Tax Cut Extensions - Good For Us All In These Times

There's been a lot of discussion about the deadline that is looming. The Bush Era tax cuts, meant to stimulate a soft economy, are expiring on the last day of this year. The debate has been to extend or not to. We as a nation are debating whether or not the tax cuts have worked in the past or not. It really doesn't matter what happened in the past. These are tough times now!

Here are the two sides: The Dem's say that they work on the middle class, but not on the upper class. How is that?  I am not sure personally. The Repub's say that you can't raise taxes in a down economy, taking more out of an economic system already short on cash and growth capital.  I personally agree with the latter. Why do I?

I just got my property tax bill, and my personal property tax bill. Guess what? They went up again. I have dues to pay at my subdivision association. My health insurance renewal just went up. Raw materials and Gas are up due to QE2, (check my previous posts) and I need to buy some Christmas gifts. I'm trying to keep payroll going for my staff, too. Do I have room for a 20% tax increase? I'll let you answer that for me.

The Estate Tax goes up so much, that a family farm changing hands to descendants next year would force the family to sell land to pay the tax, just to pass it on to their kids. Everyone, especially the middle class will see a large increase in weekly withholding. By year end, 2 million people on unemployment insurance will run out of benefits. Capital gains taxes would almost double. There is no logical argument that these tax increases will help pull us out of this recession. None.   We need a temporary extension, if not a permanent one, for a couple of years. Just remember, 70% of all employment is created by small businesses. Small businesses are owned by hard working middle class folks who can't afford a tax increase right now.

Yes, the deficit does need cutting. We also need a balanced budget. But, folks, this is going to take 30 years not 5! Everything will need to be on the table to end our deficit spending. Taxes and entitlements including Medicare and Social Security. The table below shows what we spend on entitlements (click on the pic for a larger view):

No, I'm not advocating that we balance our budget on the backs of seniors. I am just saying that everything has to be on the table. We obviously need the tax cut extensions now, and we need take a serious look at what we can afford to spend in the future. The tax cuts will be extended I am sure. The Dems can't afford not to politically, and the Repubs ran on extending them. 

But after January 1st, a lot of heavy lifting remains.

D

 

Why Is It So Hard to Borrow Money?

Bankers have had a hard year. Yes, I know, everyone else has had a hard year, too. But when you think about community bankers, please consider a few extra lines that don't normally make it past your second thought:

• Bankers in our area really didn't cause this crisis...yet the blame is passed around evenly to Banks in our area.
• Bankers are good guys while lending you money, and bad guys when asking that it be paid back. Remember, it's a law that we have to get it paid back.
• Bailouts don't happen in your/our area, and good folks in hard times don't get bailouts like the big boys did.
• Bankers get to stress the many budget woes of their customers. When your paycheck doesn't last all month, you stress it.  Bankers have many, many customers they are helping get to the next paycheck, and the stress really adds up on us.
• Bankers have much more stress to come, even if the economy recovers and we all get back to work...
• Bankers have been making loans during the crisis, only to be scrutinized by regulators for doing so.

So why won't Bankers just re-start the loaning of money and help all of us move on with our lives?

Besides stressing current events and whether or not to loan, bankers have a big storm coming over the horizon. It's the Dodd-Frank Regulatory Reform Law.  The bill, passed earlier this year, is 2319 pages long. The ensuing bank regulations resulting from that bill will generate an estimated 20,000 pages of new bank regs! Yes, 20,000 pages! Thats about 40 reams of paper. I'm serious when I say, we bankers are reeling over this, and are hopeful the new congress will roll back or repeal some or all of this behemoth of red tape before our ability to lend is stifled even more.

What were the laws intentions? It was intended to protect you the Consumer. However, simply put, if you think borrowing money now is tough now, wait a couple years.  Bankers are waiting to see just how this new government burden will add to our overhead, and how and if some of the smaller banks will be able to afford to compete. As always the costs have to be passed on. You see only big banks are too big to fail. Traditional banks are allowed to fail every Friday if they make the wrong decisions.

Results vary just like opinions, but the end of free checking is near. Possibly the end of being able to write a check to get a prescription for a sick child, all the while knowing you don't have cash in the bank, but knowing your banker will cover it for you, because it's the right thing to do. Yes, a fee is involved, and a fee is earned. But, that fee, tonight, is the farthest from your mind. And yes, your sick one got the medicine tonight, instead of next payday. And yes,  you got to make that choice yourself, instead of the government telling you that program is not good for you or your family.

Consider this: The Government can't protect all people from all things good and bad. The many are always forced to pay for the bad judgements of the few. More red tape is never the answer, but it has been the norm lately. We need less writing and more doing. You know that privacy notice you get in the mail every year about this time from banks and credit card companies? The one you dont read? The one you round file? That cost banks millions of dollars to print and mail, complying with a regulation intended to inform you that doesnt work.

Banks need to be allowed once again to invest in their customers, their communities, without fear of government red tape putting them out of business for doing so.

I am still at work, stressing about tomorrow and next week and my budget for 2011. Then I see a customer drive by. I know their name and they know mine. Our kids played ball together. Their granny and mine are quilters together at the Senior Center. That knowledge is rare in big banks. But it's not rare here. Suddenly, it all comes back into perspective why I am still here.

D

An Election Result With A Message

Regardless of your party affiliation, the electorate has spoken. It was not so much an endorsement of the Republican Party as it was a loud and clear statement that once again we want change and the Democratic Party has not delivered it these last two years. Actually, polls show that the electorate doesn't really like either party. Truly for the first time in decades, the American people have sent a message to Washington, DC: "Listen to us or lose your jobs!"

Many Democrat's, who yesterday were leading this country lost their jobs last night. All over our nation, they too, are searching the help wanted ads this morning just like the other 10%-17% of Americans who have been unemployed for the last two years. Democrat controlled seats dating all the way back to the 1880s were lost to Republicans. Truly, an extraordinary message was sent!  Harry Reid, D-NV was the only big government victor, clawing out a <1% victory. He heads back to Washington with a large slice of humble pie and a noticeably weaker political persona. Now we wait to see if the President can work with our new Congress with their message from the people in hand; effect the change the people want. We also watch the Republican House and see if they will reciprocate.

Exit polls resoundingly showed the Economy/Jobs are most important to the people.  The National Debt/Spending was a close second. One news analyst summed it up as "...we have to spend within our means on a personal level, and we want our government to do the same..."  The last two years we have cut and saved and reduced our debt, all the while our government added $4 trillion dollars to our national debt, and as much as another $4 trillion dollars in new government spending on programs the people found extremely unpopular. And we the people do not feel we got our monies' worth.

What can we expect with these changes? Well for starters I think the Bush Era tax cuts will be extended, at least for another two years.  I also think that the huge barrage of new regulations, the most since the 1930's, will be scaled back or in some cases outright repealed. This will signal some relief to taxpayers, some of whom are business entities, to begin the process of investing in growth and jobs and therefore start a meaningful economic recovery. I think the full price tag for ObamaCare will be evaluated and its true size and scope will be discovered and debated. The best change will be an economic recovery we can feel and not just be told by pundits "...the recovery is here, you just can't feel it."

What I feel was most extraordinary is something that is seldom mentioned on cable news; Once again, power was transferred. And in America we do it peacefully. In the end we are all Americans and we are all in this together. If one group doesn't succeed, we in America, do not have make war to make change. Now let's roll up our sleeves and go to work, and show the rest of the world we still can. 

God Bless America, and best of luck to the new Congress.

D