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Failure to Extend Payroll Tax Break, Jobless Pay Could Hurt, Says Economist

"The U.S. is in recovery, but it is relatively mild and weak, and certain things could derail the recovery," says economist Ross Starr of the University of California San Diego. "Failure to extend unemployment benefits and failure to extend the payroll tax cuts would both represent fiscal drag on the recovery." Today (Dec. 20), House Republicans turned down a compromise bill that would have extended the payroll tax cut for two months. It was passed by the Senate Saturday. The House Republicans named members of a committee that would negotiate a new agreement with the Senate. But the Senate has adjourned.

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"The U.S. is in recovery, but it is relatively mild and weak, and certain things could derail the recovery," says economist Ross Starr of the University of California San Diego. "Failure to extend unemployment benefits and failure to extend the payroll tax cuts would both represent fiscal drag on the recovery." Today (Dec. 20), House Republicans turned down a compromise bill that would have extended the payroll tax cut for two months. It was passed by the Senate Saturday. The House Republicans named members of a committee that would negotiate a new agreement with the Senate. But the Senate has adjourned.

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Comments
38

Don, come one, get serious, the US is NOT in recovery.

We are in stagnation and will be here for the foreseeable future. The loss of our manufacturing base has now caught up to us.

We cannot be an economic power when 41% of the population works at or close to minimum wage with no benefits and 1 in 5 (20%) employees’ works for the government at wages 2-20 times that of the other 80% of private sector employees.

CA is bankrupt and keeps kicking the can down the road. Do you really think Brown's "temporary taxes" will ever end? Do you think they will close the budget gap??? NO and NO.

Brown said we only have two choices, cut services or raise taxes. He is a liar; we have a third choice, cut over paid gov employees pay and benefits.

We will not recover until gov employment is tamed, and our manufacturing is brought back.

Dec. 21, 2011

I agree with you that we are not in recovery as far as the general public is concerned. Unemployment remains far too high, incomes are weak. We are closer and closer to the plutonomy I have written about-- that is, an economy that relies on consumption by the superrich, and then feeds those superrich with such things as tax cuts. As to Brown, he has made one very positive step: he is trying to abolish redevelopment agencies. We'll see what the state supreme court does on that issue in January. The court can go along with Brown and the legislature and outright abolish the agencies; it could make agencies give some money back to schools, or it could knock down the legislature's initiative and permit the redevelopment agencies to continue stealing money from schools, and using that money to subsidize pro sports facilities, shopping centers, hotels, etc. I am hoping it does the first: abolish the agencies, which have been kidnapped by business interests. Best, Don Bauder

Dec. 21, 2011

It takes someone with a degree in economics to figure this out?

Dec. 21, 2011

Economists look at the broad picture. If sales at Tiffany's are rising, and the rich keep buying yachts and diamonds, the economy could be improving, even if the middle class is getting squeezed out. However, many economists, including Starr, are worried about middle and lower income stagnation. Best, Don Bauder

Dec. 21, 2011

The question should be why did the Senate approve a Bill that extends the cut for two months. The House should send it back, changing the expiration date to Dec. 31, 2012 and see what the democratically controlled Senate and Executive Branch does.

One only can wonder if that date in December is important. I've heard everything ends on 12/21/2012...just in time to ruin Christmas next year.

Dec. 21, 2011

In re the payroll tax cut extension: there are other variables and exigencies that will enter into that proposed debate: a pipeline and tax increases for the superrich, for example. Best, Don Bauder

Dec. 21, 2011

The notion of bloated goverment as the root cause of the federal deficit is simply wrong. The underlying cause of our current problem is tax cuts for the wealthy and corporations. Repeal the Bush tax cuts and then some. Heck even Reagan raised taxes at least ten times in eight years because he saw the benefit of it. Then Clinton brought about robust economic growth averaging over 3% by raising corporate and personal taxes to equitable levels. Alas this simple solution won't happen as long as our representatives are bound by Grover Norquists pledge and keep taking money from Wall Street.

Dec. 21, 2011

The proposed tax increases for the higher income folks are hardly onerous -- particularly by past standards in the U.S. Without a doubt, the plutonomy -- or a government designed to live off and also feed the rich, along with a plutrocracy, or government by the rich -- is a major cause of our economic woes. However, bloated government at all levels is also a problem. Best, Don Bauder

Dec. 21, 2011

Don, good points. Look at another superpower - Rome. The empire fell in part because of a government system that imposed excessive tax due to it's bloat - keeping the empire afloat.

The us tax system, wasteful spending, and shipping: shipping jobs overseas (china) and buying goods from there, wide open door to illegal immigrants - may of whom work under the table, pay no tax and send the majority of their earnings back home (out of the country). Energy - buying tons of foreign oil means shipping billions of dollars out of the country daily. Keeping people at home on unemployment when the government could start up a work program to provide jobs - repairing roads, buildings, streets, refitting buildings with insulation and solar water heaters - etc is there any shortage of work that needs to be done?

Dec. 22, 2011

good points mrbios

Dec. 24, 2011

"The notion of bloated goverment as the root cause of the federal deficit is simply wrong. The underlying cause of our current problem is tax cuts for the wealthy and corporations."

Stingray, that is ridiculous. Gov is comping TWICE what the private sector does, that by definittion is bloat. Where GED edusated cops ff's and prison guards are comping more than medical doctors.

The size of gov employement, about 20%, is one thing, the compensation is another and IMO both are two high. Size would be less of a problem if the averge gov employee did not comp twice what the average privatse sector employee did. http://unionwatch.org/calculating-public-employee-total-compensation/

Dec. 21, 2011

I do agree taxes could be raised on corps, and tariffs on foreign goods should be placed on countries who do not have the same regulatiosn we do.

Dec. 21, 2011

I agree that we have to counter countries that are not complying with fair trade rules. However, we have to be careful with tariffs: remember what stiff tariffs did to help trigger the 1930s Depression. Best, Don Bauder

Dec. 22, 2011

Government is bloated, but at least at state and local levels, is shedding employment. Best, Don Bauder

Dec. 22, 2011

Corvette sales are the most reliable indicator of the health of the economy. As the sales figures below indicate, the economic recovery has yet to begin.

2006 36,518 2007 33,685 2008 26,971 2009 13,934 2010 12,624

In 2011, a total of 9,123 Corvettes were sold through August. The Corvette sales figures indicate that the economy has at best bottomed out, but there is no sign of a recovery in the sales data.

Dec. 21, 2011

That's the first time I have heard that Corvette sales are the best indicator of the health of the economy. Frankly, I thought Corvettes were cars of the past. Best, Don Bauder

Dec. 22, 2011

Very interesting, Covette/car sales as an economic indicator. And the Corvette could very well be a good indocator because it is not a car the super/uber rich buy, but more or less middle/upper middle class Americans buy.

I wonder if that sales relation matches up on the last recession.

Dec. 22, 2011

Of course, a lot of economic phenomena run in parallel, and people think there is a cause and effect. One example, always satirical, was that U.S. GDP perfectly tracked the price of butter in Bangladesh. (I think it was butter; I haven't heard this one for a long time.) Pretty soon, we will be hearing about the so-called Super Bowl Indicator that is trotted out each year. Best, Don Bauder

Dec. 22, 2011

Blaming American workers for gravitating toward Civil Service and Government jobs that had security and benefits during an era when American companies were slashing their payrolls is ludicrous. Those men and women were just making smart choices. Now to bemoan the fact that they get those benefits...well again look at the distribution of wealth in our country. Nobody working as a prison guard is flying first class. These people would have been getting their gold watches and a pension from the "company" in the old days. But American Businesses sold them out. Meanwhile the CEO's, Politicians and lobbyists rake in the real dough. The fact that a prison guard makes as much as a doctor is more a product of the changing reality of our culture and the avarice our our education system.

Dec. 22, 2011

In California, prison guards have a very strong union. Best, Don Bauder

Dec. 23, 2011

Blaming American workers for gravitating toward Civil Service and Government jobs that had security and benefits during an era when American companies were slashing their payrolls is ludicrous.

I don't know if I blame the workers, except to the extent that are not in an open or free marlet and as such their compensation is not indicative of their value-allowing public employees to be compensation 20 times mroe than they would in the real world-and that is not ludicrous at all.

BUT-I do blame public unions and colluding politicans for being totally irresponsible with the publics money to the point of basically destroying the economy of this state in quid pro quo fraud. / /

Dec. 22, 2011

Back in the 1950s and 1960s, private sector unions were irresponsible. They went on strike frequently and in many industries such as autos got excessive pay and benefits. This invited foreign competition. Now the private sector is very lightly unionized, and those unions have little power. But the same thing is happening with public sector unions. They have almost no foreign competition, and have made excessive demands, successfully. They are heavily unionized. They are overpaid and have excessively generous benefits. Foreign competition won't tame them. But the public might. Best, Don Bauder

Dec. 23, 2011

Those men and women were just making smart choices. Now to bemoan the fact that they get those benefits...well again look at the distribution of wealth in our country. Nobody working as a prison guard is flying first class.

You are either ignorant or an out right liar. Prison guards in CA are comping over $200K per year before OT is factored in, with OT is $250K+, that is in the top 1% in the nation...... the 1% as OWS calls it and that is "flying first class" in every sense of the phrase.

There is NO NEED to pay that kind of money for a rank and file GED level job. A job that had 125K applicants for 940 job openings in 2010-that is over 1,250 applicants per opening. That proves gov employment is a fantasyland where there are no free market principles guiding the employment, resulting in that kind of gross incompetence. That job should have a base comp of $75K max-65% less than it does now. / / But American Businesses sold them out. Meanwhile the CEO's, Politicians and lobbyists rake in the real dough. == You have no argument from me, I think Wall Street and Big Business have destroyed this county. / / The fact that a prison guard makes as much as a doctor is more a product of the changing reality of our culture and the avarice our education system. == Totally false.

The ONLY reason a prison guard makes as much as a medical doctor in CA with 10 years of higher education, half a million in student loan debt and a far shorter career span has nothing to do with our education system and everything to do with a closed gov monopoly, and HUGE quid pro quo pay offs to Gray Davis and other politicians, who are spending other peoples money to get their campaign contributions from the CCPOA while raising their pay and comp at 5-10 times the rate of inflation.

Has noting to do with free markets and everything to do with closed markets and a monopoly? In the real world these low skill set gov jobs would pay $25K per year. Which is what prison guard jobs USED to pay in CA just 10 years ago. CA public employees are being comped at TWICE the rate of the private sector, with bullet proof job security, which makes their gov jobs worth an additional 40% in value. In the case of prison guards, cops and FF's they are being comped at 10-20 times what their skill set would bring in the private sector.

BTW-gov jobs are in nearly all cases fixed. Cronyism and nepotism runs rampant in these jobs, as does incompetence. Alan Bersin is Exhibit #1.

Dec. 22, 2011

Remember when government employees were called "public servants?" Or are you folks all too young to remember those days. Best, Don Bauder

Dec. 23, 2011

24.Remember when government employees were called "public servants?"

I remember when teachers made HALF the states median salary- back int he 1960's and 70's, now they make more than twice the states median salary when including benefits.

Dec. 24, 2011

Overpaid government workers and under taxed billionaires may be central culprits in our government deficits, but our world wide problems aren't caused by US deficits RIGHT NOW. Our problem now is a collapse in demand, and the farcically overcompensated can help out by buying surplus inventory. Prison guards can buy the rural inventory of housing for example. Prisons are usually located in depressed areas, because only desperate towns want that sort of business, even at the high pay.

The problem is the middle class worldwide is too poor to spend the factories into full production, or to buy the housing surplus.

Dec. 23, 2011

Good point. Lack of demand is a major problem. The shrinking of the middle class and low and stagnant incomes of most Americans, combined with excessive pay for people who can't possibly spend their absurdly high incomes, are all part of our problems. In many respects, these are global woes. Best, Don Bauder

Dec. 23, 2011

Unfairness makes a great rallying cry, but causes problems only indirectly. The poor worldwide need money to buy needed "surpluses". Recognizing the lack of money, the central banks have responded by lending money to the rich in huge amounts at cheap rates, but the rich just hold the money. Lending won't do the trick.

The payroll tax cuts and infrastructure projects are steps in the right direction, but face formidable political obstacles. The ignorant demand that every billion be "paid for". Meanwhile trillions in lending is pumped out willy nilly to cheers all around.

The good news is that the crisis is partly caused by increased world wide producing power, when that is matched with increased spending power, we should be better than ever.

Dec. 23, 2011

The Federal Reserve loans the money to banks at 0% to 0.25%, the banks turn around and buy bonds yielding 3% or 4%, or stocks, or whatever. Then the banks and the government boast that the banks have paid back the trillions of dollars loaned to them during the panic of 2008. Huh? The Fed makes the money out of thin air, the banks do whatever they want with it, and then pay back the government. Basically, the Fed has paid back the government. Now that the European central bank is loaning money to its banks for 1%, the same thing will escalate there. Best, Don Bauder

Dec. 24, 2011

Bookkeeping separates banking and making money out of thin air, and today's bankers are the Jackson Pollocks of bookkeeping, insanely rich but their work bears no resemblance to reality. Banks should print money now, but they shouldn't be asking governments to stop printing, forcing the welfare mothers of Greece to take a cut while bankers suck up billions, asking more interest from governments than insolvent banks. When the world respects bankers more than elected government, the world becomes insane. Banks are nothing but debt, debt is worthless without law, civil law is worthless without government.

The street demonstrators around the world remind the world of these simple facts. We have seen incoherent kids make more sense than our three branches of government combined. Just a tiny drop of anarchy should remind the powerful how important government is. Certainly it seems some of the power drunk have sobered up. The House Republicans, for now at least.

Dec. 24, 2011

And former investment banks such as Goldman Sachs and Morgan Stanley have become commercial banks so they can borrow from the Federal Reserve for almost 0% to bolster their predatory activities. This was done in the 2008 panic. It should have been repealed. The deregulation of banking (repeal of Glass-Steagall that took place in the Clinton administration) should have been reversed. Banks should not only be reregulated; their trading activities should be banned. Best, Don Bauder

Dec. 24, 2011

The deregulation of banking (repeal of Glass-Steagall that took place in the Clinton administration) should have been reversed.

Amen to that! That is a BIG reason we are in ths mess.............. repeal of glass steagall / / Banks should not only be reregulated; their trading activities should be banned. == I think the direvatives should be outlawed, it is only a matter of time before a few misplaced direvative bets go sideways and wipeout the financial markets-then gov will claim they never saw it coming, even though tons of experts(like you Don) have been sounding the warning bells for years/decades......sort of similar to our public pensions.

Dec. 24, 2011

Derivatives represent one of the biggest dangers of the European mess. And we don't have adequate information to go on, thanks to Congress letting the banks off the hook after the 2008 panic. How many credit default swaps are outstanding on European debt? Who holds those derivatives? Could there be a chain reaction? And will the U.S. have to bail out domestic and foreign financial institutions again? Best, Don Bauder

Dec. 25, 2011

Every banking regulation was written because someone was cheated in a formerly legal scheme, every call for deregulation is endorsement of a criminal scheme, yet somehow, if a criminal is rich enough he can hire politicians to endorse crime, then make the crime legal. The problem is that there is possibly trillions in semi legal embezzlement undiscovered, who can know? And when it is discovered, huge amounts of spending power will disappear when investors learn they are broke. I'm amazed that people would trust their money to those who endorse law breaking, but this seems common these days.

Banks must obey the government, not own the government. We need stop banking bribery. I have an idea as cutting edge as my solar clothes dryer. If a corporate person commits a crime they should do the time, be shut down for the length of the prison term. Corporate people who find this frightening should be allowed to form a LIMITED LIABILITY ORGANIZATION, an organization banned from political contributions, that settles it's crimes by paying fines, hence the term "limited liability". In return for the limited punishment, it would have limited rights.

I also invented a way to use hula hoops for transportation.

Dec. 24, 2011

You are hitting on a key point. Billion- and trillion-dollar scams and swindles are not necessarily illegal. Tragically, in the financial realm, crimes succeed because a sharp but amoral lawyer has met the test of the scamsters following the letter of the law and not the spirit of the law. In finance, so-called "full disclosure" is the key that regulators and courts follow. All this means is that a crook's lawyer writes in legal Latin, "We are going to screw you." The only people who understand the legal Latin are Wall Street cozeners, who catch the signal: buy in early, and then get out as soon as the public falls for the scam. Best, Don Bauder

Dec. 25, 2011

Time was lawmakers wrote laws, in the time of deregulation they wrote loopholes.

In the spirit of the day, we should remember that humanity is weak and temptation is strong, and the battle between the wicked and the righteous is never ending, and when we are certain which side we are on, we fall into the pit. The crooked can't help themselves, and at the end of their days, will deserve our pity, should we live so long. On this Christmas day 99,9% of our citizens have full stomachs.

Merry Christmas. Happy Holidays.

For you also, Bernie Madoff.

Dec. 25, 2011

Lawmakers wrote loopholes, not laws, in the days of the Robber Barons, too. Best, Don Bauder

Dec. 26, 2011

The Robber Barons built factories and cities with their plunder. Fortunes made in the new banking casinos seem far more loathsome.

Dec. 27, 2011

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