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HARSH REALITY OF BUSH TRICKLE DOWN ECONOMICS
Bush's recently passed 77 Billion tax cut for the rich will leave 68% of all households with no benefits at all and 20 percent of households in the middle of the income spectrum receiving just $20 ~This is the harsh reality of Cheney/Bush trickle down economics: Allen L Roland
The harsh reality of Cheney/Bush economics is finally registering on Wall Street and the hangover is just beginning.
Wall Street is beginning to realize that the Cheney/Bush administration not only does not have an exit plan for Iraq but has no idea what it is doing on the economic front ~ except line the pockets of its large corporate political supporters with unnecessary tax cuts which add to the unmanageable deflicit.
Remember, with this administration , it is all about perception versus reality ~ and we are all about to come face to face with the economic consequences of this corrupt and irresponsible band of crooks.
Dr Stephen Jonas, Political Junkies, will fill you in with the mind boggling details of the looming financial collapse..
Allen L Roland
THE PHOTO OP PRESIDENT
Dr Stephen Jonas / www.thepoliticaljunkies.net
One headline yesterday encapsulates the story:
Inflation concerns hammer Wall Street
Dow drops 214 points, sees worst one-day drop in three years
Republican economic policy is coming home to roost
Investors were disappointed by a Labor Department report that showed its consumer price index swelled 0.6 percent in April, topping forecasts of 0.5 percent. But “core” CPI — which excludes food and energy — also gained 0.3 percent, surpassing economists’ expectations and adding to worries that soaring oil prices have begun to lift prices elsewhere, potentially leading to widespread inflation.
“The CPI data really kicked the market in the teeth today,” said Ken Tower, chief market strategist for Schwab’s CyberTrader. . . .
Wall Street has been anxious about economic news after the Federal Reserve last week said more rate hikes could be needed to battle inflationary pressures from record-high commodities prices. . . .
The Fed boosted rates to 5 percent and left flexibility to pause its rate tightening. However, the Fed cautioned that soaring oil and gold prices threaten to drive inflation and could warrant higher interest rates to stifle demand and keep prices from escalating. The CPI report and Tuesday’s PPI reading reinforced the Fed’s warning. . . .
The U.S. dollar continued losing ground to the Japanese yen and also weighed on the market’s mood, CyberTrader’s Tower said. The dollar’s retreat could propel inflation since more of the U.S. currency will be needed to purchase foreign-made goods.
“The dollar has depreciated quite sharply since the Fed started talking about stopping its rate hikes,” Tower said. “It’s not so much that the dollar is depreciating — it’s the speed of the depreciation that is worrying the currency market. The dollar is down 6 percent in one month, which is a lot.” . . .
And the prospect of higher interest rates hurt bonds, with the yield on the 10-year Treasury note surging to 5.16 percent from 5.1 percent late Tuesday. Last Friday, bond yields reached a four-year high of 5.19 percent.
In a nutshell:
- As the US Dollar declines in value you will pay more for all goods that are manufactured overseas. Because America has shipped ever increasing share of its manufacturing base overseas, that means you will be paying more for more goods.
- The declining value of the US Dollar means that the price of oil will stay higher than if the US Dollar was stronger.
- Because of higher energy prices, inflation effects the price of most everything in the United States. When prices go up, Americans stop buying, and ultimately corporate profits will feel the effect.
- Most importantly, the Federal Reserve has increased interest rates – and it appears that the increases may not be over. If you have a variable rate home mortgage, you will soon be paying more for housing. Increased interest rates also mean fewer houses will be purchased, which means the construction industry will slow.
- Most Americans’ paychecks will buy less than they did just last year.
Even as the US financial markets were taking a beating, Bush was signing 77 Billion Dollars in tax cuts into law. The picture below demonstrates the message that Republicans want you to believe.
The harsh reality (quoted in part and paraphrased in part from the Center for Policy and Budget Priorities) is far different than the photo op:
- About 87 percent of the benefits of the reconciliation conference agreement would flow to the 14 percent of households with incomes above $100,000 with:
55 percent of the 87 percent of the benefits going to the 3 percent with incomes above $200,000.
22 percent of the 87 percent will go to those earning more than $1 million a year, which represent only 0.2 percent of all households.
- 5 percent of the benefits will go to those with incomes below $75,000, which is 75 percent of all American households.
- 2 percent of all benefits will go to households with incomes of less than $50,000, which is 60 percent of all households.
In dollars terms, the average tax cut for:
- The 20 percent of households in the middle of the income spectrum would be just $20.
- The average tax cut for those in the top 1 percent of the income spectrum would be $14,100.
- For those with incomes above $1 million, the average tax cut would be $43,000.
This chart makes the points graphically:
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Distribution of Major Reconciliation Tax Cuts
(Assuming They Are Fully In Effect in 2006) |
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Income Class |
AverageTax Cut |
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Middle 20 percent |
$20 |
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Top 1 percent |
$14,100 |
|
Over $1 million |
$43,000 |
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Source: Urban-Brookings Tax Policy Center |
Finally, we need to mention that 68 percent of all households would receive no benefits whatsoever from the tax-cut package.
This is Republican “trickle down” economics.
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TRUTHTALK
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