Tax Cuts Die In Democratic Congress

I guess it was just a matter of time before Democrats in Congress got their way and did not renew the Bush tax cuts that were approved during the first year of the Bush administration. While many of these tax cuts did benefit the rich much more than the poor, there were some good parts to President Bush's tax reform. Now, Democrats in Congress are throwing out the baby with the bath water as they let President Bush's entire tax cut package expire, soon. One of the most unfair taxes imposed by the US federal government is the Estates Tax. With high Estate Taxes many families are unable to pass the family business down to their children without suffering tremendous tax consequences.

In my view Estate Tax reform should have been continued, but Democrats don't seem to agree with my assessment. The biggest problem with rolling back tax cuts is that all the extra money that will start pouring into Washington will just give Democrats and Republicans more of our money to spend to pet projects or outright pork. From a highway to nowhere to museums few people will ever visit, pork barrel politics has grown at a tremendous rate the past few years and it shows no signs of slowing down.

I saw a headline on Fox News Channels website today that said, 'Tax Cuts Die, Pork Lives'. While sometimes Fox News gets it wrong when it comes to their GOP leaning coverage of the news - today they got it right with that headline. Now that the Bush tax cuts will be allowed to expire, billions of extra dollars per year will be heading to Washington where politicians will be in search of even more pork for their districts. The US federal government is already in debt over it's head, but nothing seems to deter Members of Congress and President Bush from spending more money than they take in through taxes.

For most Americans, the expiration of the Bush tax cuts will hardly be noticed because most of the big dollar benefits did help out the richest among us, most. However, the GOP argument that rich people are the ones that create jobs is a correct position and with the US economy and small business already suffering because of increasing interest rates and high gas prices, now is the wrong time to be increasing taxes on both small and large businesses. While Republican politicians have always had to walk the tax cut walk, in recent years the GOP has fragmented into two completely different groups where one is mainly concerned with fiscal policy and the other with social issues.

This fragmentation will most likely continue and the GOP will lose even more elections at all levels of government.

March 14, 2008 Archives

Black Friday As Stocks Sell Off

It is never a good sign when the DOW opens and drops 300 points in just a few minutes, but that is exactly what happened this morning as news was released that Bear Sterns was being provided with a huge amount of cash liquidity from JP Morgan Chase and the US Federal Reserve of New York. Bear Sterns is just the latest financial company to show signs of weakness as the sub-prime leading market goes from bad to worse.

On many occasions I have seen the DOW Jones open sharply to the downside at the beginning of trading and through the day recover those losses to close higher. That may very well happen again today, but with ever increasing bad news coming out of the housing and financial sector - there will be a day soon when the Bulls on Wall Street run out of steam and just give up fighting against an ever increasing tide of bad economic news.

I have reported here several times before about concerns I have as to the financial well being of Citibank. On at least two different occasions, Citibank has traveled to the Middle East to request cash to help keep them in business. Now with today's announcement that JP Morgan Chase and the FRB are helping to bail out Bear Sterns, the worst of the news in the financial sector on Wall Street is yet to come.

I was surprised to hear that JP Morgan Chase was helping out Bear Stearns because I had assumed that their own balance sheet might have been hurt as badly as their banking competitor, Citibank. However, maybe I was wrong and JP Morgan Chase was not exposed to as many losses in the sub-prime market. My gut feeling is that the sub-prime leading crisis is just the tip of the iceberg when it comes to foreclosure issues in the US housing market. As the US economy continues to slow and job losses continue to grow, more Americans will find themselves unable to meet their monthly mortgage obligations.

March 14, 2008 Archives