The Chicago Times’ Malcolm Berko recently discussed the upcoming economic changes, as well as how they will be influenced by the next president.
DL, a reader from Vancouver, asked: “What is your opinion of our economy for the next couple of years, and what do you think will happen to stock prices if Congress allows the Bush Tax Cuts to expire? And do you think it will make any difference if a Democrat or a Republican is elected to the presidency?”
To the last question, Berko responded with a definite no. “It’s congress that makes the economy purr, bark, cough or spit,” he wrote. “The Congress passes all the legislation governing the business of economy, labor laws, tax laws, commerce, banking, securities regulation, etc.”
He continued: “Congress may allow the Bush era tax cuts of 2011 and 2003 to expire this January. This is especially difficult for retirees who figured that $1,760 in dividends from 1,000 shares of AT&T taxed at 15% is better than $330 interest on a $33,000 CD taxed at ordinary rates of 28 percent. If the tax rates on dividends increase to 28%, fixed income folks will spend a lot less on housing, electronics and other ‘stuff.’ Then the value of AT&T and other income stocks may also decline because higher dividend taxes make outcome issues less attractive to own.”
The next issue, according to Berko, is that “Social Security payroll tax cuts are also due to expire and millions of workers will be taking home about $85 less each month of $1,000 a year times 150 million of us in the work force. That’s 150 billion dollars of spendable money removed from the economy.”
Finally, there is the Budget Control Act. “Automatic government spending cuts of $1.2 trillion will take effect this coming January,” Berko writes. “These cuts will be a killer, crushing our GDP, putting more Americans out of work and increasing the 2013 deficit well beyond the anticipated $1.2 trillion number.”
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