Thursday, April 28, 2022

Economy shrinks for first time in two years

The U.S. economy shrank last quarter for the first time since the pandemic recession struck two years ago, contracting at a 1.4% annual rate, but consumers and businesses kept spending in a sign of underlying resilience.

The negative growth rate missed even the subdued Dow Jones estimate of a 1% gain for the quarter. GDP measures the output of goods and services in the U.S. for the three-month period.

Despite the disappointing number, markets paid little attention to the report, with stocks and bond yields both mostly higher. Some of the GDP decline came from factors likely to reverse later in the year, raising hopes that the U.S. can avoid a recession.

The steady spending suggested that the economy could keep expanding this year even though the Federal Reserve plans to raise rates aggressively to fight the inflation surge. The first quarter's growth was hampered mainly by a slower restocking of goods in stores and warehouses and by a sharp drop in exports.

The Commerce Department's estimate Thursday of the first quarter's gross domestic product — the nation's total output of goods and services — fell far below the 6.9% annual growth in the fourth quarter of 2021. And for 2021 as a whole, the economy grew 5.7%, the highest calendar-year expansion since 1984.

The economy is facing pressures that have heightened worries about its fundamental health and raised concerns about a possible recession. Inflation is squeezing households as gas and food prices spike, borrowing costs mount and the global economy is rattled by Russia's invasion of Ukraine and China's COVID lockdowns.

A deceleration in private inventory investment weighed on growth after helping propel GDP in the back half of 2021. Other restraints came from exports and government spending across state, federal and local governments, as well as rising imports.

“This is noise; not signal. The economy is not falling into recession,” wrote Ian Shepherdson, chief economist at Pantheon Macroeconomics. “Net trade has been hammered by a surge in imports, especially of consumer goods, as wholesalers and retailers have sought to rebuild inventory. This cannot persist much longer, and imports in due course will drop outright, and net trade will boost GDP growth in Q2 and/or Q3.”

While recession expectations on Wall Street remain low, there’s further trouble ahead for the economy: In an effort to combat burgeoning price increases, the Federal Reserve plans to enact a series of rate hikes aimed at slowing growth further.

Sources: Associated Press, CNBC

Wednesday, April 27, 2022

Biden Floats $1 Trillion Bailout of Student Loans

 This plan would actually benefit the wealthy more than the poor. 

It might be the biggest giveaway in American history and goes much further than anything Bernie Sanders or Elizabeth Warren have proposed. Biden now wants to cancel more than $1 trillion dollars in student loans – he's already let college graduates delay repayments for years.

This plan makes suckers out of the millions of Americans who have felt honor bound to pay off their debts. Even more lavishly subsidizing higher education will only push tuition even higher and making the next round of student debt even higher. But who would ever pay off a student loan after this blanket forgiveness program.

Who would benefit? The most recent Federal Reserve Survey of Consumer Finances found that only 22% of families had student loan debt and "student debt has consistently been disproportionately held by higher-income families."

Canceling all student loans is supported by 19% of voters according to the latest poll – but times are getting desperate at the White House, and a trillion dollars can buy a lot of votes from the dead beat crowd.  

Of course, 43% of Democrats strongly support extending the student loan payment pause, while only 12% of Republicans do. 



The Path to Destruction


 

Wednesday, April 13, 2022

California Crazy and BLM Racket

This Headline from the Los Angeles Times was eye catching. 

Proposed bill would shorten California workweek to 32 hours.

Here’s what you need to know:

“The bill, AB 2932, would change the definition of a workweek from 40 hours to 32 hours for companies with more than 500 employees.”

Companies would be prohibited from cutting the pay of workers – so effectively every worker covered by the law would be getting a 20% mandatory pay raise.

France and many other Western European nations tried this in the 1980s and it led to the deindustrialization of these countries, before they abandoned the ruinous experiment.

I wonder if the geniuses in Sacramento who are plowing this bill forward have any idea where the money will come from so that workers can be paid more to produce less. It’s a very good way to move all manufacturing out of California. Some employers will simply try to raise prices to make up for the higher labor costs, which will only make inflation worse.

Brilliant. And Governor Gavin Newsom may just be dumb enough to sign the bill into law if it gets to his desk.

Media Finally Discovers Black Lives Matter A Racket

It’s taken two years, but media reporters have finally woken up to the corrupt money-raising racket that goes by the name of Black Lives Matter.

Stephen Crockett of the HuffPost, has written an eye-opening essay called “The Business of Black Death.”

He points out that in 2020, Black Lives Matter took in $90 million with precious little evidence of where the money went.

New York Magazine reports the group took $6 million of donations secretly buy a 6,500 square foot mansion in Los Angeles. Black Lives Matter co-founder Patrisse Cullors, a self-avowed Marxist, purchased four homes for some $3.2 million. Right on cue, Cullors responded by saying it was both “sexist” and “racist,” to challenge how the money has been spent. These shysters are very adept at deflecting criticism.

The late Darren Seals, a fierce opponent of police brutality in Ferguson, Mo., complained for years that BLM was “just collecting checks” and that none of the programs have for “the youth or funerals or other programs…We are back at square one, back where we started. No justice, no nothing.”

Thursday, April 7, 2022

State-Local Tax Burdens 2022

 


  • In calendar year 2022, state-local tax burdens are estimated at 11.2 percent of national product.
  • Taxpayers remit taxes to both their home state and to other states, and about 20 percent of state tax revenue comes from nonresidents. Our tax burdens analysis accounts for this tax exporting.
  • New Yorkers faced the highest burden, with 15.9 percent of net product in the state going to state and local taxes. Connecticut (15.4 percent) and Hawaii (14.9 percent) followed close behind.
  • On the other end of the spectrum, Alaska (4.6 percent), Wyoming (7.5 percent), and Tennessee (7.6 percent) had the lowest burdens.
  • Tax burdens rose across the country as pandemic-era economic changes caused taxable income, activities, and property values to rise faster than net national product. Tax burdens in 2020, 2021, and 2022 are all higher than in any other year since 1978.
  • State-local tax burdens are often very close to one another and slight changes in taxes or income can translate to seemingly dramatic shifts in rank. For example, Oklahoma (10th) and Ohio (24th) only differ in burden by just over one percentage point. However, while burdens are clustered in the center of the distribution, states at the top and bottom can have substantially different burden percentages.

How to Buy Happiness


 

Wednesday, April 6, 2022

Mortgage Rates at 10-year High

The MBA Mortgage Application Index declined 6.3% last week, following the prior week's decrease of 6.8%.

The fourth-straight weekly downturn came as a 9.9% drop in the Refinance Index was met with a 3.4% fall for the Purchase Index. The average 30-year mortgage rate extended its climb, rising 10 bps to 4.90%, and is up 154 basis points (bps) versus a year ago. Some sources, such as Mortgage News Daily, reported the 30-year fixed at 5.08%.




In afternoon action, the Federal Reserve released the minutes from the Federal Open Market Committee's (FOMC) March monetary policy meeting, at which the central bank initiated its rate hike campaign. 

The report showed that Members discussed and "generally agreed" to reduce the holdings on its balance sheet by a maximum of $95 billion—$60 billion in Treasuries and $35 billion in mortgage-backed securities—phased over three months, and likely starting in May. The move would double the rate of its last effort. 

In addition, the Committee discussed the pace at which future rate hikes should occur, with the minutes noting that, "Many participants noted that one or more 50 basis point increases in the target range could be appropriate at future meetings, particularly if inflation pressures remained elevated." 

The report showed that the uncertainty surrounding the war in Ukraine deterred some from going with such a move in March. The report comes in the wake of some Fedspeak this week, where Fed governor and vice chair nominee Lael Brainard suggested yesterday a rapid pace of balance sheet reduction as soon as the May meeting, and further hawkish remarks from Philadelphia Fed President Patrick Harker today.

Treasuries finished mixed with yields sitting near three-year highs and the yield curve steepening after noticeably flattening. The yield curve spread has garnered heavy attention, with some portions of the curve inverting to foster talk of the potential for a recession on the horizon. The recent steepening of the curve brought a portion—the spread between 2-year and 10-year yields—out of inversion territory this week.

The yield on the 2-year note declined 2 bps to 2.48%, while the yield on the 10-year note rose 6 bps to 2.61%, and the 30-year bond rate advanced 5 bps to 2.62%.

Does Money Make You Mean?

 


Saturday, April 2, 2022

ICYMI: New Restrictions on Water in the Bathroom

Remember the good old days when liberals demanded: “Keep the government out of the bedroom!” Well now they want the government in the bedroom, the bathroom, the kitchen, your outdoor pool…

Biden just rescinded a popular 2020 Trump order that increased how much water you can use in the shower. Capping the flow from a shower head to 2.5 gallons per minute doesn’t save much water, it simply makes you stand longer under the water as it drips and drips and drips. (It reminds us of those obnoxious low flush toilets the feds mandated to save the planet, but they didn’t because you had to flush twice.)

Now Biden is pushing a spate of additional energy conservation measures restricting the power that can flow to power air conditioning units, gas-fire places and electric pool heaters.

Sounds like Uncle Sam is turning into Big Brother.

https://www.washingtonexaminer.com/policy/energy-department-targets-pool-heaters-and-ac-units-with-new-efficiency-rules

Friday, April 1, 2022

Biden's Budget a Massive Expansion of the State

Massive spending increases for various bureaucracies is the most offensive part of Biden’s new budget.


These huge budgetary increases (well above the rate of inflation, unlike what’s happening to incomes for American families) were not the most economically harmful feature of Biden’s plan.

That dubious honor belongs to either his massive expansion of the welfare state or his big tax increases.

The Wall Street Journal editorialized a couple of days ago about what the president is proposing.

A President’s budget is a declaration of priorities, so it’s worth underscoring that President Biden’s new budget for fiscal 2023 proposes $2.5 trillion in tax increases over 10 years. His priority is taking money from the private economy and giving it to politicians to spend. …Raising the top income-tax rate to 39.6% from 37% would raise $187 billion. Raising capital-gains taxes, including taxing gains like ordinary income for taxpayers earning more than $1 million would snatch $174 billion. Raising the top corporate tax rate to 28% from 21%—a tax on workers and shareholders—would raise $1.3 trillion. Fossil fuels are hit up for $45 billion. We could go on… Let’s hope none of these tax-increases pass, but the Democratic appetite for your money really is insatiable.

That’s a damning indictment.

But the WSJ actually understates the problems with Biden’s tax agenda.

That’s because the White House also is being dishonest, as explained by Alex Brill of the American Enterprise Institute.

The budget proposes $2.5 trillion in net tax hikes, almost entirely from businesses and high-income households, and touts policies that would “reduce deficits by more than $1 trillion” over the next decade. But a short note in the preamble to the Treasury Department’s report on the budget reveals a sleight of hand: “The revenue proposals are estimated relative to a baseline that incorporates all revenue provisions of Title XIII of H.R. 5376 (as passed by the House of Representatives on November 19, 2021), except Sec. 137601.”In other words, the budget pretends that the failed effort to enact President Biden’s Build Back Better Act was a success and considers new budget proposals in addition to those policies. But you won’t find the price of the Build Back Better (BBB) Act (including its roughly $1 trillion in net tax hikes) in the budget tables.





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