I’m not sure if an agreement in Washington over the payroll tax cut is the reason why the market is looking higher again but to put it in perspective, it’s the 5th short term tax cut/rebate check agreement since 2001. Bush had his in ’01 and ’08 followed by Obama in ’09 and this year and next. As with any short term policy, whether fiscal or monetary, the economy is left back at square 1 when it wears off. Show me one employer that has or will hire someone new because of these 5 rebates. I’m all for getting our hard earned money back from the clutches of DC but we need long term economic thinking and unfortunately it’s a lesson never learned, even following the aftermath of the past 10+ yrs of short term monetary and fiscal largesse. In Europe, Italian consumer confidence in Dec fell to the lowest on record dating back to this survey’s start date in 1996. While little changed today, the Italian 10 yr yield is just 8 bps below 7% as the market has shown little confidence that the fiscal steps taken by the Monti gov’t will have a meaningful impact. In Asia, the Shanghai index rallied for the 1st time this week.

Category: MacroNotes

Please use the comments to demonstrate your own ignorance, unfamiliarity with empirical data and lack of respect for scientific knowledge. Be sure to create straw men and argue against things I have neither said nor implied. If you could repeat previously discredited memes or steer the conversation into irrelevant, off topic discussions, it would be appreciated. Lastly, kindly forgo all civility in your discourse . . . you are, after all, anonymous.

2 Responses to “The 5th short term tax rebate since ’01 agreed to”

  1. dukeb says:

    Many tens of millions of working people will have 20 dollars a week available to spend which they would not have without the cut. My local small grocery may end up a little busier, which means they might have more hours to staff their second cash register, which is not always staffed. Spending money will create employment. In times of involuntary unemployment (substantially above the so-called “natural” rate), stimulative spending or tax policies can make sense even though they increase the long term deficit. The real physical economy is more productive with full employment, and the debt can be addressed by long term policies which do not run a deficit during the good times. Admittedly, this means that the wealthy are going to be paying off more of that long term debt but frankly the wealthy benefit by not living in an impoverished society (because hopefully we can avoid the expenses associated with civil unrest and lost human capital).

  2. ihedgemyhedges says:

    Dukeb, I appreciate your position. However, your position says something about our country and our current condition, doesn’t it? We paint a very sad picture when the leader of the free world scares ordinary folks by saying “The Republicans want to take an extra $40 from you every two weeks” and sets up a website asking people what that means to them. When you get answers like “I will have to cancel my cable subscription” and “It will mean no more Friday night pizza parties”, I’m sure those who are still alive and suffered thru the Great Depression cringe…………….we don’t know what sacrifice means any more.

    Further, you say “the debt can be addressed by long term policies…….”. Having witnessed the Bush tax cuts, that had a 2010 sunset on them, and the subsequent 2 year extension, and the one year payroll tax cut, and the subsequent 2 month extension, I ask you the question: “What does long term mean and who will be the President and who will occupy the Congress to give us a long term policy of any kind……..??????”

    Unfortunately, given our current state of affairs, the next generation will get the can that we’ve kicked simply because we can print money and borrow from ourselves. One thing I know for SURE: that will end, and it will end ugly……….