Obama Extending Bush Tax Cuts

Tuesday, December 07, 2010 Posted by RuninDC

I think stocks maybe looking up for rest of the year.  Why, because short of a major conflict in the Middle East or Asia, there's no expected bad news ahead that could spook the markets.  How about Gold -- perhaps Gold which had a wonderful run so far this year, can take a little respite.

Surprise tax cut boost from the President (I was shocked that the White House would concede w/ GOP).  As you may know, I believe strongly in government intervention and regulation.  I'm not a supporter of Laissez Faire and from my visit to Greece this summer, I don't believe neo-liberalism works.

President Obama didn't really want to extend the cuts for the wealthy. But this was a good concession.  I give him credit for this.  Better for tax cuts for the wealthy than no tax cuts for the poor and middle-class.

The GOP backed the President's plan to extend the 13 mos unemployment benefits paid to jobless workers -- this is huge for these folks to continue spending.  And it was wise of Obama to leverage this lame duck session to get his initiatives accomplished.

Additionally payroll tax was decreased for folks making less than 40K a year putting $800 more into their pockets -- these are folks throughout America.

As stocks rally, Bonds slump.  This pushes the Yield up.

If this stimulus and cut is the start of something big that could spur economic growth, watch rates to rise over the next year.
So far, retailers are doing better than expected this holiday season (both bricks and mortar and online)

This helps the economy and the stock market in the short term. But how about long term?  Many Dems are accusing the White House for capitulating to the GOP.

Also many Monetarists claim that consumer spending is a fallacy of Keynesian Economics.

They say that consumer spending does not necessarily drive the GDP.

Y = C + I + G

In this case, C increases, G increases (stimulus).  But does Y increase?
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