Weidmann Says ECB Should Resist Pressure to Use
January 18th, 2012
Economic and Finance
As the "tax the rich" debate rages in Washington D.C., some states are turning to their wealthiest residents to bring in much-needed revenue.
The governors of the two largest Democratic states want rich folks to help close budget gaps. And Democratic lawmakers elsewhere are preparing to do battle with Republican leaders to blunt budget cuts by instituting a millionaire tax.
This marks a shift from last year, when state leaders largely shied away from raising taxes in general. Several cash-strapped states, including Maryland, New Jersey and Oregon, let their millionaire taxes lapse.
But spending cuts alone aren’t getting the job done.
"As the effects of the recession linger, states are realizing they can’t [balance their budgets] by cutting education, transportation and other investments that create jobs," said Jon Shure, director of state fiscal studies for the left-leaning Center on Budget and Policy Priorities.
Election 2012: How rich are these guys?
After refusing to renew New York’s millionaire tax, Governor Andrew Cuomo ended up hiking the levy on the rich anyway. The increased revenue will close about half of the state’s $3.5 billion budget gap for the coming fiscal year.
The Empire State had instituted a surcharge in 2009 that raised the top rate to 8.97% for earnings above $500,000. It was scheduled to fall to 6.85% this year.
Instead, Cuomo created new tax brackets that lower the tax rates for those earning less than $300,000. But income above $2 million will be taxed at a new top bracket of 8.82%, nearly two percentage points higher than had been expected. It expires at the end of 2014.
"Whether a person made $20,000 or $20 million, they paid the same rate. It was just wrong — because a flat tax is not a fair tax," said Cuomo in his State of the State speech earlier this month. "Our principle is simple: the more you make, the higher rate you pay. Today, the middle class is paying the lowest rate in 58 years my credit score."
On the other side of the nation, California Governor Jerry Brown built his budget assuming that voters approve a $6.9 billion tax package on the November ballot. He’s planning to sell his plan to Golden State residents at his State of the State address on Wednesday.
If the ballot measure passes, three new tax brackets would be created. Single taxpayers would fork over an additional 1 percentage point on earnings over $250,000, 1.5 percentage points on income over $300,000 and 2 percentage points on earnings over $500,000. The higher rates would be in effect for the 2013 through 2016 tax years.
In addition, Brown wants to raise the sales tax by half a percentage point. The added revenues would go to fund schools and public safety, which would otherwise face $5.4 billion in cuts, he said.
In New Jersey, voters favor instituting a millionaire tax by a 2 to 1 margin, according to a Quinnipiac University Poll conducted late last year, marking an all-time high.
Democratic lawmakers, who control the state legislature, are hoping to convince Governor Chris Christie, a Republican, to reinstate a surcharge on the wealthiest residents. He had been staunchly opposed to a similar effort last year, instead instituting deep cuts in spending.
"Despite all the talk about shared sacrifice, the wealthiest residents in our state are the ones who are being asked to sacrifice the least," said state Senator Barbara Buono, who until recently served as majority leader.
But conservatives argue that while raising taxes on the wealthy might bring in more money in the short-term, it could hurt any state’s economy in the long run.
"We’re skeptical of the idea that high rates do anything but scare people out of the state and limit economic growth," said Joe Henchman, vice president for state projects at The Tax Foundation.
A sign that Europe’s crisis has begun to weigh on the U.S. economy emerged Friday from a report that exports to the continent sank in November — far more than overall U.S. exports did.
Europe, which consumes nearly one-fifth of America’s exports, may already be in a recession. A weakening Europe could further shrink demand for American goods and slow the U.S. economy just as the job market has started to strengthen.
The U.S. trade deficit rose 10.4 percent in November to $47.8 billion, the Commerce Department said. Higher oil prices were the main reason the deficit widened. Oil rose above $100 per barrel in November. It had been as low as $75 a barrel the previous month. More expensive oil drove the value of imports up 1.3 percent, to a record $225.6 billion.
Overall exports dropped 0.9 percent to $177.8 billion. American exports to Europe fell much more sharply — nearly 6 percent.
Economic growth weakens when exports decline because factories tend to produce fewer goods. And U.S. companies earn less. Friday’s trade report led some economists to cut their growth estimates for the October-December quarter.
Many economists had expected growth to be stronger after seeing more hiring, an increase in company stockpiles and faster production at U.S. factories. Most had been predicting that the economy would grow this quarter at an annual rate of roughly 3 percent.
But Paul Dales, senior U.S. economist for Capital Economists, said he now expects growth to be closer to 2 percent.
“The widening in the U.S. trade deficit in November bad credit payday advance… is perhaps the first real sign that the crisis in Europe and the more general global slowdown is starting to take its toll on the U.S.,” he said.
The trade figures for individual countries are not seasonally adjusted. After adjusting for such fluctuations, Dales says annual export growth to the 17 nations that use the euro slowed sharply from the summer, from 15 percent in August to a mere 2.5 percent in November.
Until recently, growth in exports to Europe had been a bright spot for American manufacturers.
“If the eurozone is on the verge of as deep a recession as we think it is, then it makes sense that U.S. exports would be falling,” Dales said.
The overall trade deficit hit a 2011 peak of $52.1 billion in June. Then it fell for four straight months. The narrower trade gap helped boost economic growth as foreign nations bought more American goods.
Exports hit an all-time high of $180.6 billion in September, reflecting healthy auto sales in foreign markets. Greater exports lead to more U.S. jobs and higher consumer spending, which boosts growth.
Through 11 months, the 2011 deficit is running at an annual rate of $559.4 billion. That’s nearly 12 percent above the 2010 deficit.
For November, the deficit with China dropped 4.3 percent. But for the year, the imbalance with China climbed to $272.3 billion.
Filed under: management, money by Fred
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Home improvement retailer Home Depot Inc. said Thursday that it will hire 70,000 seasonal workers for the spring season, its biggest season.
The number is about the same as last year, company spokesman Stephen Holmes said.
Spring is the biggest season for home improvement projects as homeowners work on projects for their homes, gardens and lawns.
Last year, about half of the seasonal workers were hired permanently as cashiers, sales, lot and garden staffers. Home Depot employs about 300,000 workers overall.
Home-goods sellers are facing cautious consumer spending and a prolonged weak housing market. They’ve had to adjust to fewer consumers making large-scale home renovations by cutting costs and improving services such as online shopping and customer service.
But results are slowly improving. Home Depot Inc.’s net income for the third-quarter ended Oct. 30 rose 12 percent while revenue edged up 4 percent to $17.33 billion from $16.6 billion last year.
Its shares rose 15 cents to $43.61 in premarket trading Thursday.
Filed under: UK, Uncategorized by Fred
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Orange juice futures surged Tuesday amid fears the U.S. government could ban Brazilian oranges after low levels of fungicide were detected by a juice company.
March orange juice futures jumped 9.6%, or 20 cents, to $2.0775 a pound on the ICE Futures Exchange, which traders said was the highest level since 1977.
"My guess is that they will ban Brazilian oranges," said Tod McElhaney, president of LaSalle Futures Group. "If that happens, you would certainly see a lessening of supplies that could push prices higher."
The FDA said it learned late last month that an unspecified juice company had found low levels of fungicide in its own products, as well as orange juice and concentrate made by competitors, according to a letter dated Jan. 9.
The letter said "industry reports" suggested that the fungicide was present in orange juice made from the 2011 crop from Brazil, the world’s largest orange producer.
The United States imports about 25% of oranges used in U.S. orange juice, with the majority coming from Brazil, said McElhaney.
The FDA said juice producers reported levels of fungicide in the "low parts per billion range." At that level, the fungicide does not raise safety concerns, according to a preliminary risk assessment from the Environmental Protection Agency.
Milk futures: Better than gold
The fungicide, called carbendazim, is legal in Brazil and other parts of the world unsecured personal loans. But it is not approved by the EPA and is considered an "unlawful pesticide chemical residue" in orange juice under U.S. law, the FDA said.
The FDA does not currently intend to remove orange juice containing the fungicide from the domestic market. But the agency is conducting its own testing and will "take the necessary action to ensure that the product is removed from the market" if a public health risk is found.
The agency is also sampling all imports of orange juice "and will deny entry to shipments that test positive for carbendazim."
Traders said orange juice futures could go even higher if the government moves to block imports from Brazil. But futures could also fall sharply if a Brazilian orange embargo does not materialize.
James Cordier, president of Florida-based Liberty Trading Group, said consumers could see "a little bump" in retail orange juice prices as a result of Tuesday’s surge. But he said the FDA will need at least a few days to determine how widespread the problem is.
"We’ll know in the next 42 to 78 hours whether this is an isolated incident," said Cordier. "We certainly can’t do without Brazilian juice."
While the Federal Reserve is trying to hold mortgage rates down, Congress recently gave them an upward shove.
The bill extending the payroll tax cut, which passed last month, also rasied the fee that Fannie Mae and Freddie Mac charge to guarantee mortgages.
The hike equals one-tenth of one percent. Mortgage lenders pay the fee, but the betting is that some of it will be passed on to people who take out new mortgages.
The extra money won’t go to Fannie and Freddie free business cards. Those companies are already receiving a taxpayer bailout that is expected to reach $124 billion. Instead, it the money will go to the U.S. Treasury, where it will help hold down the federal deficit.
A burst of hiring in December pushed the unemployment rate to its lowest level in nearly three years, giving the economy a boost at the end of 2011.
The Labor Department said Friday that employers added a net 200,000 jobs last month and the unemployment rate fell to 8.5 percent, the lowest since February 2009. The rate has dropped for four straight months.
The hiring gains cap a six-month stretch in which the economy generated 100,000 jobs or more in each month. That hasn’t happened since April 2006.
“There is no question that today’s employment report is a positive and there is also no question that the pace of job growth has accelerated of late,” said Dan Greenhaus, an analyst at BTIG LLC, a brokerage firm
A better job market is a positive sign for President Barack Obama, who is bound to face voters with the highest unemployment rate of any sitting president since World War II. Unemployment was 7.8 percent when Obama took office in January 2009.
Still, the level may matter less to his re-election chances if the rate continues to fall. History suggests that presidents’ re-election prospects hinge less on the unemployment rate itself than on the rate’s direction during the year or two before Election Day.
For all of 2011, the economy added 1.6 million jobs, better than the 940,000 added in 2010. The unemployment rate averaged 8.9 percent last year, down from 9.6 percent the previous year.
Economists forecast that the job gains will top 2.1 million this year.
The December report painted a picture of a broadly improving job market. Average hourly pay rose, providing consumers with more income to spend. The average work week lengthened, a sign that business is picking up and companies may soon need more workers.
And hiring increased across most major industries.
Manufacturing added 23,000 jobs, as did the health care industry. Transportation and warehousing added 50,000 jobs. Retailers added 28,000 jobs. Even the beleaguered construction industry added 17,000 workers.
Economists cautioned that some of the gains reflected temporary hiring for the holiday season. The government adjusts the figures to account for those seasonal factors, but doesn’t always fully account for them.
The gains in transportation and warehousing, for example, reflected a strong increase in hiring for couriers and messengers cash advance loan. That could stem from a big jump in online shopping over the holidays, the department said.
The nation’s work force, which includes both people working and those searching for jobs, shrank slightly last months and is little changed from this spring. That’s a concern because a strengthening job market normally draws more applicants.
The work force has declined by about 160,000 over the past two months, one reason the unemployment rate has fallen.
“You have to take that unemployment rate decline with a grain of salt when you look at the declines in the labor force,” said Marisa DiNatale, an economist at Moody’s Analytics.
The government only counts people as unemployed if they are actively searching for jobs. Discouraged workers who have given up on looking are not included in the rate.
And some of those who are counted as employed are working part time, but want full-time work.
When including those groups, the broader “underemployment” rate was 15.2 percent. That’s down from 15.6 percent the previous month, but still high. The figure has dropped for three straight months.
And the job market has a long way to go to recover from the Great Recession. The nation has 6 million fewer jobs that it did in December 2007, when the recession began.
More jobs and higher pay are crucial to helping the economy grow. They could enable shoppers to increase spending, which fuels 70 percent of economic activity.
The economy likely grew at an annual rate of above 3 percent, a healthy pace.
A more robust hiring market coincides with other positive data that show the economy ended the year with some momentum.
Weekly applications for unemployment benefits have fallen to levels last seen more than three years ago. Holiday sales were solid. And November and December were the strongest months of 2011 for U.S. auto sales.
Many businesses say they are ready to step up hiring in early 2012 after seeing stronger consumer confidence and greater demand for their products.
Filed under: Uncategorized, mortgage by Fred
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The euro fell to an 11-year low against the yen and reached the weakest in 15 months versus the dollar after French borrowing costs rose at a bond sale today.
The 17-nation currency slumped against most major peers after France sold 7.96 billion euros ($10.3 billion) of debt today in its first auction of the year as credit companies threaten to cut the nation