Thursday, July 22, 2010

"Bernanke Says Extending Tax Cuts Maintains Stimulus" - - Hmmm?

Above, the title of an article on Bloomberg News, today.

Below, a few excerpts from that article:

July 22 (Bloomberg) --
Federal Reserve Chairman Ben S. Bernanke said extending the tax cuts passed during former President George W. Bush’s administration would help strengthen a U.S. economy still in need of stimulus.

“In the short term I would believe that we ought to maintain a reasonable degree of fiscal support, stimulus for the economy,” Bernanke said today in testimony before the House Financial Services Committee. “There are many ways to do that. This is one way.” (Blog-editor's note: When he said, "this is one way," he was referring to an extension of the tax cuts, which, by law, are supposed to expire by the end of 2010.)

Bernanke, in the second day of semiannual congressional testimony on monetary policy, said the central bank will act to spur growth should the economy sputter. A top lieutenant, New York Fed President William Dudley, said today that the “road to recovery is turning out to be a bit bumpy.” (Blog-editor's note: As to the comment the NY Fed President made, "bumpy", all I have to say is "no shit, Shurlock" and "how about telling us something we don't already know.")

Three Options
The Fed chief reiterated three central bank options for further steps, including giving more information on the Fed’s commitment to low interest rates, reducing the rate paid on banks’ reserves held at the Fed and buying more securities.

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Joel's comments:

Beyond the Federal Government's stimulus spending, Fed policy, with the tacit approval of both the Executive and Congressional Branches of the U.S. Government, was to make our financial/banking system healthy again by substantially reducing the interest rates that Banks pay for money Banks borrow from the Fed. [I'm intentionally not mentioning the Government's decision, with tacit approval from Congress, to cure the ills of companies in the financial community by buying their toxic assets and by (for all intents and purposes) insuring / guaranteeing their garbage loans (such as is the case with Freddie Mac and Fanny Mae). Well, there we go, I did mention that, anyway.]

And, yes, the Banks are getting healthy; their cost-of-money is way down and they are earning money because of that. On the other hand, this (the very low Fed borrowing rate) was supposed to reduce the interest costs of businesses and consumers. Well, that's presuming you can actually get a loan! While it is true that mortgage rates are at an all time low, qualifying for a mortgage is much more difficult now (than it previously was), and who the hell is buying homes anyway! People who don't have jobs? People who are still fearful that they might lose their jobs? And, while interest rates on mortgage loans are at an all-time-low, what the hell happened to interest rates Banks charge on credit cards! Banks rushed to raise credit card interest rates, even though their interest costs dropped! I call that, "let's screw the consumer!" And, "while we're at it, let's cancel credit cards and make it more difficult to get them." I don't see where Banks are "sharing the wealth" with consumers! And, since our economy's recovery needs consumer spending to increase, why aren't our "leaders" forcing that (Banks to lower interest rates on credit cards) to happen?!

Our "seniors" aren't going to be "spending" anytime soon. Income on their investments is at an all-time-low. (I'm lucky if I can find a 1 year CD that pays much of anything! Same for MM accounts!) Seniors can't afford to "spend." Unemployed people aren't going to be spending anytime soon! The government will extend their unemployment benefits, but where's the government (and Congress) when it comes to really stimulating JOB GROWTH!

Wow, "ain't" you glad your bank is earning big money again?! ... while you are earning far less on your CD's and MM's?! If your banks shared some of their earnings (by increasing the interest they pay you on CD's and MM accounts), you'd have more money to spend ... and then you'd be able to help stimulate the economy! (My wife has been trying to do that all on her own, much to my chagrin! Hey, I need some relief!)

As to extending the tax cuts, I'd prefer to see that NOT happen. Unemployed people pay little, if no, tax anyway. Extending the tax cuts won't help them. Big corporations are stowing cash. Extending tax cuts doesn't necessarily mean that they will invest that money in their companies; it could very likely be that all that will happen is that they will add to the cash they are hoarding. Middle income taxpayers will see little relief; they are still unsure about their jobs, wages are not growing, compensation in many industries got cut back. So, who really benefits from the tax cuts anyway? Very wealthy people. I'm not against very wealthy people. And, I'm not into Socialism. However, I'm also not into our Government continuing to give handouts to people and entities that should not be continuing to get handouts, and, here, I'm speaking about Banks and companies in the Financial community.

How about:
Job Tax Credits?
Investment Tax Credits?

If we're going to give tax cuts (which is, effectively, what a tax-credit does, it cuts taxes on income), then let's do that by "encouraging" companies to hire people and buy equipment.

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