Econwrap: Biz tax breaks, bloodbath warnings

Once more, Obama lands on the side of the rich

So, Barry O’s done it again. While millions of Americans are struggling to survive in a worsening economy, the administration comes up with yet another plan to give tax breaks to business.

And according to this New York Times report from Jackie Calmes, he’s chosen to help the plutocrats in hopes of winning votes for Democrats in the November elections.

Don’t you feel so relieved?

As part of his emerging program to jolt the economic recovery from its stall, President Obama will call this week for allowing businesses to deduct from their taxes through 2011 the full value of new equipment purchase, from computers to utility generators, to increase demand for goods and create jobs.

The upfront deduction would allow businesses of all sizes to keep more money now and would give large corporations, many of which are sitting on cash because of uncertainty about the economy, an incentive to spend and invest.

It would cost an estimated $200 billion in revenues, though the ultimate net loss would be $30 billion over 10 years, administration officials say, since businesses would eventually deduct the depreciated value of the equipment in any case.

The proposal for 100 percent expensing through 2011 will be part of a package that Mr. Obama will outline on Wednesday in Cleveland in a speech on the economy.

The stimulus initiative will also include proposals for an additional $50 billion for infrastructure investments and a new infrastructure bank for projects over the long term, which Mr. Obama described at a Labor Day event in Wisconsin on Monday.

And it will have a provision to expand and make permanent a tax credit for corporations’ research and development expenses; for three decades, the credit has been enacted temporarily, given its revenue cost, and then always extended, but with frequent lapses that frustrate businesses.

Those ideas and others that Mr. Obama may propose on Wednesday have been under consideration at the White House for some time. But August’s mix of disappointing economic data and deteriorating poll numbers for Democrats heading into the midterm elections prompted the president, with evident impatience, to publicly press his economic team to quickly produce options that could help the economy without excessively increasing the debt.

Though liberal and labor groups have been agitating for public works spending, Mr. Obama and his advisers are emphasizing business tax cuts in hopes of drawing Republican support — or, failing that, to show that Republicans are so determined to thwart Mr. Obama that they will oppose even ideas that they and most business groups, like the U.S. Chamber of Commerce, advocate.

Irish bank bailout burdens taxpayers

From Global Economic Crisis:

Ireland’s own case of a financial institution that is “too big to fail” will probably in the end impose a penalty of €70billion on the already beleaguered people of Ireland, according to a prediction made by the Irish prime minister, Brian Cowen . The tale of woes concerning this bank I have reported on in a previous blog posting.  Let us just point out that if this projection is correct, every man, woman and child in Ireland, which has a population of about 6.2 million, will pay 11,280 euros for this financial disaster not of their making, or about 14,500 U.S. dollars at the current exchange rate.

If a typical Irish family of four is told they must fork over approximately sixty thousand dollars to bailout the no doubt well paid (and well bonused) executives of Anglo Irish Bank and their bond holders, will they remain quiescent? On top of massive unemployment, brutalizing austerity and a shaky economic future, the people of Ireland must now add  higher future taxes to pay off the excesses of a few to their growing tab of  financial and economic suffering.

Reich: Jobs depression will only get worse

From UC Berkeley prof and former Clinton cabinet officer Robert Reich:

The Great Jobs Depression continues to worsen.

The Labor Department reports this morning that companies created ony 67,000 new jobs in August. That’s down from the 107,000 they created in July. And because the government laid off temporary Census workers, the economy as a whole lost 54,000 jobs.

To put this into perspective, we need 125,000 net new jobs a month just to keep up with the growth of the population and the potential workforce.

Think of it this way. The number of Americans willing and able to work but who cannot find a job hasn’t stopped growing since the start of 2008. All told, about 22 million Americans are now jobless. Add in those who are working part-time who’d rather be working full time, and we’re up to 25 million.

And because most families depend on two paychecks, the practical impact is almost double.

All this has a negative multiplier on the economy. If families can’t pay their bills, their mortgages become delinquent (that’s why mortgage delinquencies keep rising), their credit card bills go unpaid (we’re seeing a notable rise in credit card defaults), and they can’t afford to buy anything other than necessities (hence auto sales have plummeted, new homes sales are down, and retail sales are in the pits).

As a result, more and more businesses decide to lay off workers (or refrain from adding them) because they can’t sell the goods and services they produce.

The last time we saw anything on this scale was in the 1930s.

The last time we did anything about this on the scale necessary to reverse the trend was in the 1930s and 1940s.

Illinois state office faces eviction over rent

You know the economy’s in the crapper when even state government offices and lawmakers face eviction for missing rent payments.

Russell Lissau of the suburban Chicago Daily Herald has the story:

A popular driver’s license facility in Libertyville could be forced to close if the state doesn’t pay four months in back rent within 45 days, the landlord said.

Stephen Martin, whose family owns the Brookside shopping center on the 300 block of Peterson Road that houses the Secretary of State office, has sent a letter to state officials saying he wishes to terminate the lease agreement because of the long-overdue payments. Martin said the state owes him nearly $43,000 in back rent and expenses.

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The continued payment problems essentially breach the lease contract, he said. If the state doesn’t pay up this time, Martin said, he will go to court and begin eviction proceedings.

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The delinquent rent checks are symptomatic of the state’s ongoing financial problems. The comptroller’s office has $4.3 billion in unpaid bills in its system, spokesman Alan Henry said this week.

Several state lawmakers have faced eviction because of late payments; just this week, state Rep. Sandy Cole of Grayslake temporarily began working out of her house because her office was shut down.

California mall closes, surprising tenants

From Chantal M. Lovell of the San Bernardino Sun:

Redlands Mall tenants — about six in all — received a letter dated Aug. 2 informing them their leases were being terminated and they need to exit their stores by the close of business Sept. 30. Thereafter, the Redlands Mall will be closed.

“They (GGP representatives) came in and told us that they’re out of bankruptcy and things were going to look good and then the next thing we know they come in and say they’re closing the mall,” store owner Wes Hayden said Friday. Hayden is owner of three stores in the mall: Eyeware Specialist, Rittman’s Tuxedo and Hayden-Brothers Coffee.

When reached Thursday, David Keating, vice president of Corporate Communications for GGP said that the Redlands Mall will fall under Spinco, a subsidiary company that was created as GGP moves back into business. He stressed that Spinco will not abandon or neglect its properties. He did not mention the closure.

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But the mall business owners said they have been told a very different story.

“They said they’re going to put a fence around it until the economy picks up,” Hayden said. “Why would you blight a city like this by putting a fence around the mall. We’re not a prison.”

Oscar Orci, director of Development Services for Redlands, said the city — which owns the parking lot at the mall – has been in talks with GGP about how to keep the property safe while it is vacant.

Société Générale foresees an investor ‘bloodbath’

That’s the grim prognostication reported by Angela Monaghan of the London Daily Telegraph.

Investors should brace themselves for an equities “bloodbath” and a further fall in bond yields when the current excessive optimism propping up the market seeps away, Albert Edwards, a strategist at Société Générale, has warned.

Mr Edwards said there was too much hope among investors, with excessive valuations in the US, but predicted it would come to an end in the coming months as economic data increasingly pointed to a double-dip recession.

“Equity investors are in for a rude shock. The global economy is sliding back into recession and they are still not even aware that these events will trigger another leg down in valuations, the third major bear market since the equity valuation bubble burst,” he said.

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“So far the equity market has shrugged off much of the weaker data that abounds, and has not joined the bond market in a perceptive move.

“The equity market will though crumble like the house of cards it is, when the nationwide [US] manufacturing ISM slides below 50 into recession territory in coming months.” The ISM index fell to 55.5 in July from 56.2 in June.

Mr Edwards forecast a return to the “valuation nadir last seen in 1982”, with the S&P bottoming at around 450.

Fed fights to keep bailout records secret

You’ve got to wonder why the central bank is so eager to keep the lid on records which the public should have every right to examine. The only logical conclusion is thngs are much worse than the feds would like us to believe.

Bloomberg’s Bob Ivry and David Glovin reported on the story 25 August:

The Federal Reserve Board sought to delay the court-ordered release of documents identifying banks that might have failed without the U.S. government bailout while it considers an appeal to the U.S. Supreme Court.

The Fed asked the U.S. Court of Appeals in New York yesterday to delay implementation of a ruling that compels the central bank to release the documents.

“The stay is necessary to permit the board to consult with the Department of Justice regarding an appeal to the Supreme Court,” Fed spokesman David Skidmore said.

The appeals court on Aug. 20 denied the Fed’s request to reconsider its decision requiring it to release records of the $2 trillion U.S. loan program.

Market confidence plunges among richest investors

From Reuters:

The Spectrem millionaire investor confidence index fell to its lowest level in more than a year in August as wealthy U.S. investors worried about politics and unemployment, according to Spectrem Group.

The Spectrem Millionaire Investor Confidence Index fell 11 points in August to -18, its lowest level since June 2009, when it fell a record 18 points to -20 shortly after the S&P 500 index hit a 12-year low.

The move returns the index to mildly bearish territory after 12 straight months in neutral.

The Chicago-based consulting firm, which specializes in affluent and retirement markets, defines neutral as between -10 and +10 in the index, which ranges from -100 to +100.

“The millionaires’ decline is particularly troubling since it suggests millionaires, typically more sophisticated than the broader affluent population, are reverting to a bearish frame of mind,” said George Walper, president of Spectrem Group.

Another sign of troubled times: Birthrates plunge

Associated Press medical writer Marilynn Marchione has the story:

The U.S. birth rate has dropped for the second year in a row, and experts think the wrenching recession led many people to put off having children. The 2009 birth rate also set a record: lowest in a century.

Births fell 2.7 percent last year even as the population grew, numbers released. . .by the National Center for Health Statistics show.

“It’s a good-sized decline for one year. Every month is showing a decline from the year before,” said Stephanie Ventura, the demographer who oversaw the report.

The birth rate, which takes into account changes in the population, fell to 13.5 births for every 1,000 people last year. That’s down from 14.3 in 2007 and way down from 30 in 1909, when it was common for people to have big families.

“It doesn’t matter how you look at it — fertility has declined,” Ventura said.

The situation is a striking turnabout from 2007, when more babies were born in the United States than any other year in the nation’s history. The recession began that fall, dragging stocks, jobs and births down.

“There is quite possibly a connection between the decline in births and the economic downturn,” says the federal Centers for Disease Control and Prevention, which includes the health statistics center.