economy fed Markets

What A Blue Wave Means For The Fed, According To Goldman

Over the weekend, I outlined the rather stark economic choice facing Americans as they go to the polls (or mail in their ballots) for what promises to be an epochal election. To briefly recapitulate, the Trump administration is generally in favor of more virus relief but beyond that, the ramifications of spending another four years operating under supply-side economics thinly disguised as populism should be obvious. A weaker fiscal impulse (i.e., a pivot to fiscal retrenchment to pacify budget hawks) will put the onus for sustaining the recovery squarely on monetary policy. That will result in a prolonged period of financial repression and asset price inflation, with the same predictable results: Massive gains for the rich in whose hands those assets are overwhelmingly concentrated, and meager income opportunities for everyone else, as rates on cash savings stay glued at zero and bonds yield next to nothing. The preservation of a tax regime that favors corporations and the wealthy will exacerbate that dynamic, especially if conservative aspirations like indexing capital gains to inflation are realized. Read more: For The World’s Largest Economy: Two Possible Futures Deutsche
Subscribe or log in to read the rest of this content.

8 comments on “What A Blue Wave Means For The Fed, According To Goldman

  1. AVW says:

    what is surprising is the lack of discussion of the tax code. US tax code is heavily favored to capital vs labor. own an asset more than a year and the tax rate on gains goes down–dramatically for high tax bracket folks. own a real asset, depreciate it, while it earns income….near zero taxes—gains on price can be deferred indefinitely. Labor? higher taxes the more one earns. And another example of how, somehow, the general population votes against its own interests (90% of voters are “labor”).

    • dayjob says:

      Yes, taxing capital gains at lower rates than wage/salary income is one of the biggest ongoing wealth transfers in our tax code and that transfer is going up the ladder. This just goes back to the warped thinking that returning to tax rates that we had for decades is socialism and somehow punishes success. We’ve tilted the playing field so far in the direction of capital that we don’t know what level ground looks like anymore.

    • calh0025 says:

      Exactly. I think at a minimum labor needs to have the capability to actually deduct all real basic support costs and depreciate assets. I mean sure your house might go up in value but the internal devices such as the water heater doesn’t. Your car if used for work transportation is not a luxury good. The fact humans pay taxes on income while corporations pay taxes on profit is another massive difference weighted against the success of labor. How even medical expenses have a cutoff to qualify for deduction is insanity. If I could deduct all my fixed costs that allow me to survive and work I would be just fine paying taxes, instead I pay taxes on all my income and try to argue that I deserve a little back.

      Imagine taxing corporate gross income at 21%, then filing in January to try to reclaim some costs. It’s somehow only “confiscatory” when it applies to rich people and corporations.

      • joesailboat says:

        All tax returns should be public information. Remove the veil.

      • Anonymous says:

        i read, briefly, an outline of Bidens 401k reform…seemed like he wants to give a tax CREDIT for 401k deductions b/c low income people only get a 10% break on taxes; while high earners get a 37% break. I think that would be a massive tax break for the tax mules (of which I am one).

  2. Ria says:

    A real service to the public would be to emphasize a broad regime for a VAT structured to be mildly progressive (it can be done). Corporate taxes should be raised- since they are at the lowest as a percentage of the tax base in many generations. The Vat could pay for universal health care, enhanced unemployment insurance, education, social security, medicare, and infrastructure spending

    • runamok says:

      I agree that taxes on corporations need to go up. We need to reimagine what the role of corporations is. Corporations are the greatest profit generating mechanism ever. They are a tremendous invention. The model of maximizing shareholder return was good for a while. But, a new model can and should be invented. What is the purpose of corporations? We just now need to figure out how to harness this great invention for better good.

    • I do not understand why our political system appears to be uniformly against VAT taxes. Are there downsides to VAT that are not easily understood?

Speak your mind

This site uses Akismet to reduce spam. Learn how your comment data is processed.

Skip to toolbar