big reason behind last year’s mortgage meltdown and the financial crisis that ensued.
It’s the same party that depends on that demographic as a crucial voting group, and it doesn’t seem to care the slightest bit that it’s making another huge crisis inevitable by paying off that group with trillions of dollars stolen from the banks.
The federal government is unlikely to recoup all of the billions of dollars that it has invested in General Motors and Chrysler, according to a new congressional oversight report assessing the automakers’ rescue.
The report said that a $5.4 billion portion of the $10.5 billion owed by Chrysler is “highly unlikely” to be repaid, while full recovery of the $50 billion sunk into GM would require the company’s stock to reach unprecedented heights. . . .
In all, the government has invested $74 billion in the nation’s auto industry, including $12.5 billion into auto financing giant GMAC and $3.5 billion into auto suppliers, according to the report.
So, let’s see:
The UAW paid off with tens of billions of taxpayer dollars for delivering cash and votes to Obama and countless other Democrats.
Secured bond holders robbed, potential investors given the message that the government can steal their money anytime it damn well wants and tell them to go swivel.
And now the bailout billions that were supposed to be loans (does anyone still remember that?) are officially a gift.
There is a growing sense that the current recession is over. Too bad there are already worries about the next one.
It’s a phenomenon economists refer to as a double dip — and it’s just as unsavory as the chip-eating practice of the same name that got George Costanza in a heap of trouble.
A double-dip recession is a downturn that technically ends, but is followed by a fleeting period of growth and another period of economic declines.
This last happened nearly three decades ago, with the economy coming out of a minor recession in early 1980 only to be followed by a far more pronounced downturn that lasted from the middle of 1981 throughout the end of 1982.
Of course, things are a bit different from the early 1980s. This recession can hardly be considered minor. So if growth resumes later this year, it’s tough to imagine how the dip would be worse than the initial plunge.
That said, the cause of another double dip could be similar. Inflation.
And high unemployment. And the foreclosures. And the unsustainable level of debt the government is busy accumulating.
For most Americans, until the recent past, home ownership was a dream and the pile of rent receipts was the reality. From 1900, when the census first started gathering data on home ownership, through 1940, fewer than half of all Americans owned their own homes. Home ownership rates actually fell in three of the first four decades of the 20th century. But from that point on forward (with the exception of the 1980s, when interest rates were staggeringly high), the percentage of Americans living in owner-occupied homes marched steadily upward. Today more than two-thirds of Americans own their own homes. Among whites, more than 75% are homeowners today.
Yet the story of how the dream became a reality is not one of independence, self-sufficiency, and entrepreneurial pluck. It’s not the story of the inexorable march of the free market. It’s a different kind of American story, of government, financial regulation, and taxation.
We are a nation of homeowners and home-speculators because of Uncle Sam.
It all started during the Great Depression. “Never let a serious crisis go to waste. What I mean by that is it’s an opportunity to do things you couldn’t do before,” as Obama’s Chief of Staff Rahm Emanuel said last November. F.D.R. would agree.
A 1933 MGM propaganda film explaining how FDR’s inflationary policies were going to make short work of fixing the economy. It was made to be played in movie theaters across the country, and it totally made it look like the government knew what it was doing.
“And sailors will soon again be able to afford a stripper in every port! . . . What inflation has done before it will do again! . . . What a man! And what a leader! Yowzer! Happy days are here again!”
Consumer prices shot up in June by the largest amount in 11 months, reflecting the biggest jump in gasoline prices in nearly five years.
The Labor Department said Wednesday that inflation at the consumer level rose by 0.7 percent last month, slightly higher than the 0.6 percent increase that economists were expecting. It was the biggest one-month gain since a 0.7 percent increase last July. . . .
The 0.7 percent jump in the Consumer Price Index in June followed three months of moderation including a small 0.1 percent rise in May.
The upward surge was driven by a 7.4 percent rise in energy prices, reflecting a 17.3 percent increase in gasoline prices, the biggest one-month jump in gas prices since a 20.9 percent spurt in September 2005 after Hurricane Katrina had shut Gulf Coast refineries.
Not to worry, though – there’s this handy scientific thing called “core inflation”, and it says everything is just fine:
Core inflation, which excludes food and energy, posted a moderate 0.2 percent rise in June, slightly higher than the 0.1 percent rise that economists had expected.
Hey, you just need to learn to exclude food and energy from your life, and you’ll have nothing to worry about.
