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Inflation finally is going up after years and we can get out of this stagnating economy. Wage growth up 3% in new January report and so we can finally expect in

Inflation finally is going up after years and we can get out of this stagnating economy. Wage growth up 3% in new January report and so we can finally expect interest rates to rise faster like they did in the past. Many investors, especially institutional ones have for years thought the stock market has been over priced but where else to park money because interest rates are too low? Overall the 3% wage growth is huge for the economy especially because unemployment is so low. Other economic indicators also show a very healthy economy so when the next recession hits we'll have the tools to stop it. Inflation not rising has like stated baffled everyone so glad we are now dealing with what we know rather than wading into the unknown. The normal rules seem to apply again. This is also why presidents shouldn't make their number one accomplishment the market because often times market crashes don't correlate with recessions or a poor economy. Trump did have a huge effect on the market, but not 10% which he thinks he did. That said the market is still higher than it was 5 weeks ago. Risk averse savers will finally be rewarded. My biggest fear is the huge deficit, and the huge spending. I think the tax cut is great long term but could have been made significantly better, and could have scored under $100B deficit over 10 years under dynamic scoring (currently at 500B) if they decreased the top rate but still made it significantly higher than what it is today, and made the global min tax per individual countries but payable over time rather than all combined.

adventured 9y ago
The wage growth would be nice, except actual wage growth isn't anywhere near 3%. That's the nominal figure. For production and non-managerial positions, which is nearly the entire economy, inflation adjusted annual wage growth is under 1%. We'll need to see 4% or 5% nominal wage growth, with inflation holding at 2% or lower, to generate meaningful wage gains at the median.
- cgb223 9y ago
  I haven't heard this side of the argument, do you have a source on that data?
  - woolvalley 9y ago
    Would this be it? https://fred.stlouisfed.org/series/AHETPI https://fred.stlouisfed.org/series/AHETPI Disclaimer: I don't know much about the arguments, to me it just looks like a typical linear graph.
dcosson 9y ago
Didn't the top income tax rate decrease by something like 2.5%? Doesn't seem like a lot of room for it to have decreased but still be "significantly higher" than it ended up at.
- propman 9y ago
  The top rate before was 39.6% for over 480k, over 480k now hits the 35% and 37% mark and that is a HUGE difference. Let's only consider how that effects the top 1% and a rough estimate. Currently that's around 1.73M filers with an average income of 1.4M a year. Under the new tax rules the average 1% will save $40,000 over 480k (will obviously save more under 480k but not counting that). That totals out to be $692B in tax cuts over 10 years or in other words basically 70% of the tax cut deficit based on standard scoring and 138% based on dynamic scoring (obv not exact). So this could have been a revenue neutral tax cut even after a massive tax cut to everyone, just a slightly less of a tax cut to the top 1%. In other words 70% of the tax plan deficit over the decade is coming from cuts from the top 1%. I would have preferred a different allocation that would have decreased their tax burdens but not by that much. Obviously this doesn't consider many smaller factors but it's a fairly accurate estimate.
  - sokoloff 9y ago
    > In other words 70% of the deficit over the decade is coming from cuts from the top 1%. I believe it's far more accurate to say that 70% of the tax cut-related deficit is coming from tax cuts to the 1%. The impact on the overall deficit is far less than 70% from those cuts.
    - propman 9y ago
      Thanks, edited. I can see how that was confusing
  - TimJRobinson 9y ago
    Your math is off by one magnitude. $40k * 1.73 million people = $69.2 billion. Unless I'm missing something?
MediumD 9y ago
"Many investors, especially institutional ones have for years thought the stock market has been over priced but where else to park money because interest rates are too low?" What information are you basing this off of? I'm not doubting you, just curious as to where one could find that sort of sentiment of institutional investors?
- nopriorarrests 9y ago
  Well, if your average pension fund planned 7% yearly returns back in 2005, then boom, zero rate interest policy arrived, with 2.5% coupon on 10 year treasury bill, they had to dig into more risky assets. corporate debt, more exposure to stocks.
oculusthrift 9y ago
how can you simultaneously care about the deficit and support the tax cuts. Cognitive dissonance?
- gonational 9y ago
  Um... by reducing spending.
  - cmontella 9y ago
    The current admin has proposed a multi billion dollar wall (turns out we will pay for that after all), a trillion dollar infrastructure project, and increases in military spending. What is this "reduced spending" you're talking about?
    - sanderjd 9y ago
      It seems pretty straightforward: they likely aren't in favor of those policies either.
      - cmontella 9y ago
        Who is "they" exactly? The party that spent the past 8 years talking about how deficits and spending are going to destroy the country are currently running things... and looking to increase deficits and spending. Self labeled "fiscal conservatives" just voted for a $1.5T unfunded tax cut, banking on essentially fairy dust (trickle down economic voodoo) to save the budget.
        sanderjd 9y ago
        I was just talking about the commenter you replied to (gonational).
        thomasrognon 9y ago
        There's more than just Democrat and Republican out there.
Gustomaximus 9y ago
> economic indicators also show a very healthy economy so when the next recession hits we'll have the tools to stop it. Will the tools be there? You basically have monetary policy limited as interest rates are already low. And fiscal policy is limited as major tax cuts are already given and the debt/deficit mean increasing spend is difficult or come with potential negative consequences. Am I missing something? I'm more hopeful the govt uses this window to get itself in a position to manage the next downturn vs ride the good times and then not have the tools for the bad.
state_less 9y ago
I wasn't a big fan of the tax cuts, even though I'll see the proceeds from them. Some think that the less you pay, the better, all the way to zero. In my view, taxes are like porridge, you don't want it too hot or too cold. The best amount is not too little or too much. I too worry about the deficit and think we need to tax the biggest gainers a bit more and provide safety nets for the economic losers so they can breath easy and participate in the economy a little more than just sustenance levels. As we've written and read about here in the past, it's expensive to to be poor (e.g. visiting the ER vs. early prevention, overdraft fees, etc). That may not be what you like to hear, but I also don't think we should tax the gainers too much either. There needs to be an incentive to to do well and I'd be against cutting into that too deeply.
- xienze 9y ago
  > I wasn't a big fan of the tax cuts, even though I'll see the proceeds from them. Some think that the less you pay, the better, all the way to zero. So I take it you’ll be paying extra on your federal taxes next year and earmarking the difference for the federal debt or other things you find worthwhile?
  - sokoloff 9y ago
    That line of questioning frequently appears in these arguments. I find it disingenuous because if I did pay extra towards my federal taxes, I still (after rounding) have inherited the same amount of future obligation and I should expect, as taxes are invariably raised in the future, that I would be expected to pay towards that future obligation as well. Arguing that we should all collectively pay more does not require one to individually contribute at that higher rate, nor does arguing that we (including the proponent) should collectively pay more ring near as hollow as arguing that those other people should pay more.
    - Gustomaximus 9y ago
      The other stupidity of that line is what difference will it make it I paid more tax voluntarily? Obviously bugger all. But should the middle/upper society all pay more it gives the govt significantly more resources to better society. Its a willingness for personal sacrifice for the greater good, not personal sacrifice for no good. Can these people ever see tax as a value proposition? Wasted tax dollar are bad. But if you pay 5% more and get universal healthcare and get a liveable social security safety net that seems OK to me. Further this attitude that its 'taking money I earnt' need to understand they are driving on roads that were built by generations ahead of them. Using sewers that their grandfathers laid, often on tax dollars. Benefiting from the political freedoms people literally fought and died for. Etc. If they want to claim the money earn is theirs the should go to someplace completely unoccupied and carve out an existence. See how much success they create truly on their own back. Maybe then they can understand we are all standing on the shoulders of those that came before us and that opportunity/system needs to be paid for and ideally continued to be improved upon.
ajmurmann 9y ago
Trying to find a correlation between how the actual economy is doing and the current president is in my opinion a foolish endeavor. It takes way too long for a policy change to actually impact the economy and on top of that it's pretty much impossible to isolate the cause of the economic change. How the market reacts in the short term is even less relevant since it really only says how a certain group of people likes the change and isn't necessarily related at all to how the economy will nee impacted by the change. Every time a president claims economic growth to be because of them they reveal themselves to either be a liar or a fool.
- notyourwork 9y ago
  > Every time a president claims economic growth to be because of them they reveal themselves to either be a liar or a fool. Is both possible?
- richardknop 9y ago
  > Every time a president claims economic growth to be because of them they reveal themselves to either be a liar or a fool. Every president claims credit if economy is doing well. Same for Obama, Bush and Clinton. All were claiming credit for their periods of solid economy. That's just what you do as politician, take credit for good things and try to blame somebody else for bad things. Part of the political profession.
  - ajmurmann 9y ago
    Yes and I see them all as liars.
  - cmontella 9y ago
    True, but it's rare that a President claims on an almost daily basis that he alone is responsible for the current standing of the stock market specifically. Just last week he claimed had Clinton been elected, the market would have lost 50% of its value.
    - richardknop 9y ago
purplezooey 9y ago
Future generations will have to pay for the deficit in SS and Medicare shortfalls, so voters today don't care.
- ec109685 9y ago
  What happens if they don’t pay? Will the federal government go bankrupt? How much debt is too much and why?
  - dragonwriter 9y ago
    > What happens if they don’t pay? Workers today relying on those programs in retirement will find them reduced or eliminated.
    - ec109685 9y ago
      Couldn’t you have said the same thing 20 years ago?

adventured 9y ago

The wage growth would be nice, except actual wage growth isn't anywhere near 3%. That's the nominal figure. For production and non-managerial positions, which is nearly the entire economy, inflation adjusted annual wage growth is under 1%. We'll need to see 4% or 5% nominal wage growth, with inflation holding at 2% or lower, to generate meaningful wage gains at the median.

cgb223 9y ago
I haven't heard this side of the argument, do you have a source on that data?
- woolvalley 9y ago
  Would this be it? https://fred.stlouisfed.org/series/AHETPI https://fred.stlouisfed.org/series/AHETPI Disclaimer: I don't know much about the arguments, to me it just looks like a typical linear graph.

dcosson 9y ago

Didn't the top income tax rate decrease by something like 2.5%? Doesn't seem like a lot of room for it to have decreased but still be "significantly higher" than it ended up at.

propman 9y ago
The top rate before was 39.6% for over 480k, over 480k now hits the 35% and 37% mark and that is a HUGE difference. Let's only consider how that effects the top 1% and a rough estimate. Currently that's around 1.73M filers with an average income of 1.4M a year. Under the new tax rules the average 1% will save $40,000 over 480k (will obviously save more under 480k but not counting that). That totals out to be $692B in tax cuts over 10 years or in other words basically 70% of the tax cut deficit based on standard scoring and 138% based on dynamic scoring (obv not exact). So this could have been a revenue neutral tax cut even after a massive tax cut to everyone, just a slightly less of a tax cut to the top 1%. In other words 70% of the tax plan deficit over the decade is coming from cuts from the top 1%. I would have preferred a different allocation that would have decreased their tax burdens but not by that much. Obviously this doesn't consider many smaller factors but it's a fairly accurate estimate.
- sokoloff 9y ago
  > In other words 70% of the deficit over the decade is coming from cuts from the top 1%. I believe it's far more accurate to say that 70% of the tax cut-related deficit is coming from tax cuts to the 1%. The impact on the overall deficit is far less than 70% from those cuts.
  - propman 9y ago
    Thanks, edited. I can see how that was confusing
- TimJRobinson 9y ago
  Your math is off by one magnitude. $40k * 1.73 million people = $69.2 billion. Unless I'm missing something?

MediumD 9y ago

"Many investors, especially institutional ones have for years thought the stock market has been over priced but where else to park money because interest rates are too low?" What information are you basing this off of? I'm not doubting you, just curious as to where one could find that sort of sentiment of institutional investors?

nopriorarrests 9y ago
Well, if your average pension fund planned 7% yearly returns back in 2005, then boom, zero rate interest policy arrived, with 2.5% coupon on 10 year treasury bill, they had to dig into more risky assets. corporate debt, more exposure to stocks.

oculusthrift 9y ago

how can you simultaneously care about the deficit and support the tax cuts. Cognitive dissonance?

gonational 9y ago
Um... by reducing spending.
- cmontella 9y ago
  The current admin has proposed a multi billion dollar wall (turns out we will pay for that after all), a trillion dollar infrastructure project, and increases in military spending. What is this "reduced spending" you're talking about?
  - sanderjd 9y ago
    It seems pretty straightforward: they likely aren't in favor of those policies either.
    - cmontella 9y ago
      Who is "they" exactly? The party that spent the past 8 years talking about how deficits and spending are going to destroy the country are currently running things... and looking to increase deficits and spending. Self labeled "fiscal conservatives" just voted for a $1.5T unfunded tax cut, banking on essentially fairy dust (trickle down economic voodoo) to save the budget.
      - sanderjd 9y ago
        I was just talking about the commenter you replied to (gonational).
      - thomasrognon 9y ago
        There's more than just Democrat and Republican out there.

Gustomaximus 9y ago

> economic indicators also show a very healthy economy so when the next recession hits we'll have the tools to stop it. Will the tools be there? You basically have monetary policy limited as interest rates are already low. And fiscal policy is limited as major tax cuts are already given and the debt/deficit mean increasing spend is difficult or come with potential negative consequences. Am I missing something? I'm more hopeful the govt uses this window to get itself in a position to manage the next downturn vs ride the good times and then not have the tools for the bad.

state_less 9y ago

I wasn't a big fan of the tax cuts, even though I'll see the proceeds from them. Some think that the less you pay, the better, all the way to zero. In my view, taxes are like porridge, you don't want it too hot or too cold. The best amount is not too little or too much. I too worry about the deficit and think we need to tax the biggest gainers a bit more and provide safety nets for the economic losers so they can breath easy and participate in the economy a little more than just sustenance levels. As we've written and read about here in the past, it's expensive to to be poor (e.g. visiting the ER vs. early prevention, overdraft fees, etc). That may not be what you like to hear, but I also don't think we should tax the gainers too much either. There needs to be an incentive to to do well and I'd be against cutting into that too deeply.

xienze 9y ago
> I wasn't a big fan of the tax cuts, even though I'll see the proceeds from them. Some think that the less you pay, the better, all the way to zero. So I take it you’ll be paying extra on your federal taxes next year and earmarking the difference for the federal debt or other things you find worthwhile?
- sokoloff 9y ago
  That line of questioning frequently appears in these arguments. I find it disingenuous because if I did pay extra towards my federal taxes, I still (after rounding) have inherited the same amount of future obligation and I should expect, as taxes are invariably raised in the future, that I would be expected to pay towards that future obligation as well. Arguing that we should all collectively pay more does not require one to individually contribute at that higher rate, nor does arguing that we (including the proponent) should collectively pay more ring near as hollow as arguing that those other people should pay more.
  - Gustomaximus 9y ago
    The other stupidity of that line is what difference will it make it I paid more tax voluntarily? Obviously bugger all. But should the middle/upper society all pay more it gives the govt significantly more resources to better society. Its a willingness for personal sacrifice for the greater good, not personal sacrifice for no good. Can these people ever see tax as a value proposition? Wasted tax dollar are bad. But if you pay 5% more and get universal healthcare and get a liveable social security safety net that seems OK to me. Further this attitude that its 'taking money I earnt' need to understand they are driving on roads that were built by generations ahead of them. Using sewers that their grandfathers laid, often on tax dollars. Benefiting from the political freedoms people literally fought and died for. Etc. If they want to claim the money earn is theirs the should go to someplace completely unoccupied and carve out an existence. See how much success they create truly on their own back. Maybe then they can understand we are all standing on the shoulders of those that came before us and that opportunity/system needs to be paid for and ideally continued to be improved upon.

ajmurmann 9y ago

Trying to find a correlation between how the actual economy is doing and the current president is in my opinion a foolish endeavor. It takes way too long for a policy change to actually impact the economy and on top of that it's pretty much impossible to isolate the cause of the economic change. How the market reacts in the short term is even less relevant since it really only says how a certain group of people likes the change and isn't necessarily related at all to how the economy will nee impacted by the change. Every time a president claims economic growth to be because of them they reveal themselves to either be a liar or a fool.

notyourwork 9y ago
> Every time a president claims economic growth to be because of them they reveal themselves to either be a liar or a fool. Is both possible?
richardknop 9y ago
> Every time a president claims economic growth to be because of them they reveal themselves to either be a liar or a fool. Every president claims credit if economy is doing well. Same for Obama, Bush and Clinton. All were claiming credit for their periods of solid economy. That's just what you do as politician, take credit for good things and try to blame somebody else for bad things. Part of the political profession.
- ajmurmann 9y ago
  Yes and I see them all as liars.
- cmontella 9y ago
  True, but it's rare that a President claims on an almost daily basis that he alone is responsible for the current standing of the stock market specifically. Just last week he claimed had Clinton been elected, the market would have lost 50% of its value.
  - richardknop 9y ago

purplezooey 9y ago

Future generations will have to pay for the deficit in SS and Medicare shortfalls, so voters today don't care.

ec109685 9y ago
What happens if they don’t pay? Will the federal government go bankrupt? How much debt is too much and why?
- dragonwriter 9y ago
  > What happens if they don’t pay? Workers today relying on those programs in retirement will find them reduced or eliminated.
  - ec109685 9y ago
    Couldn’t you have said the same thing 20 years ago?