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.

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It seems, judging by news cycles and the way the media presents the economic situation that the unemployment situation is disproportionately bad compared to the depth and breadth of our economic situation.  The reality, however is far different.  In comparison to other recessions in the past, the job situation in this one is just about on par with the crisis amongst other economic indicators.  While many analysts are claiming that we are in the midst of a so called, “jobless recovery” the reality is that unemployment has always lagged stock recovery by about 5-6 months, which is similar to what we are seeing in today’s recession.  Moreover, while past recessions have manifested an average increase of .39% in unemployment for a 1% drop in the Dow, this one has shown a .5% increase in unemployment for a 1 percent drop in the Dow, a very minimal difference.  In order to better recognize the disparity between the facts we are presenting and the reality in terms of the scope of the unemployment situation with respect to the scope of the recession, we take a look at every major recession since 1970.

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The numbers on Friday seemed to set a gloomy cloud over the good economic news that has come out recently.  But we wanted to see whether all the hype about a “jobless recovery” is true.  Tomorrow’s newsletter will take a look at all major recessions since 1970 and compare the depth of the employment situation with respect to the fall in stocks with that of other recessions and that of the recession we are currently stuck in.  The time periods we examined were from the beginning of each recession to the bottom on the Dow Jones (we used unemployment rates of t=t+6 months due to its role as a lagging indicator).  Below we compared the % increase in unemployment rate to the % decrease in the Dow for each month in each of the recessions, coloring our current recession in blue and providing a separate trend line for the current recession.

Tomorrow we’ll have full analysis so make sure to sign up for our free weekly newsletter to get our newest article!

As Fiscal Frenzy has been saying for months now, the economy is in a recession.  Today the NBER(National Bureau of Economic Research) said the US economy has been in a recession since December 2007, a year ago from today.  This news confirmed what many had already believed and the Dow dropped almost 700 points and 7.7%.  The bright spot in this session of deep economic decline is that Crude Oil has also been affected.  Today the price of crude dropped more than 9% to close below $50 a barrel.  Ease as the pump is little to no consolation for Americans however as companies are cutting back on jobs and salaries as their stocks suffer in these times.  One possible bright spot for investors to help take us out of the recession would be strong consumer spending this holiday season.  Black Friday sales were up year over year and strong consumer spending over the next month would be a good signal for investors.  Some stocks that could benefit you this holiday season include Apple (AAPL).  The company had lower than expected price cuts for Black Friday but today it was announed that Mac sales were better than expected.  This news by Gene Munster of Piper Jaffray prompted him to keep his 12 month price target on Apple at $250 a share.  The stock closed down 4% today at $88.93 a share.