The Discount Store

      Let's say you have a list of things you need at the store, there's no rush, but you plan on getting them in the next week or so. When today's newspaper arrives there is a flier in it from that store that says there is going to be a big sale next week. Are you going to run right out and buy the stuff you need this week? Of course not, you're going to wait until next week when it's on sale. Conversely, if the flier says the current sale is going to end this Friday, are you going to wait until next week to go buy them? Of course not. You'll go buy them now.
      Now let's discuss President Bush's tax cuts of 2003. I know you're saying, "What in God's name are you talking about"? We'll get to that shortly. The only way Bush could get the tax cuts passed because of Democrat resistance to the cuts was to put a "sunset clause" in them. This clause said that if there was not further legislation to make the cuts permanent, they would expire and return to their previous levels on January 1, 2011. We're almost there. If nothing is done and it looks like nothing will be.done, your taxes are going to go up come January. Income taxes, Capital gains taxes, Dividend taxes, and the Estate or "death" tax. So what does all this mean. It could very well mean that the economy is going to go into the tank next year in a way that will make 2008 look like a summer picnic. Corporations, small businesses, and individuals are pulling as much profit or income as possible into this year (buying the stuff they need this week when the sale is on) and they will be doing everything possible to limit income next year (not buying stuff after the sale is over)so their increased taxes will have limited impact on them. That is why the economy appears to be improving right now. When those tax increases hit in January, the stock market will fall because of the lower profits of companies, consumers will consume less because of higher taxes and less money to spend, so demand for products will fall. Retail sales will plummet.  Without that demand, business production will fall resulting in further layoffs. The increase in taxes will cause economic activity to contract with the resulting decrease in revenue to Federal, State, and Local Governments. This will lead to further layoffs of teachers, police, firefighters, and State and Municipal workers.
      I'll go out a limb here and predict that by the end of next year the stock market will be hovering around 5-6000, unemployment will be around 10.5-11.0%, and the Federal budget deficit will be approaching $2 trillion (That's trillion with a "t"). Someone make a note of this and be sure to let me know if I'm wrong. On second thought, I guess I don't have to worry about that, I know there are people out there who will jump all over me if I'm wrong, but I won't hear a peep out of them if I'm right!