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Comments »Top 50p Tax Rate Damages UK, say Economists
Twenty high-profile economists have urged the government to drop the top 50p tax rate, which they say is doing “lasting damage” to the UK economy.
In a letter to the Financial Times, they say it should be axed “at the earliest opportunity” to boost growth.
The tax is paid at 50p for each pound earned over £150,000 and affects around 310,000 people.
Critics say cutting the top rate at a time of cuts would be “monstrously unfair” and “phenomenally immoral”.
Ministers say although the 50p rate is temporary, their policy is to first increase the income tax threshold to £10,000.
The chancellor has asked HM Revenue and Customs to look at how much has been raised by the 50p rate, but it will not be able to count this until this year’s self-assessment tax returns are in after January next year.
The 20 signatories to the FT letter include two former members of the Bank of England’s Monetary Policy Committee, DeAnne Julius and Sushil Wadhwani.
It is part of a campaign being promoted through PR firm Westbourne, which they say is funded by businesses concerned about the impact of the 50p rate.
‘Mobile people’
The economists argue that the tax rate makes is making the UK “less competitive internationally, and making us less attractive as a destination for both foreign investment and talented workers”.
They call on the coalition, “to drop the 50p tax at the earliest opportunity as part of a package of measures to stimulate growth”.
Read the rest here.
Comments »One Reason Why Keynesian Stimuli Aren’t Working: They Aren’t Keynesian
Nick Gillespie, September 7, 2011
In The Washington Times, businessman Mike Whalen (who’s associated the free-market think tank NCPA) writes up an interesting take on why various federal stimulus program have tanked like the Titanic(while causing few ripples on the way down).
His points are worth thinking about.
According to the Keynesians, the remedy for today’s economic problem is for the federal government, as the single biggest actor, to “prime the pump.” As government money starts to ripple through the economy, consumers and businesses will be encouraged and cautiously respond with limited increases of their own. Vroom! The economic engine steadily revs up in billions of responsive steps until happy days are here again. This pump-priming reaction is termed the “multiplier effect.”
There are many reasons to doubt that the multiplier exists at all and if it does, it certainly isn’t at the levels the Obama administration has claimed. As Reason’s economics columnist Veronique de Rugy has pointed out, the administration claimed that one dollar of government spending would create as much as four dollars in economic activity while other economists were coming in with multipliers of between 0.8 and 1.2, meaning that each dollar of government spending might yield just 80 cents to $1.20 in activity. Even if accurate, that buck-twenty is nothing to write home about, especially given the fact that government spending has to be pulled out of some other part of the economy via current or future taxes or borrowing. Which casts huge doubt on the possibility of any stimulus to work.
But Whalen isn’t simply dumping on Keynesianism, he’s bent on pointing out that even its latter-day adherents are straying far from their master’s theory. And in this, he’s surely correct. As Allen Meltzer has argued, Keynes was against the very sort of large structural deficits that characterize contemporary federal budgets and policy, believing instead that deficits should be “temporary and self-liquidating.” And Keynes believed that any sort of counter-cyclical spending by government should be directed toward increasing private investment, not simply spending current and future tax dollars on public works projects.
Or, to put it another way: If the federal government had a strong track record of responsible spending, it would mean one thing if it went into hock for a short period of time to goose the economy (again, whether this would work is open to question). It means something totally different when a government that spent all of the 21st century piling on debt and new, long-term entitlement programs responds to an economic downturn first by creating yet another gargantuan entitlement (Obamacare) and taking on even more debt in the here-and-now. This cuts in a Milton Friedmanesque, monetarist direction too. If the Federal Reserve had not been keeping money artificially cheap for the past couple of decades and it worked to lower interest rates and increase the availability of money in a given moment, that would mean one thing. Promising to keep rates low for the next couple of years – after years of loose money and statements that all those bubbles weren’t bubbles at all – doesn’t mean the same thing.
Read the rest here.
Comments »Mainstream Media Is Already Expecting and Titling a Fed Move at the End of the Month
The key to this article is ”
Though officials aren’t certain to take new steps this month, they are looking at alternatives to that controversial bond-buying, known as “quantitative easing.” One step getting considerable attention inside and outside the Fed would shift the central bank’s portfolio of government bonds so that it holds more long-term securities and fewer short-term securities.
The move—known to some in markets as “Operation Twist” and to some inside the Fed as “maturity extension”—is meant to further push down long-term interest rates and thus encourage economic activity. The program draws its name from a similar 1960s effort by the U.S. Treasury and the Fed, in which they tried to “twist” interest rates so that long-term rates were lower relative to short-term rates.
Anticipation of the move—along with grim economic news and the Fed’s public plan to keep short-term interest rates near zero through 2013—has helped push yields on 10-year Treasury notes, above 3% in late July, to around 2%.
Although some consumers and businesses are unable or unwilling to borrow more at any interest rate, several Fed officials believe pushing rates still lower can help on the margin.
“There are still some businesses that at a lower cost of funds are going to make investment decisions and hiring decisions based on an ability to lock in those funds at a lower rate,” Eric Rosengren, president of the Federal Reserve Bank of Boston, said in an interview.”
Comments »U.S. Takes Fifth Place in Competitive Countries
7 of 12 Districts Report Business Activity as “very subdued”
Despite Beige Book Report; Feds Evans: “Conditions still aren’t much different from an economy still in recession”
Fed Report: all 12 regions show modest growth
Comments »WASHINGTON (AP) — Despite the turmoil that shook the financial markets last month, the Federal Reserve says its 12 bank regions grew modestly this summer because consumers spent more in most parts of the country.
The Fed survey notes growth was mixed and some regions reported weaker expansion. But the survey appeared to be an improvement from the previous report, when the central bank said growth had slowed in eight of its 12 regions in June and early July.
The survey looked at economic conditions around the country from mid-July through Aug. 26. It was based on reports provided by the Fed’s 12 regional banks. The regional outlook will help shape the discussion at the central bank’s next meeting on Sept. 20-21.
Mitt Romney Unveils a 59 Point Jobs Plan
Greek Default Calculated at 88% According to CMA and CDS Markets
Quotes From EU Finance Ministers Suggesting the Euro is DEAD
Retirement Becomes Elusive As Debt Consolidation Keeps People From Retiring
Obama’s Job Speech Expected to Request From Congress a $300 Billion Stimulus Package
U.S. Home Loans Fall for a 3rd Week Despite Low Rates
G-7 Meeting on Friday May Fail to Offer Euro Debt Crisis Plan
Jim Rogers Says the Swiss Franc Peg to th Euro is a “Huge Mistake”
Rogers said it will work for a period of time, but in the end the SNB will eat a huge loss.
Comments »Soros: Crisis ‘Worse Than Lehmans’
Soros feels the current European situation is worse than the Lehman Bros. crisis sighting tight liquidity problems and Europe’s ability to actually handle the crisis.
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