Archive for category Budget
Monetary Policy Gets No Respect
Posted by Tetyana Matychak in Budget, Favourites on July 19th, 2010
The cover story in Time’s current issue summarizes what everyone already knows. The economic rebound has lost strength recently. The story goes on to report that the policy responses at this late date aren’t encouraging, largely because political support for more fiscal stimulus is weakening faster than the economy. Strangely, the article makes no reference to the possibilities for additional monetary stimulus. The not-so-subtle suggestion is that if the economy needs additional help, new government spending programs are the only game in town and this door is closing fast because of political considerations.
The chief problem, as the Time article presents it, is one of fading public support for more spending by Washington:
Polls show that voters either don’t understand — or don’t buy — the long-established economic theory of John Maynard Keynes, which calls for more government spending (even if it means running up deficits) to help the economy through hard times. Instead, the public is in the mood to smack big Washington spenders hard this November…A new Time poll reveals just how hard the task is: Two-thirds of respondents say they oppose a second government stimulus package.
But as many economists have been explaining recently, monetary policy options may not be a dead end at this point–despite the fact that nominal interest rates are at or near zero. Yet the so-called zero-bound problem inspires some economic pundits to conclude that fiscal stimulus is all that’s left, or so Time’s cover story this week counsels. But this is shortsighted, according to a number of dismal scientists. What’s more, the possibilities for additional monetary policy at the zero bound have been circulating for quite some time. Read the rest of this entry »
Deflation Comes To Europe
Posted by Tetyana Matychak in Budget, Favourites on June 11th, 2010
Many economists regard deflation as more dangerous than inflation, as it encourages consumers to delay purchases as they wait for a lower price tomorrow. When consumers put off buying in anticipation of lower prices it creates a downward spiral of lower demand followed by lower production.
Deflation harms debtors as well. Countries like Greece have to pay back the money they borrowed with money that will be more expensive next year. Paying down debt with cheaper money slows economic growth. Japan has struggled with deflation for the last two decades, as growth in Japan faltered.
A sign that deflation is near comes from countries like Ireland and Spain that saw prices fall in May. Inflation was below 1 percent in five other euro zone countries.
There are four causes of deflation:
Decrease in the money supply
Increase in demand for money
Increase in supply of goods
Decrease in demand for goods Read the rest of this entry »
Does The Tax Code Penalize Savings?
Posted by Tetyana Matychak in Budget on June 4th, 2010
Larry McDonald has a mini crusade on adopting a flat tax. The proposal most likely encounters more political issues than purely economic ones. But a flat tax is one way of looking to solve the large economic issue. Mainly, we are a society wedded to the urgency of consuming now and have become terrible savers as a result. While politicians may be setting up financial literacy task forces and regulating the financial industry, it may best spend more time looking at how the tax code promotes us the wrong type of behavior (unless, conspiracy minded people think this is exactly the type of society leaders want…).
For example, the American estate tax is a punitive tax (the Federal tax is 55% in 2011 with an exclusion amount of $1 million assuming Congress does not pass other legislation) which implicitly encourages people to spend it in life rather than pass it onto generations. The larger, more global problem, is that interest income on savings is taxed higher than any other form of investment income.
The reason for this policy used to make sense. When North American society actually saved and the economy was in a long boom period, the tax code was attempting to discourage the taxpayer from stashing money in high-interest savings accounts and, instead, encourage investment in industry by investing in equities. This policy works if you assume: (i) the population is saving; and (ii) the demographics were aligned in such a way that a taxpayer could enter into the risk-reward of investing in equities. Read the rest of this entry »
U.S. wants to boost airline passenger bumping fee
Posted by Tetyana Matychak in Budget on June 3rd, 2010
Maximum compensation for bumping passengers off oversold flights would rise to $1,300 under a U.S. government proposal released on Wednesday.
The Transportation Department plan would also expand its runway delay program to overseas airlines, making them comply with the same requirements as domestic counterparts for ground delays exceeding three hours.
Current bumping fees range from $400 to $800, depending on whether an alternative flight is available and whether the trip is domestic or international service. U.S. airlines also would have to clarify charges for checking luggage and notify consumers if the fees rise.
The rule builds on steps taken by the Obama administration to bolster consumer protection in the wake of long ground delays and charging for bags as a way to get more money from their customers. Read the rest of this entry »
Jobs: Will a May Surge Be Followed by a June Slump?
Posted by Tetyana Matychak in Budget on June 2nd, 2010
With Census hiring peaking in May, Action Economics expects a gain of 480,000 U.S. jobs. But a fall-off in Census jobs could lead to a payrolls decline in June.
Action Economics expects U.S. nonfarm payrolls to surge by 480,000 in the government’s May employment report, scheduled for release on June 4, with a hefty boost of 420,000 from Census hiring and a 400,000 rise for government payrolls, alongside an 80,000 rise in private payrolls—the fifth straight monthly increase—that would come in below the surprisingly large 231,000 increase in April and the 174,000 gain in March.
We also expect the jobless rate to moderate to 9.8 percent from the surprising pop to 9.9 percent in April, while the average workweek holds at 34.1 hours and average hourly earnings post a 0.1 percent gain.
The industry mix should reveal the 400,000 surge in government hiring mentioned earlier, alongside a 10,000 rise in goods-producing employment that includes a 20,000 gain in factory employment, and a 70,000 gain in service-sector jobs excluding government. Though construction employment has risen in each of the previous two months, the gains may reflect the boost in April housing-sector activity spurred by the Apr. 30 expiration of the home buyers’ tax credit, and could prove temporary. Read the rest of this entry »
A Toolkit for Women Seeking a Raise
Posted by Tetyana Matychak in Budget on May 31st, 2010
Even now, when women represent half the work force, they’re still paid considerably less than men — and part of that pay gap may be a result of what happens at the salary negotiation table.
That’s assuming that women make it to the table, since research shows that they are less likely to ask for raises. Even when they do, their requests may be perceived as overly demanding or less agreeable.
“We have found that if a man and a woman both attempt to negotiate for higher pay, people find a woman who does this, compared to one who does not, significantly less attractive,” said Hannah Riley Bowles, an associate professor at Harvard’s Kennedy School of Government, who has conducted numerous studies on gender, negotiation and leadership. “Whereas with the guy, it doesn’t seem to matter.”
So what’s a woman to do if she feels her work merits a raise?
A new study concludes that women need to take a different approach than men. Women, it suggests, should frame their requests in more nuanced ways to avoid undermining their relationship with their boss. Read the rest of this entry »
Check the Rules on Your Rewards Programs
Posted by Tetyana Matychak in Budget on May 25th, 2010
For those of us who play the rewards game — collecting miles and points from airlines and card companies and others — our earned perks have real economic value. So much so that years ago, Yodlee, which provides the guts for many online banking and brokerage Web sites, started allowing people to update their frequent flier balances automatically right alongside their investment portfolios.
To protect these earnings, however, you need to keep up with the rules of your various programs. Here are four reasons why:
1) The rules may change.
Programs tweak the fine print almost every year, though the story of the old Chase 5 percent cash rebate card illustrates how big the changes can be. As we mentioned in a Bucks post not long ago, Chase took away the once rich rebate only to restore it later in an arguably more limited form.
2) Partners may be added (or taken away).
If you’re earning points in, say, American Express’s Membership Rewards program, where can you redeem them? Those of us banking the points who live near New York City rejoiced several years back when it became possible to redeem them for JetBlue points. Read the rest of this entry »
Winfrey Hires a Star Manager
Posted by Tetyana Matychak in Budget on May 20th, 2010
Oprah Winfrey has made a fortune in television, magazines and movies. Now she has hired someone to manage it.
Ms. Winfrey, one of the most powerful brands in media, has begun setting up a so-called family office to handle her personal investments, according to people familiar with the situation. Her first hire: Peter Adamson, a well-regarded investor who currently serves as chief investment officer for Eli Broad, the Los Angeles billionaire and philanthropist.
The move comes as Ms. Winfrey begins a new chapter in her professional life. In January she plans to launch her own channel, the Oprah Winfrey Network, a joint venture between Ms. Winfrey’s Harpo Inc. and Discovery Communications Inc. that aims to reach 80 million homes in the U.S.
A spokeswoman for Ms. Winfrey confirmed the hire but declined to elaborate. Mr. Adamson didn’t return emails and telephone calls seeking comment.
Ms. Winfrey historically has been private about her financial affairs, but this is believed to be the first time she has established a full investment organization around her fortune.
Wealthy investors typically hire managers at banks and brokerage firms to handle their financial affairs. A family office is considered a step up from such an arrangement, with a team of advisers working exclusively, and directly, for the client. Read the rest of this entry »
Hedge funds, private equity expect tax hike
Posted by Tetyana Matychak in Budget on May 19th, 2010
Private equity, real estate and hedge fund managers are increasingly resigned to a tax increase on their profits as U.S. lawmakers get set to vote next week on a long-delayed measure.
At issue is a change in the tax treatment of profits earned by partnership fund managers, known as “carried interest.” The measure would treat the profits as ordinary income subject to a 35 percent rate, more the double the 15 percent rate they are currently taxed at as capital gains.
The tax change, which lobbyists have managed to beat back for three years, has gained steam as lawmakers hunt for revenue to fund other popular tax breaks for business that have expired. Many lobbyists and former opponents now see passage of an increase as inevitable.
“Many people are resigned because it is round four,” said Francois Hechinger, a partner at BDO Seidman advising private equity and venture capital clients..
He added that they are still putting up a fight to try to soften the impact. “If it was really their choice they wouldn’t give up on it at all.”
The $20 billion or so of revenue that the tax change could raise over a decade would help pay for a politically popular group of tax breaks for individuals and business, including a corporate research and development tax credit. Read the rest of this entry »
How to Prepare for an Audit
Posted by Tetyana Matychak in Budget on May 13th, 2010
It’s the last thing most people want to see at this tax-paying time of the year: A plain brown envelope marked “Official Government Business” with the return address of the Internal Revenue Service. But don’t panic. The news might not be as bad as you think.
While a full-blown tax audit might be your first thought, that notice might be the extent of your contact with the IRS. The agency might be telling you that you’ve made a math error on your return that must be fixed. Or maybe something on your W-2 doesn’t agree with your tax return. In such correspondence-audit situations, you usually can clear up the discrepancy with a couple of exchanges of information via the mail.
Then again, the worst could happen and that envelope could be a notice that one of your past tax returns is being audited in full. In this case, what do you do?
Sharon Tabor Warren, an enrolled agent and author from Amherst County, Va., says, “If I have prepared the client’s tax return for the year under audit, I ask them for an IRS power of attorney, Form 2848, and to forward their audit notice to me. Then, I tell them to sit back and relax — I’ll handle it from there.”
This makes a good case for having a professional prepare your tax returns! Read the rest of this entry »
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Consumer Spending in U.S. Rises More Than Forecast
30 August 2010Monetary Policy Gets No Respect
19 July 2010
Stocks May Surprise By Year-End
5 July 2010
Is A Global Reserve Currency A Necessity?
28 June 2010
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