Best of the Week
Most Popular
1. Trumponomics Stock Market 2018 - The Manchurian President (1/2) - Nadeem_Walayat
2.Yield Curve Inversion a Remarkably Accurate Warning Indicator For Economic & Market Peril - Dan_Amerman
3.China is Now Officially at War With the US and Japan - Graham_Summers
4.Markets Pay Attention Moment - China’s Bubble Economy Ripe for Bursting - 16th Jul 18 - Plunger
5.Stock Market Longer-Term Charts Show Incredible Potential - Chris_Vermeulen
6.U.S. Stock Market Cycles Update - Jim_Curry
7.Another Stock Market Drop Next Week? - Brad_Gudgeon
8.The Death of the US Real Estate Dream - Harry_Dent
9.Gold Market Signal vs. Noise - Jordan_Roy_Byrne
10.The Fonzie–Ponzi Theory of Government Debt: An Update - F_F_Wiley
Last 7 days
SPX Losing Gains - 17th Aug 18
What Gold Is Not - 17th Aug 18
Dollargeddon - Gold Price to Soar Above $6,000 - 16th Aug 18
Stock Market Higher Again, Correction Over? - 16th Aug 18
Up Your Forex Trading Game - 16th Aug 18
Large Caps Underperformance vs. Small Caps is Bullish for Stocks - 16th Aug 18
“The Big Grab” - Failing Pension and Retirement System - 16th Aug 18
How US Indo-Pacific Vision Forgot Asian Development - 16th Aug 18
Impulse Moves in the Currencies - 15th Aug 19
Best Merlin UK Theme Park Summer Holiday 2018 - Thorpe, Alton Towers, LegoLand or Chessington? - 15th Aug 18
The Essence of Writing an Essay that Must be Understood - 15th Aug 19
Is Solar Energy Rising From The Ashes Again? - 15th Aug 18
A Bullish Bond Argument That Hides in Plain Sight - 15th Aug 18
Jim Rogers on Gold, Silver, Bitcoin and Blockchain’s “Spectacular Future” - 15th Aug 19
A Depressed Economy And A Silver Boom - 15th Aug 19
Moving Averages Help You Define Market Trend – Here’s How - 14th Aug 18
It's Time for A New Economic Strategy in Turkey - 14th Aug 18
Gold Price to Plunge Below $1000 - Key Factors for Gold & Silver Investors - 14th Aug 18
Dow Stock Market Trend Forecast 2018 - Video - 13th Aug 18
Stock Market Downtrend to Continue? - 13th Aug 18
More Signs That the Stock Market Will Rally Until 2019 - 13th Aug 18
New Stock Market Correction Underway - 13th Aug 18
Talk Cold Turkey Economic Crisis - 13th Aug 18
Which UK Best Theme Park - Alton Towers vs Thorpe Park vs Lego Land vs Chessington World - 12th Aug 18
USD is Rising. What this Means for Currencies and Stocks - 12th Aug 18
Hardest US Housing Market Places to Live - Look Out Middle Class - 12th Aug 18
America’s Suburbs Are Making a Comeback - 12th Aug 18
Stock Market US Presidential Cycle, Seasonal Analysis and Economy - Video - 12th Aug 18
Yield Curve Inversion and the Stock Market - Video - 11th Aug 18
Land Rover Discovery Sport 1st Dealer Oil Change Service - What to Expect - 11th Aug 18
How to Setup Webinars and Use Them to Overcome the Barriers in E-Learning - 11th Aug 18
Big US Stocks’ Q2’18 Fundamentals - 11th Aug 18
Dow Stock Market Trend Forecast 2018 - 10th Aug 18
SPX Testing Its First Support Level - 10th Aug 18
Dreaming of a "Comfortable Retirement" on a Public Pension? - 10th Aug 18
The Forrest Gump of All Future Democrat Election Losses - 10th Aug 18
More Uncertainty as Stocks Got Closer to January Record High - 10th Aug 18

Market Oracle FREE Newsletter

Trading Any Market

Here Come Bigger Paychecks!

Politics / Government Spending Feb 03, 2018 - 11:02 PM GMT

By: Rodney_Johnson

Politics So far in 2018, New England froze over and the government shut down. And it’s only January!

But just like with Christmas, there are some things that never happen fast enough. One of them is any change that gives workers bigger paychecks. With February just around the corner, that change is coming fast!

The IRS has published the new withholding tables reflecting the recent tax reform. By the pay period ending February 15, employers should have built these rules into their payroll calculations.


The end result will be more money in almost every pocket. (There are some high-earners who will feel a pinch.)

There’s reason to believe the lower tax rates will stick around longer than the law allows, and unfortunately, they probably won’t create the economic growth that the president and Congress want.

Tax reform was mostly about cutting corporate taxes, along with mild tax relief for individuals. Without significantly raising taxes elsewhere, the overall effect was to increase the budget deficit by $1.5 trillion over the next 10 years.

But Congress cannot increase the deficit without 60 votes. This tax reform passed, ironically enough, through budget reconciliation, which only requires a simple majority of 50. Because of this procedural dance, the tax reform act had to add back in tax revenue by the end of the 10-year window.

By making personal taxes move higher seven to 10 years from now, the impact of the legislation will be revenue neutral at the end of 10 years. That’s why individual taxes that fall today are set to rise in the future.

While this is the law of the land, I don’t think many politicians will object to maintaining lower taxes on individuals down the road, at least not on the bottom 80% of earners. To do otherwise would be political suicide, and most of the elected class are more concerned with re-election than anything else.

Then there’s this… Even with more jingle in their pockets, I don’t think consumers will rush out to spend those extra nickels.

We still have the same financial issues we had at the end of last year, and a few extra bucks won’t make them go away.

The largest group of Baby Boomers turn 57 this year, which means they’re more than halfway through their empty-nester years. By all measures, they are woefully unprepared for retirement.

Per the 2016 Federal Reserve Survey of Consumer Finances, Americans 55 to 64 years old had about $59,000 in financial assets. This is the median, so half the group had less, and half had more. This doesn’t include retirement accounts, but the news isn’t much better on that front.

From the same report, only 60% of the same age cohort actually had a retirement account, and the median value was a mere $120,000.

Looking at the typical empty-nester with a retirement account and a few bucks in the bank, that person has a whopping $180,000 to use in retirement, plus whatever modest amount they receive from Social Security.

Those numbers aren’t exactly comforting.

That’s why I think the Boomers, along with most people older than 30, will probably save more of their newfound wealth than spend it. Restaurants might get a boost, and perhaps Starbucks will sell a few more lattes, but modest spending growth in a few areas won’t be enough to boost GDP. For that, we need a major economic change, which won’t happen until the Millennials get fully onboard with forming households and having children. When that trend takes hold in the 2020s, then we’ll be back in growth mode.

Rodney

Follow me on Twitter ;@RJHSDent

By Rodney Johnson, Senior Editor of Economy & Markets

http://economyandmarkets.com

Copyright © 2018 Rodney Johnson - All Rights Reserved Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.

Rodney Johnson Archive

© 2005-2018 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules