Brent Nyitray
Fairlington Blade
Let the mutherfuker burn!
jnc4p
Kevin S. Willis
Michigoose
lmsinca
markinaustin
Arcanaut
novahockey
quarterback
ScottC
yellojktVital Statistics:
| Last | Change | Percent | |
| S&P Futures | 1445.5 | 25.4 | 1.79% |
| Eurostoxx Index | 2705.2 | 69.3 | 2.63% |
| Oil (WTI) | 93.3 | 1.5 | 1.61% |
| LIBOR | 0.305 | -0.001 | -0.33% |
| US Dollar Index (DXY) | 79.45 | -0.282 | -0.35% |
| 10 Year Govt Bond Yield | 1.84% | 0.09% | |
| RPX Composite Real Estate Index | 191.8 | -0.5 |
Markets are higher this morning after the government reached a compromise on the fiscal cliff. It turned out the bond market (which was refusing to rally in spite of the setbacks along the way) was correct in its forecast. When stocks and bonds are telling you different things, listen to the bond market – it is usually right. The 10-year is at the top of its recent 1.55 – 1.85 trading range. MBS are down.
The House passed the Senate compromise on the fiscal cliff late last night, taking income tax hikes for most people off the table (although taxes are going up for everyone with a job). Here are the main effects:
- Tax rates will increase to the Clinton level rates for incomes over 450k
- Limits on itemized deductions kick in at incomes > 300k
- Capital Gains and Dividends rise to 20% for incomes over that threshold
- Estate tax set at 40%, with a $5 million threshold that will be indexed to inflation
- The sequester will be delayed for 2 months
- the AMT will be permanently patched and indexed for inflation.
- Extended unemployment benefits continue
The debt ceiling was not addressed in this deal. The end deal is more or less a tax hike with no spending cuts. It looks like they extended the tax relief for principal mods / short sales as well. So, unless you make over $300k, you are fine, right? Nope. 77% of all households will see their taxes increase because the payroll tax holiday expired.
On to the debt ceiling, where Obama has already said he won’t accept spending cuts without further tax increases. That will be a contentious debate, since Republicans already walked the plank with their base and voted for tax hikes without Democrats giving up a thing. Given that Republicans have voted for tax hikes already, the “Republicans are unreasonable” arguments will lose some of their sting. They will be emboldened to push for more spending cuts, which the White House will refuse. While the WH had the benefit of circumstance in the fiscal cliff negotiations, where the default outcome was a big tax hike, now Republicans have the benefit of circumstance where the default outcome is where spending gets cut (as the sequester was merely delayed, not eliminated). Punch line, things will get ugly again in Washington, so look to fade this rally.
Bob Schiller is not convinced we are off to the races in the housing recovery. Basically, he believes housing has hit “fair value” and isn’t going anywhere for a while. He may be correct, and that house price inflation will go back to its old relationship with incomes.
Filed under: Morning Report |
All Things in Moderation 
Spending cuts (or the lowered rate of increase in spending, depending your need for semantic precision) need to back back-end loaded to not strangle the struggling recovery.
Entitlement reform (which inevitably means smaller payments for somebody) will be the most contentious issue with the Republicans easily tarred as Granny Starvers.
LikeLike
yello:
Spending cuts (or the lowered rate of increase in spending, depending your need for semantic precision) need to back back-end loaded to not strangle the struggling recovery.
I think a more accurate reflection of both reality and the motivation of Obama, his fellow Dems, and far too many R’s is that the lowered rate of increase in spending needs to be back-end loaded to make them less likely to ever actually happen.
Entitlement reform (which inevitably means smaller payments for somebody) will be the most contentious issue with the Republicans easily tarred as Granny Starvers.
Probably, but the ease with which they will be tarred will be in direct proportion to the number of unserious ignoramuses listening to the demagogues doing the tarring. And, regrettably, Obama’s got a fairly big audience of listeners.
LikeLike
Brent, you left out the extension of the farm bill which is somewhat significant. I assume the Medicare Doc fix is in the bill as well.
And thus the end of the year omnibus bill approach returns.
LikeLike
With the U-6 at around 15%, it’s not like there ever really was a recovery, the only reason it’s gone down is become how the U-3 is calculated. Those adjustments were made in the Reagan Admin I believe. A good site for less manipulated data (or data manipulated back to less favorable terms for government) is
http://www.shadowstats.com/alternate_data/unemployment-charts
Look, sooner or later we’re going to run out of real money. The voters don’t want to pay for the welfare state they have.
LikeLike
McWing:
The voters don’t want to pay for the welfare state they have.
Of course not. It’s not welfare if you pay for it yourself. The whole point of voting yourself welfare is that someone else has to pony up. Of course it must end badly eventually, but the hucksters of the left have been preying on economic ignorance for years, and will continue to do so because it obviously works to get them votes.
LikeLike
jnc:
The doc fix is in the bill, but only for another 9 months. Also, extension of the ARRA business tax breaks for 1 year and the low-income tax breaks (EITC, CTC, etc.) for 5 years. Exemption phase outs start at $250/300K as well.
Spend, spend, spend.
LikeLike
“easily tarred as Granny Starvers.”
my new band name.
Also, the doc fix is in through Dec 2103. so, it’s lather, rinse and repeat. always repeat. therapy caps extended, add on payments for ambulance services, add-on payments for low volume medicare inpatient hospitals, couple of other Medicare provision.
LikeLike
Scott,
Your right, the Thatcher rule does apply however.
LikeLike
nova:
the doc fix is in through Dec 2103
2013, right? Just one more year of kicking the can and not 90 years?
LikeLike
Nova, I always favored Zydecho Trainwreck as a band name.
LikeLike
Republicans should not push for spending cuts with the debt ceiling bill, because the media will accuse them of brinkmanship. Take the debt ceiling off the table and nip the suicide pact accusations in the bud.
They should separate the sequestration and the debt ceiling, give obama his increase in the debt ceiling, and draw an ultra-hard line in the sand with the sequestration. They have the benefit that obama had in the fiscal cliff – that the cuts will happen anyway, even if nothing is done. Make obama justify no cuts in spending.
LikeLike
Brent – this makes perfect sense. Do you think it will play out that way?
If you were the negotiator, I believe the debt ceiling charade would be avoided and spending would also be reduced.
LikeLike
Brent – did you note this?
http://online.wsj.com/article/SB10001424127887323689604578217850195921128.html?mod=rss_economy&wpisrc=nl_wonk
LikeLike
whoops. yep. 2013.
that’s a good name too. maybe I can open for you sometime.
LikeLike
My band’s name is Johnny Derivative and the Indefinite Integrals. Our first album will be called ‘The Fundamental Law of Calculus’.
LikeLike
My band’s name is Roadside Attraction. meh. I wanted Lacy Underall or Fawn Leibowitz.
LikeLike
Brent, nice Animal House reference.
LikeLike
Our singer is younger, so she didn’t get the Animal House or Caddyshack reference…
LikeLike
It’s a spending problem not a revenue problem. But hey, let’s raise taxes on a tiny minority of people anyway.
LikeLike
Hell is freezing over. I think I actually agree with the union on this one:
http://www.washingtonpost.com/opinions/harold-meyerson-averted-port-strike-holds-lessons-for-all-workers/2013/01/01/3befd548-5393-11e2-bf3e-76c0a789346f_story.html
LikeLike
Scott, this tax increased balanced the budget. He’ll, the President campaigned on it. Problem solved.
LikeLike
“Mr. Gore and his partners were eager to complete the deal by Dec. 31, lest it be subject to higher tax rates that took effect on Jan. 1”
http://mediadecoder.blogs.nytimes.com/2013/01/02/al-jazeera-said-to-be-acquiring-current-tv/?smid=tw-share
Paid off in clean oil money, no doubt.
LikeLike
That’s different.
http://www.washingtontimes.com/news/2013/jan/1/two-systems-of-justice/
LikeLike
Troll — http://en.wikipedia.org/wiki/Law_of_Privilege
Etymologically a privilege (privilegium) means a “private law”, or rule relating to a specific individual or institution. or, as the kids might say it … fuck you, that’s why.
LikeLike
Troll/nova:
Has the MPD even started an investigation on Gregory? Or are they just letting it slide completely?
LikeLike