Browsing Category: "GDP"
As Congress begins to turn towards 2010 and the tax issues that accompany it, I have a short opinion piece on why I believe that the highest earning Americans should face higher taxes:
The economy is still in dire straits and 2010 is around the corner marking time for the debate over income taxes to be rejuvenated. In the 1940s the highest marginal tax bracket on those making over 5 million dollars (75 million 2009 dollars) was over 90%. Today, after a wave of fiscal conservatism, the highest bracket applies to those making over 373,000 dollars a year and is at 35%. . The question today is what must be done with taxes to reinvigorate spending, lessen the deficit, and increase GDP. The answer lies in higher taxes for the richest Americans.
The moral arguments dealing with economic inequity are commonplace in today’s world so I’d like to focus on the economic benefits of higher taxes on the rich.
GDP results are coming out early tomorrow morning, before the markets open and Fiscal Frenzy is giving its final minute estimates. Although 3.2 % GDP growth has generally emerged as the consensus estimate amongst economists of all types, we believe that is a little cautious. Our GDP estimate is an real GDP growth rate of 3.5 percent for third quarter of 2009, effectively ending the recession. However, it should be noted that just because we believe reality to best 3.2 % does not mean that a result of around 3.2 percent is in any way bad news. First off, it can pretty clearly be established that investors generally have more bearish views of the economy than economists due, especially when coming out of a recession because they are more tied to the losses they have experienced. Thus, while we see 3.5 % as the closest estimate we can give to what will come out tomorrow, the reality is that almost any number that presents growth of greater than 3 percent will be spun by the media as a clear sign of substantive recovery. While it is lower than the consensus estimate, it is investors that are going to be buying or selling contingent on the news, and I believe that if all investors were polled, the estimate would be significantly lower than the 3.2 percent presented by economists. Look for a great day on the street tomorrow!
For Part 1 on home sales, click here.
For Part 2 on Stock Markets, click here.
GDP Numbers
Continuing our one week series on why we predict a V shaped recovery, after a hiatus article on economic stability and volatility, we point to the most critical of economic indicators: GDP growth. Last friday, GDP numbers came out for the second quarter of 2009. They indicated a robust reversal from the prior GDP contraction of 6.4 percent and motivated many economists to revise their estimates for Q3 2009. Below are 2 charts, one involving our current recession’s real GDP growth numbers and Q3 estimates, and the other GDP growth numbers from the commonly cited V shaped recession of 1953. Analysis continues after the jump.
Today reports came out that the GDP contracted just one percent in second quarter 2009. This was much better than the expected 1.5 percent market contraction as well as our estimate of 1.8 percent. Markets ended the day mixed with the Dow ending the day up about 18 points, but with the Nasdaq closing the day down. This week featured five days of generally flat trading, Thursday being the exception. But at least, the markets did not stall the momentum building up over the past two weeks. Furthermore, earnings continued to be strong over the course of the week and they prevented the Dow from having a massive sell off. Next week, the biggest news of the cycle comes out with job reports for July being reported. The last several job reports have shown mixed results. They have continued to show massive job losses across the board but the job losses have been consecutively less than the prior month. Should that trend continue, it could indicate that we have passed the bottom in terms of job losses and are nearing the bottom in terms of unemployment percentage.
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