Personal Economics 101

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...

 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 – ...

 

 

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 ...

  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 dra...

 

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 Commi...

 

 

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

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. Raisin...