It’s worse than reported. As John Mauldin explains, the system that the Bureau of Labor Statistics uses to estimate unemployment is slow to reflect economic upturns or, in this case, downturns.
So inflation is understated (and likely to get worse); employment is overstated (and likely to decline further).
Senator McCain’s solution? He’s reading Alan Greenspan’s book to bone up on economics. (Alan Greenspan who, for all his considerable good points, never met a bubble he didn’t accommodate.)
But one thing the Senator knows for sure: the tax cuts on millionaires and billionaires must be made permanent. It’s what Bush has been calling for, through thick and thin; it’s what McCain (who first opposed them) now calls for; it’s what the Republican Party stands for as a bedrock principle: even when a billionaire dies, he should be lightly taxed.*
I hate to be a gloomsayer – especially when I think we have a new day dawning next January. But if you bought any of those Rydex double-inverse S&P exchange-traded fund shares mentioned here in April (‘A Safe-ish Way to Short the Market’), I wouldn’t sell them just yet.
*Making the tax cuts permanent means, among other things, following through with the scheduled drop in the estate-tax rate from 45% down to a far more modest 0%.
IT’S NOT ALL BAD NEWS
Yes, since 2001, the average income of the bottom 90% of wage earners dropped a hair, adjusted for inflation. But the top 10% have seen their incomes rise 15%. And that’s pre-tax. Because of the tax cuts we in the top 10% have gotten, the after-tax boost is much higher. I have to tell you: I’m sorry you can’t feed your family or afford the drugs you need, and I’m sorry your kids have been burdened with a few trillion extra in National Debt so we could occupy Iraq and lower taxes on the rich. But it’s been a positively grand time to be wealthy and powerful in America. For that much, the Republican Party deserves credit.
For the top1%, of course, it’s been even better. (And for the top 0.1%, better still, but let’s not get carried away.*) Behold:
As a result, the share of the nation’s income flowing to the top 1 percent has increased sharply, rising from 15.8 percent in 2002 to 20.3 percent in 2006. Not since 1928, just before the Great Depression, has the top 1 percent held such a large share of the nation’s income. . . .
And, again, this is pre-tax income. After tax, the gains in wealth have been much wider. As Warren Buffett has noted, if this is class warfare, his class is winning. (Appalled by this, he is voting Democrat.)
* I know we’re almost all in the top 10%. Indeed, when candidate Gore was warning that candidate Bush’s tax cuts would go mainly ‘to those in the top 1%’ a poll showed that fully 19% of Americans thought they were in the top 1% – and a further 20% (God bless ’em) expected to be. For a total of 39% in or expecting to be in the top 1%. Still, somebody must be in the bottom 90%.
Quote of the Day
[It would be splendid if someday] economists could manage to get themselves thought of as humble, competent people, on a level with dentists.~John Maynard Keynes
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