So the main thing that happened was my payroll tax holiday expired (I read that this was the only bipartisan bill passed into law in the last 4 years), which will reduce the average family’s take home pay (both working) by over $200/month.

That’s a lot, and its highly regressive. And about as high multiple as you can get, with a lot of that income is leveraged into car payments
and mtgs. and other debt service.

It all brings us back to very modest GDP growth, maybe a bit of (population adjusted) employment growth, and a bit of top line revenue growth for corporations.

Ok for stocks, not so ok for people trying to work for a living.

And more deficit reduction to come.

31 Responses

  1. 79% of households earn less than $100,000 per year. The savings from last years’s mortgage refi now gets nicked a bit. Can’t win for losing.

  2. Yep.

    But while we’re complaining about a 2% tax increase, Portugal is looking at a 30% increase.

    The whole world has gone mad.

    You’re more optimistic than me about employment, but I guess it’s like you say, we’ve never had a recession when the deficit is this large.

  3. W, do you anticipate demand from credit expansion filling in for lost payroll tax gap? If not how can stocks do anything but go down with a 1.5% loss in GDP.

  4. All I can say is “idiots”. I wish we would just come out and say we have no use for the founding principles. Let us heap verbal scorn on it so that the words match our actions.

    “If direct taxes upon the wages of labour have not always occasioned a proportionable rise in those wages, it is because they have generally occasioned a considerable fall in the demand for labour. The declension of industry, the decrease of employment for the poor, the diminution of the annual produce of the land and labour of the country, have generally been the effects of such taxes


    Absurd and destructive as such taxes are, however, they take place in many countries. ”

    -Adam Smith.

  5. If the sequester is delayed as it likely will, GDP growth should still come in around 1%, which, like Warren said, is ok for stocks but not so ok for people. Think equities and bonds outperform gold and other commodities this year as the US economy continues to “muddle-through.”

  6. Sign the White House Petition

    we petition the Obama administration to:
    Direct the United States Mint to make a single platinum trillion dollar coin!

    With the creation and Treasury deposit of a new platinum coin with a value of $1 trillion US Dollars, we would avert the absurd-yet-imminent debt ceiling faceoff in Congress in two quick and simple steps! While this may seem like an unnecessarily extreme measure, it is no more absurd than playing political football with the US — and global — economy at stake.

      1. @JJTV,

        If the platinum coin is the ace up Obama’s sleeve, it could gain a lot of publicity for MMT. Maybe that’s what Obama meant when he declared… “I’m not going to play that game”, with regard to not allowing the debt ceiling to become part of the negotiations over taxes, spending and the deficit.

      2. @Ed Rombach,

        The process to determine the “specs” of the coin, U.S. Mint Public Affairs Specialist Genevieve Billia warns, must be “determined by legislation,” creating the potential for another congressional impasse…in other words congress can vote it down. Next idea.

      3. @Fin,

        I don’t know about Warren’s reservations (if he is serious; I can’t tell), but did you see the language in the code?

        31 USC § 5112 – Denominations, specifications, and design of coins
        […]
        (k) The Secretary may mint and issue platinum bullion coins and proof platinum coins in accordance with such specifications, designs, varieties, quantities, denominations, and inscriptions as the Secretary, in the Secretary’s discretion, may prescribe from time to time.
        […]

      4. @Fin,

        Hadn’t seen that but one would have to believe congress would have a way to block such an audacious end around…and the political damage to the administration in attempting and failing would be to great to chance.

      5. that would leave the fed with negative capital which is ‘legal’ and which I have no problem with but
        for the out of paradigm it’s highly problematic

        In any case, however, govt. liabilities outstanding remain the same. it’s just about whether they are called ‘debt’ or not.

        This whole thing is purely semantics

      6. @Nihat,

        Also
        This law was passed in 1996, and became operational in 1997, and was reaffirmed in 2000 – H.R.5273 — United States Mint Numismatic Coin Clarification Act of 2000 (Enrolled Bill [Final as Passed Both House and Senate] – ENR)

        (k) The Secretary may mint and issue platinum bullion coins and proof platinum coins in accordance with such specifications, designs, varieties, quantities, denominations, and inscriptions as the Secretary, in the Secretary’s discretion, may prescribe from time to time.

        All the other coins have these things specified by Congress, except for Dollar Coins. There also, there is a loophole – no weight, or thickness is mentioned. But nothing is stated as to who makes the decision on those matters.

        However, the Platinum coin part of the law is very specific as to who has the responsibility. It is very likely that Billia was talking of non platinum coins. In that case, she would indeed be correct.

      7. @Fin, by the way, i don’t think the language was a loophole. I think it was meant to stay obscure and used for catastrophe to replenish the trsy in one swift action.

        Regardless, there has to be at least 3 or 4 movie plots all ready in the works….:-)

      8. @Warren Mosler,

        From A trillion-dollar-coin idea takes off, and a former head of the U.S. Mint doesn’t see why it shouldn’t

        But for what it’s worth, the guy who was in charge of the U.S. Mint when the original law providing for the minting of such a coin was passed told me he thinks Nadler’s proposal is perfectly legal.

        “My understanding of how this all works suggests that this is a viable alternative,” said Philip Diehl, a former chief of staff to the late Texas congressman Lloyd Bentsen, who was head of the U.S. Mint from 1994-2000.

        Diehl tried to make the Mint function more like a business, and saw an opportunity in the worldwide market for platinum bullion coins. (The gold bullion coins fashioned by the Mint are not produced at the preferred purity for the worldwide gold trade, Diehl said, making them a tough sell on the international market.)

        Diehl planned to conduct extensive market research, focusing in particular on the hot market for platinum in Japan, and wanted legislation that would allow him to react quickly to those results. The Treasury Department, wary of its bureaus making their own friends on the Hill, was “decidedly unenthusiastic” about the legislation, Diehl said, but he worked closely with Republican Rep. Mike Castle, who was chairman of the House Financial Services Subcommittee at the time, and eventually got the bill through the Republican-controlled House with what Diehl called a “blank check.”

        “One of the ironies in this story is that a G.O.P. Congress passed the legislation over the objections of a Democratic Treasury, and now, today, Treasury may well be in a position to use the law as leverage to neutralize the G.O.P.’s threat to hold the debt limit hostage,” he said.

        The legislation served its purpose; the Mint rushed out a platinum bullion eagle coin—in denominations up to $100—and overtook the market.

        “We brought that coin to market faster than any coin the U.S. Mint had ever brought to market, and within about six months of launching it, we owned about 80 percent of the worldwide market for platinum bullion coins,” he said. “The Canadians had dominated the Japanese and U.S. market up to that time, and we basically took them out of his both markets.”

        “Of course, no one ever imagined that a scenario like this would develop,” said Diehl, who is now C.E.O. of a gold seller in Austin, Texas.

        Diehl said he thought it could be used “as a backstop,” and that it appeared to be on more firm legal ground than the 14th Amendment.

      9. The ball is in the President’s court, just as it was in August 2011, when he decided not to end run Congress.

        Unfortunately the ‘mainstream monetary analysis’ from the President’s out of paradigm advisers surrounding the use of the coin, etc. is of course way off base in a way that causes the President to at least hesitate to use it.

      10. @Warren Mosler,

        “This whole thing is purely semantics”

        thanks for finally making that clear;

        even MMT people have too often said that there’s no problem calling gov liabilities “debt”;

        that really IS a stumbling block for many, since all those out of the MMT paradigm certainly do define “debt” differently than CB accountants do, and are NOT familiar with discriminating the context-specific semantics

  7. The coin idea is political suicide. The initial reaction in the international markets will be to dump the dollar and you could very well have a crisis. From a trading perspective, that’s tremendous as everything will revert back after investors realize that nothing has changed.

    That said…mint the coin. Looking for a great crisis/ post crisis trade!

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