House Republicans hustled to build support for Boehner’s “Plan B,” which would extend tax cuts for incomes under $1 million. Democrats have rejected the plan.
Some lawmakers suggested the Obama-Boehner budget negotiations—currently stalled—could resume if Plan B passes the House. Messrs. Boehner and Obama still appear to want a broader deal than Plan B, which doesn’t address across-the-board spending cuts set to take effect next year and does little for the budget’s long-term problems, such as health-care costs. (…)
The talks remained frozen Wednesday as both sides awaited the outcome of Thursday’s vote. Messrs. Obama and Boehner (R., Ohio) have not negotiated since Monday and continued to take shots at each other in public. (Chart from IBD)
“There are a lot of gyrations, tensions and difficulties, and this could still go awry,” said Rep. Tom Cole (R., Okla.). “But we are closer on Wednesday than we were on Friday. All the other major budget deals were all last-minute deals.”
Mr. Obama said Wednesday he would reach out to congressional leaders in coming days. (…)
Mr. Obama said it was “puzzling” Mr. Boehner would offer a fallback plan when the two sides were only a few hundred billion dollars apart, and added he would be willing to offer more spending cuts.
“If you look at Speaker Boehner’s proposal and you look at my proposal, they’re actually pretty close,” Mr. Obama said during a 35-minute news conference. “There are a few differences, but we’re right there.” (…)
Both sides also laid the groundwork for blaming the other if a deal isn’t reached. Administration officials said the president would use his inaugural and State of the Union addresses to pressure Republicans if negotiations fail.
The Internal Revenue Service, meanwhile, warned that if Washington fails to reach a deal, 30 million additional taxpayers would be subject to the alternative minimum tax, and most taxpayers would not be able to file their 2012 tax returns until late March or beyond. “This situation would create two significant problems: lengthy delays of tax refunds and unexpectedly higher taxes for many taxpayers,” IRS Acting Commissioner Steven T. Miller wrote lawmakers.
Why all that fuss? Tomorrow is the end of the world!
Business is booming for companies that sell survival gear, freeze-dried food and underground bunkers ahead of the Mayan calendar’s predictions of the end of the world on Dec. 21, as well as other doomsday scenarios.
From a French weather channel (HT Terry):
Tax Increases Coming Whether Fiscal Cliff Is Averted or Not Neither the Obama administration nor congressional Republicans want to increase taxes on everyone, but most workers are likely to see lower take-home pay in 2013, eating away at economic growth.
The White House, in its latest offer Monday to resolve the fiscal cliff, made a key concession that would be felt by every U.S. wage earner: allowing the expiration of the payroll tax cut, a provision that has lowered the workers’ share of Social Security taxes by two percentage points for the past two years. That translates into an average tax increase of about $1,000 a year for the typical American household making about $50,000 annually.
Letting the payroll tax rate revert to 6.2% from the current 4.2% would raise government revenue by about $125 billion next year, equivalent to 0.8% of total U.S. economic output, according to J.P. Morgan Chase.
Many forecasters say an increase in the payroll tax rate would damp consumer spending, weighing on the recovery. J.P. Morgan forecasts it would slow growth in 2012 by 0.6 percentage point, a sizable drag for an economy projected to expand by around 2% next year.
In reality, Democrats just want to make you happier:
(…) People who pay higher taxes than other people tend to be more satisfied with their lives, according to a new paper written by six economists at the Institute for the Study of Labor in Bonn. The researchers analyzed 26 years of German panel data that asked about 25,000 people the question “How satisfied are you with your life, all things considered?”
After controlling for income, age, education and other variables that could influence someone’s level of well-being, the researchers found that people who paid more in taxes reported higher levels of happiness. (…)
The research doesn’t answer whether people would be happier if their tax rates increase. “You can’t rule it out, but I think it’s probably not very likely that it’s that direct of an effect,” Mr. Siegloch said.
Only economists say things like “it’s probably not very likely”.
Americans might also show different results than Germans. “It could be different in the U.S.,” he said. (…)
Zillow’s November Real Estate Market Reports, released today, show that national home values rose 0.6% from October to November to $156,200. November 2012 marks the 13th consecutive month of home value appreciation. On a year-over-year basis, home values were up by 5.2% in November 2012 – a rate of annual appreciation we haven’t seen since August 2006 (when the rate was 6%), before the peak of the housing bubble. Rents are still appreciating, currently at 4.5% on a year-over-year level.
The rate of homes foreclosed continued to decline in November with 5.26 out of every 10,000 homes in the country being liquidated. Nationally, foreclosure re-sales continued to fall, making up 12.4% of all sales in November (Figure 4). This is down 3.8 percentage points from November 2011.
Central bank independence? BoJ adds Y10tn to easing programme Abe welcomes move as step in right direction
Retail-sales volumes were flat compared with October and 0.9% higher than in November last year, the Office for National Statistics said. There was also no sales growth in the three months to November from the previous three-month period. In October, sales fell a revised 0.7% on the month and rose 0.8% on the year.
The gauge rose 1.1 percent from October to 248.5, the Conference Board, a New York-based research group, said in a statement today, citing a preliminary reading. That compared with a revised 1.6 percent gain the previous month.
November freight traffic out of China keeps improving. ISI calculations show a 4.9% M/M gain (s.a.), +14.3% Y/Y.
China Stock Investors Empty 199,000 Account Amid Rally The biggest two-week rally in the Shanghai Composite Index in 13 months failed to draw Chinese stock investors, who emptied accounts at the second-fastest pace in 17 months last week.
The pain in Spain not in vain:
Rajoy Drives Spanish Revolution With Low-Cost Manufacture Spain’s turn toward wage cuts to restore competitiveness without leaving the euro is starting to bear fruit. At least that’s how it seems for Pablo Garcia, a 34- year-old autoworker who just got hired after a year out of work.
(…) As labor costs fall and Prime Minister Mariano Rajoy’s legislation makes it easier for companies to cut wages and reorganize staff, carmakers including Ford Motor Co. (F), Renault SA (RNO) and Peugeot are boosting production in Spain. (…)
A surge in exports and foreign corporate investment indicates Spain is quietly being transformed within the constraints of the single currency. (…)
Spanish labor costs fell in the second quarter and third quarters from a year earlier.
Spanish unit labor costs fell 4 percent from 2008 to the first half of 2012, and the decline relative to the euro area average amounted to 10 percentage points, according to data compiled by Commerzbank AG in Frankfurt. As the implementation of the new labor law allows for further wage cuts, Spain may outstrip the 16 percentage-point decline against the euro region that Germany achieved in the decade through 2008, said Joerg Kraemer, Commerzbank’s chief economist. (…)
Boulogne- Billancourt, France-based Renault, which last month opened talks with French labor unions to lower costs at home, plans to boost output in Palencia, northern Spain. Dearborn, Michigan-based Ford said Oct. 25 it will shut three plants in the U.K. and Belgium while increasing capacity near Valencia, Spain. (…)
Peugeot said in October its Madrid factory will make a new Citroen model starting in 2014. The company has hired 70 people in Spain this year, according to Pierre-Olivier Salmon, a spokesman. (…)
Money funds are worried that the expiration of the unlimited FDIC guarantee on no-interest bank accounts at the end of the year will spark a massive influx of cash that could depress yields even further. Businesses that use the accounts are expected to move as much as $250 billion in deposits to money-market funds or large banks, the WSJ’s Kirsten Grind and Dan Fitzpatrick report. BlackRock and Federated Investors are warning investors that if the flood of money is large enough, some money-market funds could be closed to new entrants.
The unlimited Federal Deposit Insurance Corp. guarantee on no-interest bank accounts is expected to end on Dec. 31 and revert to $250,000 per depositor for each account category. An effort to extend the program died in the U.S. Senate last week.
Businesses and municipalities that use the accounts largely for payroll needs are expected to move cash to money-market funds or large banks. As much as $250 billion in deposits could shift, according to FBR Capital Markets. More than $220 billion currently protected by the unlimited coverage is held by banks with less than $50 billion in assets, according to the FDIC.
Why do we exchange gifts? I once enjoyed a heated debate with a group of anthropologists. After discussing what we might learn from each other we adjourned to the pub, where the debate continued. We bought rounds of drinks. But why?
For the anthropologists, the custom of standing a round represented ritual gift exchange. They drew an analogy with Native American potlatch festivals, where tribes would gather to eat, sing, dance and confer lavish presents – sometimes treasured or essential possessions – on each other. The economists preferred a more hard-nosed explanation. Buying drinks in rounds rather than individually was a means of reducing transaction costs. The number of dealings between the customers and the bar was reduced, and the need for small change diminished.
I proposed an empirical test between the competing hypotheses. Did you feel successful or unsuccessful if you had bought more drinks than had been bought for you? Unfortunately, the result was inconclusive. The anthropologists believed their generosity enhanced their status. The economists sought to maximise the difference between the number of drinks they had consumed and the number they had bought. They computed appropriate strategies for finite games and even for extended evenings of indeterminate length. The lesson is that if you want a good time at a bar, go with an anthropologist rather than an economist. (…)