A little history for those who don’t remember ....
Today, U.S. taxes are set to march higher. From the income tax to the dividend tax, all will rise in the next year or so. Also a challenge, albeit less discussed, are the increases in state and municipal taxes in the name of reducing shortfalls in public coffers. This change represents a reversal from the tax-lowering trend of the first part of the decade.
In 1932, a similar reversal occurred. Then-Treasury Secretary Andrew Mellon presided over an enormous tax increase. The top rate on personal income taxes rose to 63 percent from 25 percent. Add in new levies on telegraph and telephone use and, in an obscenely bad error for a recession, a tax on checks. In addition, corporate taxes moved up, as did levies on tobacco. Mellon, who had earlier personally crafted a series of rate cuts, consoled himself about this switch by calling it a temporary emergency measure. The revenue was a disappointment and the economy didn’t recover.
Today President Barack Obama is applying upward pressure on compensation where he can — in federal contracts, for example. The president is being egged on by various academics. This week Christopher Edley, dean of the University of California-Berkeley’s Boalt Hall School of Law, published an article in the Los Angeles Times titled “The Economic Power of Obama’s Pen,” urging the president to sign an executive order encouraging federal contractors to pay the so-called living wage, government code for wages higher than it might otherwise have paid.
Hoover likewise advocated keeping wages high during periods of economic decline. Even while still Commerce secretary, Hoover argued that worker spending was key to fostering recovery. Shortly after the 1929 crash, the new president hauled corporate heads to Washington and exhorted them to keep wages as high as they could. Henry Ford served as cheerleader for this policy, telling the press as he exited the White House, “Wages must not come down.” In short, Hoover and Ford were Keynesians before John Maynard Keynes.
Wait 'till all the new taxes kick in in 2011 to see what a 'risk averse' economy looks like.
The dollar has been slowly falling against the Euro and the Pound over the past week. Gold and silver prices have been falling as well.
Bonds were considered to be safer than equities until.....Obama and his henchmen ripped off the bondholders of GM and Chrysler.