Not too much in the way of economic news to report this week, though yesterday’s report on jobless claims exploded to 439,000 new claims for benefits. The Atlantic Region released its manufacturing report, as well, and showed a contraction in activity.
Raw steel production so far this year is up 3.3% from the same period last year as the mills operated at an annual capability utilization rate of 76%.
The president had a press conference this week, the first in some time where journalists could ask questions. No hard questions were asked and any direct questions were skirted around. There are still no answers concerning the possible cover-up of the security lapse and facts around the possible requests for help which were refused in Benghazi, Libya on 9/11/12. Who knew what and when? Former army general and former head of the CIA Petraeus is at the White House this morning to answer questions. He has had to resign over an extramarital affair and the facts surrounding this incident are still being investigated, but it has taken the heat off Benghazi. It is likely both incidents are somehow intertwined.
The president is adamant that any deal made to avoid the “fiscal cliff” will have to include an increase in revenues (he is seeking $1.6 trillion in tax increases) by raising taxes on those earning $250,000 or more per year. It’s a weak argument at best. The facts show doing so would raise about $89 billion per year which would put around a 7% dent in the $1 trillion per year the government will be spending going forward. Big deal. It is political rubbish. The better answer is to work for the betterment of the country. How? A simplification of the tax code which would aim to lower marginal tax rates and eliminate many of the itemized deductions taken by business and individuals.
In an opinion article written by Stephen Moore in today’s Wall Street Journal he cites the following, I quote:
- “The country needs an economy that will create more of the “millionaires and billionaires” that Mr. Obama loves to excoriate, not more taxes on those who already exist.”
- “Total taxes paid by millionaires fell by almost $100 billion between 2007 and 2010, the last year with statistics available from the IRS. The drop resulted not from too-low tax rates, but from the severe recession and anemic recovery since 2009 that thinned the ranks of the wealthy.”
- “Over the past century, lower rates have shifted the tax burden onto high income earners and away from the middle class while maintaining the tax code’s progressivity.”
- “Let’s start with the 1920’s. All tax rates were cut during the Calvin Coolidge administration, including the top rate, which fell to 25% from the World War I high of 73%. Between 1923 and 1928, benefited by lower tax rates, the economy surged, raising incomes and living standards for the middle class.”
- “Tax rates weren’t reduced much until the Kennedy administration. JFK cut rates by about 30% for every income group. He argued that the lower tax rates would “boost the economy, produce revenues and achieve a future budget surplus.” He even called lower rates “an investment in the future.”
- Believe it or not, the “Kennedy tax cut was enacted in 1964 (after JFK’s assassination), lowering the highest tax rate to 70% from 91%. His prediction that the economy would surge was validated by rapid growth every year from 1965 through 1968. Tax collections grew by 8.6% per year and unemployment fell to 3.4%.”
- “President Reagan cut all tax rates across the board in his first term, with the highest rate reduced to 50% from 70%. That was followed a few years later with the 1986 Tax Reform Act, which closed loopholes and lowered the top tax rate to 28%.”
- “The economy soared in the 80’s and the unemployment rate plunged after the mini-depression of 1978-82. Tax rates fell but Federal revenues rose.”
- “In 2003, President George W. Bush signed legislation that cut the top income tax rate to 35% from 39.6% and cut taxes on capital gains, too. Federal tax revenues surged….from 2003-07, when the housing bubble collapsed.”
- “But the economic growth that was touched off by lower tax rates, particularly in the 1960’s and 1980’s, also benefited middle class incomes and living standards. If Mr. Obama has his way and raises tax rates on upper-income groups, it will slow the economy and everyone will lose.”