Monday, July 12, 2010

Economy To Crash Harder-er

Here's an angle I have not heard mentioned anywhere yet.

The tax cuts installed by President Bush will expire at the end of 2010. This includes capital gains taxes going up a bunch. Increasing capital gains taxes hurts investors, who invest less (because they have less -after taxes are counted- to invest).

There will be less investment activity on the US stock exchanges come January 1st, 2011, unless something is done about the coming increase in taxes on capital gains. Fewer dollars being poured into American corporations means fewer dollars being poured into the American economy. The economy takes a hit.

Smack in the middle of the Double-Dip that will be announced as having begun in February, while it actually started this month.

Congress could do something about it, but the rest of the Congressional working schedule until the mid-term election is about 14 days of good solid work. They have very important campaigns holidays to attend, you see. The lame-duck session after the election will probably not be able to do anything about the capital gains taxes going up. At best, there will be a January dip in the economy because of this. At worst, Obama will refuse to sign a tax cut, and the hit we take as a nation from the tax increases will linger indefinitely.

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