Q1 GDP Revised Downward To 1.9%
Q1 GDP Revised Downward To 1.9% – Hot Air
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The Commerce Department released its second estimate of economic growth in the first quarter, and as expected, the number got revised downward. The advance report a month ago showed Q1′s annualized growth number at 2.2%, down from 2011Q4′s 3.0%, a significant drop, but the second estimate pegs Q1 growth even lower at 1.9%:
Real gross domestic product – the output of goods and services produced by labor and property located in the United States – increased at an annual rate of 1.9 percent in the first quarter of 2012 (that is, from the fourth quarter to the first quarter), according to the “second” estimate released by the Bureau of Economic Analysis. In the fourth quarter of 2011, real GDP increased 3.0 percent.
The GDP estimate released today is based on more complete source data than were available for the “advance” estimate issued last month. In the advance estimate, the increase in real GDP was 2.2 percent (see “Revisions” on page 3).
The increase in real GDP in the first quarter primarily reflected positive contributions from personal consumption expenditures (PCE), exports, residential fixed investment, private inventory investment, and nonresidential fixed investment that were partly offset by negative contributions from federal government spending and state and local government spending. Imports, which are a subtraction in the calculation of GDP, increased.
The deceleration in real GDP in the first quarter primarily reflected a deceleration in private inventory investment, an acceleration in imports, and a deceleration in nonresidential fixed investment that were partly offset by accelerations in exports and in PCE.
In last month’s report, I noted that real final sales of domestic product, which takes out inventory expansion, only increased by 1.6%. That indicates a lack of demand, and hinted at a downward revision. In the new report, this same indicator now comes in at 1.7%, close to the new 1.9% overall figure for the quarter. I’d guess that the final number for Q1 will be unchanged when it gets released in another month.
Nor is that the only economic indicator today on the growth side to raise red flags. After-tax corporate profits in Q1 fell for the first time in three years:
The department also said after-tax corporate profits fell at a 4.1 percent rate, the biggest decline since the fourth quarter of 2008, as taxes took a big bite from earnings. After-tax profits rose 1.1 percent in the fourth quarter.
What happens when profits fall? Jobs don’t get created, and business doesn’t expand. Don’t expect a significant boost in job creation this summer, in other words, or perhaps even the fall. Looks like we’re in for another Stagnant Spring and Wreckovery Summer once again.
Obama Labor Board Slapped Yet Again
Obama Labor Board Slapped Yet Again – Townhall
For just over a year now and since the failure of the Employee ‘Forced’ Choice Act (EFCA) to receive a vote in the 111th Congress, union bosses have been desperate to obtain the “payback” they believe is owed to them. Big Labor is beside itself that its membership numbers continue to dwindle despite giving half a billion dollars in campaign contributions to President Obama and Congressional Democrats.
In the absence of employees voluntarily choosing to join unions, labor bosses have decided to force them into collective bargaining units in an effort to line their own pockets. More than a year ago, an official with the American Federation of Labor and Congress of Industrial Organizations (AFL-CIO) stated clearly that “administrative action” was the means labor would pursue to forcibly unionize workers and increase their number of dues-paying members.
Over the course of the last year, we have seen union bosses in concert with President Obama working to enact portions of EFCA through regulatory fiat. Unelected bureaucrats at the National Labor Relations Board (NLRB) have made decisions and issued job-killing rulings that could never pass in Congress, because they hurt workers and businesses, at a time the country struggles to recover from one of the most significant economic downturns in American history.
The NLRB is supposedly an “independent” federal agency which oversees relations between employers and organized labor in the private sector. During the Obama Administration, however, it has become the principal means by which union bosses see their anti-business agenda enacted. Worse yet, a number of the unelected bureaucrats on the Board have never gone before the U.S. Senate nor been confirmed as President Obama recess appointed them even though Congress was in session.
That has led to news this past week that a federal judge nullified a recent ruling by Obama’s labor board concerning “ambush elections.” The regulation rushes employees into making an uninformed decision concerning the formation of a collective bargaining unit, which is critically important to future of their livelihoods. It also severely disadvantages employers as they would struggle to gain access to the resources they need to make a fair case against professional labor organizers. Businesses could have as few as seven to 10 days from the petition filing to ensure their side of the story is told.
U.S. District Judge James Boasberg wrote in his opinion that, “According to Woody Allen, 80 percent of life is just showing up. When it comes to satisfying a quorum requirement, though, showing up is even more important than that. Indeed, it is the only thing that matters – even when the quorum is constituted electronically. In this case, because no quorum ever existed for the pivotal vote in question, the Court must hold that the challenged rule is invalid.”
According to The Wall Street Journal, “As manipulative was the way President Obama’s NLRB appointees raced the new rules into the Federal Register and violated the normal standards of administrative procedure. In December 2011, former union lawyer Craig Becker’s recess appointment to the labor board was about to expire, which with two seats vacant would have deprived the five-member NLRB of a quorum. When the final rule came up, the NLRB’s lone Republican commissioner, Brian Hayes, did not cast a vote. He was given only a matter of hours on the NLRB’s electronic ballot system before the Democratic majority went ahead and published it that day, without anyone requesting a response.”
In fact, the two member minority-majority ordered the Board’s Solicitor to issue the rule without Brain Hayes noting off on it, which is directly contrary to NLRB procedures governing the issuance of cases. They also – for the first time in the agency’s history – refused to permit a dissenting Board member the time to consider the rule they were adopting and issue a dissent with the majority, a critical role in the deliberative process.
In the end, the new rule has been shelved for the time being, but labor’s handpicked government regulators are not ceding any ground. Shortly after Judge Boasberg’s decision, NLRB Chairman Mark Pearce stated, “We continue to believe that the amendments represent a significant improvement in our process and serve the public interest by eliminating unnecessary litigation. We are determined to move forward.”
In the process of formulating the original rule, the NLRB received more than 65,000 comments from Americans with the vast majority opposing the change. Next, the NLRB recently issued its own 2011 annual report showing union elections normally only take 38 days, which is well below the agency’s goal of 42.
The reality is that there is absolutely no need for the ambush election rule outside of rewarding the President’s top political contributor. The business community must continue to ensure employees and employers vocally oppose this job-killing regulation. Even the government bureaucrats at the NLRB must be made to understand there will be political repercussions associated with their reckless behavior.
First Ever Private Commercial Space Vehicle Launches Successfully From Cape Canaveral (Pictures/Video)
After one false start, the final frontier has finally become open territory for the commercial world, after the SpaceX Falcon 9 rocket successfully launched from Cape Canaveral just moments ago.
The private space cargo firm’s historic launch to the International Space Station blasted off at 8.44BST, carrying with it a capsule loaded with 1,000lbs of space station provisions.
Also on-board are the ashes of Star Trek legend James ‘Scotty’ Doohan, fulfilling his final wish to spend eternity resting in space.
Off we go: The Falcon 9 SpaceX rocket is seen during a time exposure as it lifts off Cape Canaveral this morning, flying off to the ISS
Space goes commercial: SpaceX successfully launched this morning at 8.44BST, three days after an aborted attempt
Up, up and away! Sparks fly as the rocket leaves the launch pad and heads to the horizons
The rocket is lost against the inky-black sky during the pre-dawn launch at Cape Canaveral, but the flames light up the surroundings
The mission is the first by a private company to the $100billion orbital outpost, a project of 15 countries.
NASA is investing in SpaceX, as well as four other companies, to fly cargo and eventually astronauts to the station following the retirement of the space shuttles last summer.
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The first attempt on Saturday stalled, as the countdown reached all the way to practically zero before there was an automatic shutdown by on-board computers.
So instead of blasting off from Cape Canaveral on a delivery mission to the International Space Station, the rocket remained on its launch pad amid a cloud of engine exhaust.
The engine ignition sequence had started up, but there was an automatic shutdown by on-board computers.
The unfortunate delay caught even NASA’s most seasoned launch commentator off guard.
‘…3-2-1, zero, and liftoff,’ announced commentator George Diller, his voice trailing as the rocket failed to budge. ‘We’ve had a cutoff. Liftoff did not occur.’
Billionaire rocket designer Elon Musk attributed the problem to slightly high combustion chamber pressure on engine No. 5. ‘Will adjust limits for countdown in a few days,’ he wrote via Twitter.
Standing tall: Falcon 9 and Dragon spacecraft, pictured a day before its first launch, are in the final stages of preparation for their historic flight
Only governments have completed such a feat to date, with the SpaceX voyage the first time such a voyage has been completed by a private firm.
Ferrying the Dragon capsule into space, the mission to the ISS will be to deliver 1,000 pounds of non-essential cargo after passing a series of test maneuvers over the course of three days.
If successful in its first-of-a kind mission, the company behind the venture SpaceX would collect the remaining payments on the $396 million contract it has with NASA and then enter into a $1.6 billion agreement for 11 more flights to the ISS.
The first step in the commercialisation of space to non-governmental firms, SpaceX is hoping one day to deliver up to seven passengers to the ISS and other destinations in low-Earth orbit.
The Falcon 9 rocket suffers from an ‘instantaneous launch window’ which means that if they don’t take off at the exact scheduled moment they will have to wait till 3.44 a.m on Tuesday for the pad and the ISS to line up again.
This will be the Falcon’s third flight as SpaceX have already sent the projectile into space on two previous occasions.
But this will be the first time it will dock with the ISS – signalling the first time a commercial enterprise has ever hooked up with the orbiting space station.
However, this mission from a private contractor is not without risk and could very well end in failure, something which SpaceX have been upfront and honest about.
‘Demonstration launches are conducted to determine potential issues so that they might be addressed and – by their very nature – carry a significant risk,’ said a statement by the private space firm according to the Guardian.
‘All spaceflight is incredibly complicated, and this flight introduces a series of new challenges – it is only the third flight of the Falcon 9 rocket, the second of the Dragon capsule, and the first for a number of all-new components necessary to berth with the International Space Station.
‘If any aspect of the mission is not successful, SpaceX will learn from the experience and try again.’
If all goes well though on the next launch, Falcon 9 will carry the Dragon capsule into space and match orbits with the ISS.
Flashback: The launch of Falcon 9 Flight 1 from the SpaceX launch pad at Launch Complex 40, Cape Canaveral, Florida in 2010
The full flight-ready Falcon 9 (left and right) with Dragon capsule onboard stands on the launch pad at SLC-40, Cape Canaveral, Florida
There it will go through a series of tests and will pass around one and a half miles below the station to see if its controls are testing properly.
If that checks out OK, the ISS will allow the Dragon capsule to within 10 feet and pull it in for docking all the while traveling at 17,500 mph.
Staying on board the space station for a week and a half, it will then be re-loaded and sent back to Earth where it will land in the Pacific and be retrieved.
The launch and subsequent mission will be nerve-wracking for SpaceX and Elon Musk, the PayPal entrepreneur who founded the space exploration firm.
An artists view of the space station’s robotic arm reaching out to grab SpaceX’s Dragon capsule which will happen if all goes according to plan after this Saturday’s launch
‘We have to allow for the fact that this is an extremely complex and tough flight. It’s a test flight, not a standard milk run,’ said Alan Stern, a U.S aerospace consultant and former associate administrator in charge of science at Nasa according to the New York Times.
‘Elon Musk and SpaceX have a tremendous track record, and when Falcon 1 failed, they stuck with it and made it work.
‘They will have a failure again, because everyone does, but a test flight is a learning experience.
SpaceX tested the Dragon capsules ability to parachute safely (left) and to splash down in the Pacific (right)
‘Regardless of how successful the flight is, whether it’s complete or partial, it’s a big step forward. This is a sea change.’
Originally, the plan was for SpaceX and their capsule to have docked with the ISS by 2009.
‘Certainly, we would have hoped to have been further ahead,’ said Elon Musk, founder of SpaceX to the New York Times.
‘But I wouldn’t have expected that with great confidence.’
Like this:
Leftists Seek To Punish Rich Folks Driven Out Of U.S. By Leftist Tax Policies
Schumer’s Shakedown – New York Post
Facebook co-founder Eduardo Saverin becomes a billionaire today, and Chuck Schumer is seething.
Saverin, you see, objects to the staggering tax bills he would’ve incurred after today’s record-setting Facebook IPO – and so he decamped to Singapore and renounced his U.S. citizenship.
Which is rational, if impolitic. And which is his absolute right.
Now Schumer has the twitchies.
He’s co-sponsoring a bill that would permanently bar Saverin, among others, from re-entering the United States, while imposing punitive tax burdens on future investments in America.
“I have a status update for [Saverin],” Schumer declared yesterday, “Pay your taxes in full, or don’t ever try to visit the U.S. again.” Blah, blah, blah.
One needn’t sympathize with Saverin’s situation – he’ll be swimming in dough before sundown today – but it’s not inappropriate to be appalled by the message Schumer is sending.
First, it’s downright un-American to punish folks retroactively, no matter the offense. It may even be unconstitutional.
But the real problem with Schumer’s peevishness is that it ignores the basic problem: America’s globally uncompetitive tax structure.
Singapore has no capital-gains tax. America’s is one of the world’s most voracious – something that might not have made a difference a generation ago, but which makes no sense whatsoever in an age of international connectivity.
That is, high tax rates combined with high taxpayer mobility in the electronic age makes for a volatile mix.
Singapore is one nonstop jet flight away.
The Internet is infinitely faster.
Innovators don’t have to stick around just to be shaken down.
These Are the ‘Least’ & ‘Most’ Business-Friendly States In The U.S.
These Are the ‘Least’ & ‘Most’ Business-Friendly States In The U.S. – The Blaze
The Ewing Marion Kauffman Foundation, a nonprofit dedicated to supporting entrepreneurship, and Thumbtack.com have released a study ranking the “least” and “most” business-friendly states in the U.S.
Idaho, Texas, Oklahoma, and Utah all scored A+’s for their treatment of small business while California, Hawaii, Vermont, and Rhode Island received F’s.
Massachusetts, Michigan, Connecticut, and New York all scraped by with D’s.
“Six thousand small business owners have told an unusually nuanced story about what they value in their local government,” said Sander Daniels, co-founder of Thumbtack.com., according to the Kauffman Foundation’s press release.
The study’s conclusions are based on data collected from over 7,000 respondents, 6,022 of whom answered questions regarding demographics and the economic health of small business in their state, according to the survey’s methodology.
However, it should be noted that although more than 6,000 small businesses in Thumbtack’s database of 275,000 members responded to the survey, the ranking excluded Alaska, North Dakota, South Dakota, West Virginia and Wyoming because they received fewer than 10 respondents, according to CNN Money.
Here are a few of the categories survey respondents were asked to rank:
* Overall small business friendliness
* Ease of starting a small business
* Cost of hiring a new employee
* Overall regulatory friendliness
* Friendliness of health and safety regulations
* Friendliness of employment, labor, and hiring regulations
* Friendliness of tax code
* Friendliness of licensing regulations
What were some of the major findings of the “business-friendly” study?
For starters, Texas has three of the five highest ranked cities on the list (Dallas-Fort Worth, San Antonio, and Austin) while California has three of the lowest rated (Los Angeles, San Diego, and Sacramento).
Furthermore, and perhaps a little more surprising, many small businesses owners said licensing laws were “nearly twice as important as tax rates in determining overall business-friendliness.” This is interesting considering that the Institute for Justice has just released a report, titled “License to Work: A National Study of Burdens from Occupational,” that argues occupational licensing requirements are an oftentimes unnecessary, unreasonable, and costly burden on workers and business owners.
“Although Texas and Idaho clearly come out on top as the nation’s friendliest states towards small business, entrepreneurs value a lot more than just low tax rates. Easy-to-understand licensing regulations and well-publicized training programs are critical tools necessary to support small business,” Daniels said.
But perhaps more important than the demographic information is the fact that the Kauffman/Thumbtack study comes with some interesting political implications.
“Asking entrepreneurs to rank state friendliness to their businesses is a powerful resource for helping policymakers understand the needs of business owners and for helping aspiring founders understand the full dimensions of their business environment,” said Dane Stangler, director of research at the Kauffman Foundation.
*VIDEO* Remember This Guy? He’s A True Conservative Who Ran For President But Couldn’t Get Into The Debates, So His Campaign Suffered A Premature Death
Click HERE to visit Congressman Thaddeus McCotter’s congressional re-election campaign website.
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Click HERE to visit the Thaddeus McCotter Wikipedia page.
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Lies, Damned Lies And Government Jobs Data – By Elizabeth MacDonald
Lies, Damned Lies And Government Jobs Data – Elizabeth MacDonald
There is lots of talk about the “fiscal cliff” the U.S. faces at year end, as stimulus and tax cuts go away.
So the last thing the government needs now is market distrust in its job numbers. But, as analysts dig into the government job numbers, questions are increasingly being raised about the reliability of the data, from questionable revisions in the weekly jobless numbers to the odd changes in unemployment rates.
For 59 out of the last 60 weeks, the weekly jobless numbers have been revised, after the fact, always in the same direction: higher. That’s unheard of.
Those revisions higher make the present week’s unemployment number look better in comparison, more so since the markets often treat the prior week’s revision as an afterthought.
And there is statistical manipulation in the unemployment rate, too. The government’s reported unemployment number doesn’t include people who stopped looking for work, but who want jobs.
The Bureau of Labor Statistics says the unemployment rate is dropping, and fell from 10% in October 2009 to 8.2% now. That’s got the White House and media pundits saying an economic recovery has taken place, and that the President’s stimulus bill, which cost more than $750 billion to date, has driven unemployment down towards 8% as promised.
However, the unemployment rate is the number of people out of work but who are actively looking. The government doesn’t count in that rate the now 6.3 million who have given up and stopped looking for work, but want jobs. That number has grown from 5.7 million in January 2009.
So, this “improvement” in the unemployment rate is artificial – it was due to workers giving up and dropping out of the labor force.
The statistic to look at simply counts the people who are either working or not working. It sets aside the idiosyncratic manipulation whether they’re actively looking for work or not.
If the adult labor force participation rate stayed the same today as it was when the Great Recession ended in June 2009, at 67.5%, the unemployment rate would be 10.9%.
“Some 80% of the reduction” in the unemployment rate from 10% hit in October 2009 to today’s 8.2% “has been from adults quitting the labor force,” says economist Peter Morici.
Morici adds the unemployment rate “rises to 14.5% if you factor back in those who’ve stopped looking for work but would re-enter if there were jobs, as well as part-time workers who would prefer full-time positions.”
Yes, the number of people who have given up looking for work include retiring baby boomers. Still, there is no decent government data showing the number of actual, retiring baby boomers, only estimates. And there are no solid data showing the number of boomers retiring who still want to work.
Overall, government estimates show we have less people wanting to look for work as the population ages, and that’s bad for Social Security, which depends on workers funding it. The “labor force participation rate is declining as baby boomers retire, and what is striking is that decline even includes the number of students and immigrants looking for jobs,” says James Farrell, FOX News analyst.
So ask yourself this: As more people drop out looking for a job, is it right that the government counts it so the unemployment rate looks lower than it really is?
What’s important is the broader trend. Since President Obama took office, America has lost a net 740,000 jobs. But during the first 30 months of President Ronald Reagan’s economic recovery, which started in December 1982, total U.S. employment increased by 8.9 million jobs.
All of this was borne out in the disappointing April ADP employment report today on new private sector jobs, which arrives two days before the Dept. of Labor’s payrolls report for last month.
The ADP number came in showing 119,000 jobs were created in the private sector in April, while analysts had expected it would show that U.S. employers added 177,000 workers (still lower than the 209,000 increase recorded in March.)
It’s important to note that the ADP jobs report has tracked the Labor Department’s numbers closely for the last 10 years, according to Charles Brady, senior editor at FOX Business.
“While there is often a wide variance between the two readings, the directional correlation is very strong – they move in the same direction,” Brady says.
The engine of U.S. job growth, small businesses (those with 1-49 employees), reported a weak 58,000 jobs created, the third straight monthly decline and the lowest since August. Small businesses that produce goods lost jobs, too. Large businesses with more than 500 employees added just 4,000 jobs.
ADP says weather may have played a factor. Better hiring in the mild winter months could be leading to a “payback” in the spring, as businesses have already done the hiring they need for now. Still, all of this means it is unlikely there will be a decline in the unemployment rate Friday, unless the labor force shrinks again, which would not be good, either.
This Friday, forecasters expect the Labor Department to report the economy added 165,000 jobs in April – better than the 120,000 in March, but still under the 212,000 rate for the first quarter, when the U.S. economy grew at just a 2.2% annualized rate.
The U.S. economy is creating jobs, but it is struggling, adding jobs at a rate of just 131,000 a month in 2011, which is not enough to reduce the unemployment rate.
Morici says the U.S. economy “must add 13 million jobs over the next three years -362,000 each month – to bring unemployment down to 6%. GDP would have to increase at a 4% to 5% pace.”
So there you have it.
Since when does a nation’s labor force shrink during a recovery? It should not shrink, it should grow in a recovery. The labor force participation rate is at the rate it was in 1979 and 1982, even around the same rate it was back in 1969, while the worker population has grown dramatically since.
The rate now is 63.8%, trending at the 30-year low it just hit this past January, at 63.7%. Today there are 154.7 million people over age 16 who either have jobs or want jobs, but out of a much bigger total U.S. population of 16 or older, 242.6 million.
That’s around the same level in July 1982, when the labor force participation rate was 65.3%. There were 110.3 million people working or who wanted to work out of a smaller population of 172.2 million people aged 16 or older.
The labor force participation rate has stayed pretty much the same as it was in 1969, at 60.1%, and 63.8% in February 1979, when the total U.S. population of 16 or older was smaller. The same holds true for more than a decade ago, in April, 2000, when the employment-to-population ratio was 64.7%. That’s when the overall population was lower. at 282 million, versus the 310 million today.
Jobless Claims Rose Last Week ‘Unexpectedly’
Jobless Claims Rose Last Week ‘Unexpectedly’ – Sweetness & Light
From the perennially blindsided Reuters:
Jobless claims unexpectedly rise last week
Lucia Mutikani
April 12, 2012WASHINGTON (Reuters) – New claims for unemployment benefits rose last week to their highest level since January, a development that could raise fears the labor market recovery was stalling after job creation slowed in March.
Initial claims for state unemployment benefits increased 13,000 to a seasonally adjusted 380,000, the Labor Department said on Thursday. The prior week’s figure was revised up to 367,000 from the previously reported 357,000.
Wow, Reuters is even reporting that last week’s number was revised up. (As usual.)
Economists polled by Reuters had forecast claims falling to 355,000 last week…
Meanwhile, the Associated Press tries to make the best of things:
US applications for jobless aid up to 2-month high
By CHRISTOPHER S. RUGABER
April 12, 2012WASHINGTON (AP) – More people sought unemployment benefits last week, pushing the number of applicants to the highest level in two months.
The Labor Department said Thursday that weekly unemployment benefit applications jumped 13,000 to a seasonally adjusted 380,000. The previous week’s figures were also revised higher…
The figures come after a disappointing employment report last week that showed that employers added only 120,000 jobs in March, half the average pace in the preceding three months. But many economists downplayed the weak March figures, noting that a warmer winter may have led to some earlier hiring in January and February…
Hilarious. But the AP never says die:
The economy has added an average of 212,000 jobs per month in the January-March quarter, well ahead of last year’s pace.
Economists note that applications for unemployment aid are at a much lower level than they were last year, suggesting that March’s weak numbers might have been a temporary lull…
And their economists are never wrong. Except all the time.
Like this:
*LIVE STREAMING* Arizona Republican Primary Debate (CNN) – February 22, 2012 – 8pm EST
….LIVE STREAMING FOR THIS EVENT HAS ENDED.
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Daily Benefactor News – Obama’s Assault On Dividends… Elderly Hardest Hit
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Obama’s Assault On Dividends… Elderly Hardest Hit – Wall Street Journal
President Obama’s 2013 budget is the gift that keeps on giving – to government. One buried surprise is his proposal to triple the tax rate on corporate dividends, which believe it or not is higher than in his previous budgets.
Mr. Obama is proposing to raise the dividend tax rate to the higher personal income tax rate of 39.6% that will kick in next year. Add in the planned phase-out of deductions and exemptions, and the rate hits 41%. Then add the 3.8% investment tax surcharge in ObamaCare, and the new dividend tax rate in 2013 would be 44.8% – nearly three times today’s 15% rate.
Keep in mind that dividends are paid to shareholders only after the corporation pays taxes on its profits. So assuming a maximum 35% corporate tax rate and a 44.8% dividend tax, the total tax on corporate earnings passed through as dividends would be 64.1%.
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In previous budgets, Mr. Obama proposed an increase to 23.8% on both dividends and capital gains. That’s roughly a 60% increase in the tax on investments, but at least it would maintain parity between taxes on capital gains and dividends, a principle established as part of George W. Bush’s 2003 tax cut.
With the same rate on both forms of income, the tax code doesn’t bias corporate decisions on whether to retain and reinvest profits (and allow the earnings to be capitalized into the stock price), or distribute the money as dividends at the time they are earned.
Of course, the White House wants everyone to know that this new rate would apply only to those filthy rich individuals who make $200,000 a year, or $250,000 if you’re a greedy couple. We’re all supposed to believe that no one would be hurt other than rich folks who can afford it.
The truth is that the plan gives new meaning to the term collateral damage, because shareholders of all incomes will share the pain. Here’s why. Historical experience indicates that corporate dividend payouts are highly sensitive to the dividend tax. Dividends fell out of favor in the 1990s when the dividend tax rate was roughly twice the rate of capital gains.
When the rate fell to 15% on January 1, 2003, dividends reported on tax returns nearly doubled to $196 billion from $103 billion the year before the tax cut. By 2006 dividend income had grown to nearly $337 billion, more than three times the pre-tax cut level. The nearby chart shows the trend.
Shortly after the rate cut, Microsoft, which had never paid a dividend, distributed $32 billion of its retained earnings in a special dividend of $3 per share. According to a Cato Institute study, 22 S&P 500 companies that didn’t pay dividends before the tax cut began paying them in 2003 and 2004.
As former Citigroup CEO Sandy Weill explained at the time: “The recent change in the tax law levels the playing field between dividends and share repurchases as a means to return capital to shareholders. This substantial increase in our dividend will be part of our effort to reallocate capital to dividends and reduce share repurchases.”
And that’s what happened. An American Economic Association study by University of California at Berkeley economists Raj Chetty and Emmanuel Saez examined dividend payouts by firms and concluded that “the tax reform played a significant role in the [2003 and 2004] increase in dividend payouts.” They also found that the incentive for firms to pay dividends rather than sit on cash helped “reshuffle” capital from lower growth firms to “ventures with greater expected value,” thus increasing capital-market efficiency.
If you reverse the policy, you reverse the incentives. The tripling of the dividend tax will have a dampening effect on these payments.
Who would get hurt? IRS data show that retirees and near-retirees who depend on dividend income would be hit especially hard. Almost three of four dividend payments go to those over the age of 55, and more than half go to those older than 65, according to IRS data.
But all American shareholders would lose. Higher dividend and capital gains taxes make stocks less valuable. A share of stock is worth the discounted present value of the future earnings stream after taxes. Stock prices would fall over time to adjust to the new after-tax rate of return. And if investors become convinced later this year that dividend and capital gains taxes are going way up on January 1, some investors are likely to sell shares ahead of paying these higher rates.
The question is how this helps anyone. According to the Investment Company Institute, about 51% of adults own stock directly or through mutual funds, which is more than 100 million shareholders. Tens of millions more own stocks through pension funds. Why would the White House endorse a policy that will make these households poorer?
Seldom has there been a clearer example of a policy that is supposed to soak the rich but will drench almost all American families.
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Gallup Finally Discovers What Conservatives Have Known From The Beginning
Health Costs, Government Regulations Curb Small Business Hiring – Gallup
U.S. small-business owners who aren’t hiring – 85% of those surveyed – are most likely to say the reasons they are not doing so include not needing additional employees; worries about weak business conditions, including revenues; cash flow; and the overall U.S. economy. Additionally, nearly half of small-business owners point to potential healthcare costs (48%) and government regulations (46%) as reasons. One in four are not hiring because they worry they may not be in business in 12 months.
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Companies typically hold back on hiring when the economy is weak and when their operating environment is not providing sufficient revenues or cash flows. This appears to be the case right now, as the economy has been weak for more than four years. Less typical is for many owners to point to such things as potential healthcare costs and government regulations.
Paging The ACLU: Minneapolis Helps Muslim-Owned Businesses Follow Sharia Law
Paging The ACLU: Minneapolis Helps Muslim-Owned Businesses Follow Sharia Law – Weasel Zippers
Call it a hunch but I suspect the ACLU won’t be filing any lawsuits over this.
(MNDaily) – In 2005, Afrik Grocery and Halal Meat on Cedar Avenue needed to expand. Owner Abdi Adem, who operates his business under Sharia law, needed to find a loan that funded the expansion and complied with his religious beliefs.
Finding the loan was easier than he expected.
Since December 2006, the city of Minneapolis, in partnership with the African Development Center, has given out 54 loans in a way that is compliant with Islamic law by using a fixed rate in place of a variable interest rate, which some considered sinful.
Instead of charging interest, the city and the ADC estimate how long it will take the business to pay off the loan and totals what the interest would be. That amount is added as a lump sum to the total cost of the loan.
“It feels like, looks like and acts like a loan, but it’s just a different way of looking at it,” said Hussein Samatar, executive director of the ADC.
Abdulwahid Qalinle, an adjunct associate professor of Islamic law at the University of Minnesota, said interest rates can be considered sinful under Sharia law.
“Islam has specific guidelines where people can acquire wealth and how to spend their wealth,” Qalinle said.
A classic example of how regulations can kill businesses
Duane Lester has a story about how tough it is to start a business in San Francisco.
The New York Times (yes, that one) has an article about an ice cream parlor in San Francisco that almost wasn’t. The journey from idea to reality was one filled with red tape and over $30,000 in fees.
But small business is a priority in San Francisco:
The Ice Cream Bar opened Jan. 21 in the Cole Valley neighborhood — an homage to the classic parlors of the 1930s, complete with vintage soda fountain and lunch counter seating. It has become an immediate sensation, packed with both families and the foodie crowd, savoring upscale house-made ice creams and exotic sodas (flavorings include pink peppercorn and tobacco). The shop also employs 14 full- and part-time workers.
But getting it opened wasn’t easy.
“Many times it almost didn’t happen,” said Juliet Pries, the owner, with a cheerful laugh.
Ms. Pries said it took two years to open the restaurant, due largely to the city’s morass of permits, procedures and approvals required to start a small business. While waiting for permission to operate, she still had to pay rent and other costs, going deeper into debt each passing month without knowing for sure if she would ever be allowed to open.
“It’s just a huge risk,” she said, noting that the financing came from family and friends, not a bank. “At several points you wonder if you should just walk away and take the loss.”
Ms. Pries said she had to endure months of runaround and pay a lawyer to determine whether her location (a former grocery, vacant for years) was eligible to become a restaurant. There were permit fees of $20,000; a demand that she create a detailed map of all existing area businesses (the city didn’t have one); and an $11,000 charge just to turn on the water.
Simply unbelievable isn’t it? Cities need businesses to grow and prosper, they need the sales tax revenues, yet, some cities seem intent on making it nearly impossible to start, or expand a business. It ought to be common sense for city councils, and mayors to realize that making it easier, and less expensive to start a business will be far more beneficial for that city, and yes, the city’s revenues.
Yet, the desire to micro-manage is inherent in the Liberal mind, and make no mistake, that desire plays a big part in this process. Another contributing factor is incompetence that infests every layer of government. The third factor is greed. Make no mistake, the Left is greedy, greedy for your money, no matter where it comes from. The fees, in this story topped $30,000. Why? Certainly some licenses might be perfectly reasonable, but how many people might not start a new business because of all those fees. They might also pack up their dreams, and open a business in a neighboring town if that town is more business friendly.
Rule #1 for government, be it city, county, state or federal, is this. If you want economic growth, do not kick businesses in the groin with regs and taxes. Will the Left ever learn this rule? Of course not. They are addicted to their failed ideals, which is why they are Leftists.
Hundreds Of Solar Companies Expected To Go Bankrupt
Hundreds Of Solar Companies Expected To Go Bankrupt – Sweetness & Light
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From CNN’s Money.Com:
Solar power bankruptcies loom as prices collapse
By Steve Hargreaves
November 30, 2011NEW YORK (CNNMoney) – The once high-flying solar power sector is headed for tough times, as a combination of slack demand and massive oversupply is leading to plummeting prices and profits for solar panel makers…
The only time solar power was high flying was when it was being held up by massive government subsidies and sweetheart deals.
The past year was already grim. The Guggenheim Solar (TAN) exchange-traded fund is down 60% since January and sits even lower than it did following the crash in 2008.
Two high profile companies have gone bankrupt in the United States – government-backed Solyndra and Evergreen – and analysts anticipate more failures ahead.
“Solyndra was just the beginning,” said Jessie Pichel, head of clean energy research at the investment bank Jefferies & Co. “We’re going to see a lot of companies go bankrupt.”
Just how many? Of the few hundred or so solar panel makers worldwide, just 20 to 40 are expected to remain standing in a few years time, said Mark Bachman, a renewables analyst at Avian Securities…
[T]he next couple of years will be wrenching for companies and investors in the solar power space as the weaker players go bust or get bought by larger rivals…
Or the government.
In some ways, the bust was inevitable. For much of the last decade solar power worldwide saw annual growth rates in the double or even triple digits…
Both of these things led to a massive amount of available capital. Factories were built and production capacity mushroomed.
But just as all these new solar panels were making their way to market, the debit crisis hit in Europe. The generous subsidies offered to solar power by European governments and utilities were cut. Demand for solar panels fell.
Malarkey. If the solar industry had been funded by private capital and not governments, this would not have happened.
The simple truth is that solar power never attracted enough real capital. Just taxpayers’ money.
Plus, solar project developers were having a hard time getting credit to build new power plants, further cutting into demand. Prices for solar panels began falling rapidly.
A year ago solar panels were selling for $1.50 to $2 per watt, said Ramesh Misra, a senior analyst at Brigantine Advisors, a research outfit. Now they sell for half that, and the decline hasn’t stopped…
Lack of production caused the prices to fall rapidly? This article is all over the place trying to find excuses. And none of them make much sense.
Solar power is failing because it is not all that it was cracked up to be.
What has to happen to turn things around?
Better access to credit, a more stable subsidy policy and fewer solar panels on the market, analysts say. Fewer panels means fewer solar panel makers.
In other words the only thing that will save solar power is more subsidies and more bankruptcies.
Which just shows what a tangled web you weave, once you practice to deceive. And deception is what these ‘green’ industries are all about.
Perry proposes flat tax with some deductions – politics – Decision 2012 – msnbc.com
Rick Perry offers his tax reform plan
U.S. Incomes Fall For First Time In Nearly 2 Years
U.S. Incomes Fall For First Time In Nearly 2 Years – Breitbart
Americans earned less last month, the first decline in nearly two years. With less income, consumers could cut back on spending and weaken an already-fragile economy.
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Consumers spent a little more in August despite seeing their incomes drop 0.1 percent, the Commerce Department said Friday. Consumer spending rose just 0.2 percent, after a more robust 0.7 percent gain in July.
Many tapped savings to cover the steeper costs. And most of the increase in spending went to pay higher prices for food and gas. When adjusted for inflation, August consumer spending was flat.
Stocks fell after the report’s release. The Dow Jones industrial average fell more than 100 points in the first half-hour of trading.
The data offered “more evidence that households are in quite a bind,” said Paul Dales, senior U.S. economist at Capital Economics.
In August, employers added no new jobs and cut hourly earnings for the first time in more than three years.
Income growth has been sluggish for most of the year. After taking inflation into account, after-tax incomes actually fell 0.3 percent in August and 0.2 percent in July. That’s the first back-to-back declines in inflation-adjusted incomes since mid-2008, when the country was in the midst of the recession and financial crisis.
Even the increase in spending wasn’t necessarily a good sign. Consumers spent 0.3 percent more on nondurable goods, such as food and clothing.
Gasoline prices are now roughly $3.46 per gallon. While that is higher than last year, the price is down nearly 52 cents from this year’s peak price of $3.98.
Consumers spent less last month on big purchases, such as cars, appliances and furniture. Car sales fell during the month, but part of that weakness reflected supply problems stemming from the Japan crisis.
“Consumer spending is still rising, which is important for U.S. economic growth. But the gains are pretty mediocre,” said Jennifer Lee, senior economist at BMO Capital Markets.
Facing higher prices and earning less money, consumers saved only 4.5 percent last month. The savings rate rose as high as 6.5 percent in late 2008, at the height of the recession and financial crisis.
Prior to the recession, Americans saved just 2 percent. An abundance of jobs and inflated home prices made many resist stowing money away.
The economy grew at an annual rate of just 0.9 percent in the first six months of the year, the slowest growth since the recession officially ended more than two years ago.
Consumer confidence stayed weak in September after the economy experienced a number of shocks this summer. Lawmakers fought over raising the nation’s borrowing limit, Standard & Poor’s downgraded long-term U.S. debt, the stock market fluctuated wildly and Europe’s debt crisis intensified.
The Federal Reserve last week agreed to shift $400 billion of its portfolio of Treasury securities to try to drive down long-term interest rates. It was the Fed’s latest unconventional move seeking to give the economy a boost.
Daily Benefactor News – U.S. Jobless Claims Rise To 428,000 As Inflation Accelerates
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U.S. Jobless Claims Rise To 428,000 As Inflation Accelerates – Financial Times
U.S. jobless claims rose for a second straight week to the highest level since late June as the weak economy continued to take its toll on the labour market.
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Separately, higher prices for rent, clothing and cars accelerated inflation to the fastest annual pace in nearly three years.
Initial claims for unemployment insurance increased by 11,000 to 428,000 in the week ending September 10, the labour department said, missing expectations of a decrease during the week following the Labor Day holiday.
Claims generally fall during a shortened week because there is one less day to file. But last week, applications did not fall as much as anticipated, a labour department spokesman said, so the seasonally adjusted level of claims rose.
The longer trend of claims also continued to move higher, with the four-week moving average of claims climbing by 4,000 to 419,500.
The labour market is in dire straits, with unemployment stuck above 9 per cent and no net jobs added in August.
“We also have to consider that the trend in claims could be turning higher again in the wake of the sharp drop in business confidence,” said Ian Shepherdson, chief economist at High Frequency Economics. “One bad week means nothing, but claims have been nudging higher since their 399K low in early August. We await the next few weeks’ numbers with interest, and a degree of trepidation.”
The number of people continuing to claim unemployment insurance pulled back in the week ending September 3, falling by 12,000 to 3.73m. Claims for emergency benefits ticked up by 6,049 to 3.07m.
A separate labour department report on Thursday showed inflation accelerated faster than expected in August as Americans paid more for a wide range of goods and services.
Core prices, which strip out more volatile food and energy prices, rose 2 per cent from August 2010, the fastest yearly pace in almost three years and at the upper end of the Federal Reserve’s target range. Higher prices for shelter, apparel, new and used vehicles, and airline fares all fuelled the annual increase. From July, core prices were 0.2 per cent higher, in line with expectations and the same rate as the previous month.
Overall prices were 3.8 per cent higher from last August, the fastest rise since September 2008 and 0.4 per cent higher than in July, exceeding expectations. Food prices rose 0.5 per cent over the month, the steepest increase since March, as costs of cereals and dairy products increased.
Energy prices also contributed to higher inflation, rising 1.2 per cent last month, but petrol costs decelerated from July. Prices at the pump rose 1.9 per cent in August, compared with July’s 4.7 per cent surge.
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