Interesting View on the Tax Compromise

Greg Mankiw discusses the implications of reducing the payroll tax on the employee side versus the employer side.

Read it here.

November 7th - The Week Ahead

Fox News' The Week Ahead

Biggest news this week is President Obama travelling to Asia and the G20 Summit

President Barack Obama will spend the next week in Asia, visiting India and Indonesia before heading to the summit of the Group of 20 largest economic powers in Seoul. The G-20 meeting, which starts Thursday, will address trade surpluses and deficits as part of efforts to restore so-called balanced global growth. The world leaders also will consider stronger global banking regulations

Also, earnings from major retailers will be released this week including Disney and Cisco. Earnings are expected to increase.

The Federal government will be release trade statistics later in the week.

The U.S. trade deficit for September, to be released Wednesday, likely changed little from a month earlier, according to a poll of economists by Briefing.com. The deficit widened to $46.3 billion in August as import demand remained strong despite a weaker dollar. The government also will report on September wholesale inventories Tuesday. Next Friday, the Reuters/University of Michigan consumer sentiment index will issue its preliminary reading for November.

Talking to Kids About Money

The economic downturn has been hard on everyone, even the kids, with less discretionary money to go around. Here are some tips on talk to your kids about the family funds:

(From CBS's MoneyWatch)

The Wrong Thing: “I don’t know how we’re going to pay the bills this month.”

Freaking out about the pile of bills? Resist the urge to tell your children about it, because they can’t help. “Don’t give them TMFI: too much financial information,” [Dr. Brad] Klontz says. “We can’t involve them in things they’re powerless to do anything about. Laying that load on a child makes her anxious.”

The Right Thing: Present a confident front, and then involve them with problems they can help solve.

Do have a conversation, because kids are sponges, and if you’re stressed, they’re going to feel it anyway. Tell them what’s going on, and then ask them to help with things they can manage. “Times are kind of tight. Dad lost his job. He’s looking for a new job, but don’t worry about it, Mom and Dad have it handled. This is what we’re going to do. We’re going to be eating out less. Do you have any ideas on stuff we can cook at home?”


The Wrong Thing: “It’s none of your business how much money I make.”

If a kid asks how much money you make, should you tell them? It’s understandable if you don’t trust them to keep that information private. But realize that if you don’t talk about it, you’re sending a signal. “You could be giving them the message that having a lot of money or having a little money is shameful,” Klontz says. “So maybe the kid walks away with the belief that having money must be bad, or that rich people are somehow evil or shallow.” What will that do to his earnings potential?

The Right Thing: Be honest - if you can stomach it.
Klontz meets with 30 adolescents each week, and if they ask about his income, he tells them. (Note to readers: I didn’t have the nerve.) “People will tell you more about their sex lives than how much money they make. I don’t feel any reason to feel ashamed about it,” he says. “If they ask you, I think it’s OK to tell them. You can ask them not to tell their friends, but give them a reason why: You’re afraid other families or friends are going to judge you for having more or less than them.” Try to avoid conveying shame to your kids.

The Wrong Thing: “I work so you can go to camp, art lessons, or play sports.”

If kids are fussing about your long work hours, it’s natural to want to tell them you’re putting in extra hours to fund their activities and their toys.

The Right Thing: Look at what’s really going on.

When your kid makes you feel like you’re not spending enough time with him, that gets you defensive. The right answer is, “Work is important to Mom, but what do you think about us trying to set aside some time when we can be together, you and I?” In this case, it’s not about the money, so resist trying to place an unfair burden on the kids.

The Wrong Thing: “$60 for a Halloween costume? That is way too expensive. I’m sorry, but I just can’t afford it.”

You feel bad or guilty, so you’re apologizing, which only magnifies the issue.

The Right Thing: We have $15 to spend on a costume.

Say it matter-of-factly: “This is our budget, $15. We can go to a thrift store or the Salvation Army, or we can buy something in this range.” If you state it firmly, without letting your emotions in, they probably won’t challenge you on it.

The Wrong Thing: Silence about money.

“Kids make the association very early on between money and the ability to buy things,” Klontz says. “I don’t think you can talk about it too early. The biggest mistake parents make is not talking about it. Because kids will arrive at their own conclusions about how money works, based on what they see us do and what they hear. They always arrive at erroneous conclusions - that’s the child’s mind, right?”

If those understandings aren’t challenged, as they turn into adults, they operate from these beliefs. For example, if a child grows up in a family that’s struggling financially, he might walk away with the belief that there will never be enough money. “There are two typical responses,” Klontz says. “Either he’ll be a workaholic who hoards money and never spends it. Or he’ll be a frivolous spender, because he’s never going to have enough anyway, so why try? The more emotional the experience is growing up, the more tightly we hold onto those beliefs.”

The Right Thing: Share Your Values About Money.

When your son is begging for a new computer game, say no, and say why. “It’s important for kids to get used to the idea that they can’t have everything they want,” Klontz says. Tell them what your other plans are: “With our money, we’re going to choose to have a vacation together or an experience together, to us, that’s more important than things. It’s OK that you want that, maybe that’s something we can think about getting down the road, but for now, we want to spend money on doing something fun as a family. That means a lot to me.”

If you hear a child talking about money, and she seems way off base, it’s a teachable moment. “Stop what you’re doing and say, ‘What do you mean? Where did you hear that?’ It gives you a chance to clarify and challenge whatever that belief is, and help flesh it out so it’s more accurate,” Klontz says.

How do you talk to your kids about money?

Foreclosure Moratoriums

There has been a lot of talk about debate this week about the federal government issuing moratoriums on foreclosures following allegations of fraud.

Congress and the banking industry are of two minds of the issue of moratoriums.

Senate Banking Committee Chairman Christopher Dodd is planning hearings for November.

Dodd's expected hearing comes after three lenders, including Bank of America Corp., agreed recently to foreclosure moratoriums until they could determine whether or not employees signed off on affidavits without verifying the information in the paperwork. "American families should not have to worry about losing their homes to sloppy bureaucratic mismanagement or fraud," said Dodd.

(Source: Fox News)

The heads of prominent financial and housing industry groups wrote a letter to Congress this week.

"Calls for a blanket national moratorium on all foreclosures are a bad idea and would cause significant harm to communities at risk, the unstable housing market and the fragile economy. A foreclosure moratorium would not change the ultimate outcome for borrowers impacted by this situation," they said.

(Source: Fox News)

The fallout from the hearings and the market reaction could send shockwaves through an already shaky economy.

Myths About Raising the Retirement Age

The Tax Policy Center of the Urban Institute and the Brookings Institution debunk some popular myths about raising the retirement age for social security benefits.

Myth 1: Increasing the retirement age will reduce benefits. Compared with what today's retirees get, no. Under most proposals, increasing the retirement age reduces only the rate of benefit growth from one generation of retirees to the next, as real annual benefits still grow and people continue to live longer.

Under Congressional Budget Office projections, for instance, increasing the normal retirement age gradually from 67 (where current law will put it by 2022) to 70 would still allow expected median lifetime benefits per person to increase from about $250,000 for today's people in their 50s to $360,000 for their 10-year-old kids.

Myth 2: Increasing the retirement age discriminates against low-income workers who have shorter life expectancies. Nope, and it's largely irrelevant. Low-income groups receive a disproportionate share of disability benefits, and any change in retirement age wouldn't affect those on disability or those who don't live long enough even to receive old-age benefits. There are many better ways to protect and help low-income workers.

Myth 3: Increasing the retirement age makes Social Security reform regressive. Wrong again. The progressivity of reform will be determined by the package as a whole, not by bits and pieces. Not that it should matter, then, but partly because retirement age changes don't affect those on disability, higher-income groups tend to be relatively more affected by increases in the retirement age.

By way of contrast, consider the commonly discussed reform of tweaking the annual cost of living adjustment (COLA). Whereas a retirement age change asks people to adjust when they are healthier and wealthier, COLAs compound over retirement to hit hardest those in their late 80s or 90s, whose annual benefits eventually might fall by 10 or 15 percent.

Myth 4: Social Security's Old-Age Insurance goes to the old. Not really. Social Security has morphed into a middle-age retirement system. It defines people as old - eligible for Old-Age Insurance - when they are 62. When this benefit was first made available 70 years ago, people couldn't get it until they were 65, and on average they retired at age 68 (compared with about 64 today).

If Americans were to retire for the same number of years today as they did then, on average they would work until about age 75 and, within another 60 years, to age 80. Instead, most draw benefits for about a decade more than they did when the system was first established - now approaching one-third of their adult lives. One or another partner in a couple retiring at age 62 today will probably draw benefits for about 26 years!

Myth 5: The elderly need to fear such Social Security reforms as increasing the retirement age. Of all the crazy myths that interest groups can rant, blog and tweet about, none is sillier than this one. Budget reform is around the corner, and the elderly will feel the pinch along with everyone else. Already, subsidies for Medicare Advantage plans held by the elderly have been cut back, and some tax rates are likely to rise.

But Social Security reform? Apart from the possible COLA change, not a single Social Security benefit reform option on the table would affect anyone currently older than 60. Literally, grandfathers are grandfathered into today's system. Social Security reform is almost entirely an issue for today's middle-aged and young people. Purely from self-interest, the elderly should lobby for Social Security reform because no other budget revision so totally exempts them from sharing the pain of deficit reduction.

Social Security is a huge program - its 2009 tab came to $678 billion, or about 20 percent of the federal budget - with lots of moving parts. Because the effects of the whole system matter most, the electorate and the elected need to see how all reforms fit together to make Social Security solvent and secure for all generations.

Raising the minimum age is just one of the options facing Congress and the current Social Security system.

Working at Home Tips

Working at home is a fast growing concept between small business, consultant firms, and teleworking. To most American's it is the dream job.

Fox Business gives some good tips for balancing work and everything else at home.

No. 1: Cleanliness is Next to Productiveness

Do NOT keep your office and desk space a mess – it’s a major distraction and the clutter will just provide an excuse for you to clean instead of work.

No. 2: Don’t Do “Home Work”

Do NOT get distracted by household chores, personal errands, etc. It can be so easy to get dragged into washing the dishes in the sink, doing the laundry or cleaning up the kids’ toys instead of returning work phone calls, but give those chores a certain time of day to get done. Don’t let it cut into your valuable work time.

No. 3: It’s Not Social-Networking Hour

As valuable as Facebook and Twitter may be to building your brand, do NOT fritter away your work time hunting down old flames, a former nemesis or others on such sites. That goes for getting caught up on personal e-mails, as well.

“You need every minute of your office hours and you have no time to waste on distractions and disruptions,” said Heather Allard, founder of TheMogulMom.com who started three businesses out of her home since 2001.

Added Leslie Truex, author of The Work-At-Home Success Bible and founder of Workathomesuccess.com: “Shuffling papers, reading e-mail and posting on Facebook have a part in running a business, but if not managed will waste time and money.”

No. 4: Location, Location, Location

Do NOT place your office in the middle of your house. While some may say working from the kitchen table works for them, most work-from-home experts agree that a separate room with a door is necessary if you plan to be productive.

No. 5: Make Plans to Make Time

Do NOT work without a plan – that includes routines and schedules just as importantly as a business plan. Plans also help avoid having the personal life bleed into the work one, and vice versa. A daily plan should include when to go out for lunch or throw the laundry in.
“Extra time to ‘work’ doesn't magically appear. People who work-at-home need to make time for work and for play,” Truex said.

Do you have any great work from home tips? Please share in the comments.

New Year, No Budget

Congress once again has failed to pass a budget prior to the start of the new fiscal year today.

However, a continuing resolution was passed to keep the federal government in business through December 3rd.

From the Federal Times:

Congress passed the measure to keep government functioning until after the November elections when it will reconvene for a lame-duck session and presumably finish work on more detailed appropriations for all agencies

One Senator spoke out about the measure:

Sen. Tom Coburn, R-Okla., said that the government is too large, and spending is too high for the Senate to pass a continuing resolution.

"We are not addressing what the American people want us to address, and that is for us to live within our means," Coburn said.

The continuing resolution keeps most funding at the 2010 levels.

Success Culture

How do you foster success in your business? How do you build the success concept into your employee's actions and work?

Fox News' Small Business Center answered some of these questions in an article recently.

“Culture positively or negatively affects your business,” says Marcus Erb, a consultant and senior research associate with the Great Place to Work Institute, a consulting firm that creates Fortune’s 100 Best Companies to Work For and 50 Best Small & Medium Companies to Work For in America lists. “Companies need to establish their cultural DNA early, and if you’re a smaller business, you can take control of your culture,” he says, noting that Google strategically thought about its culture early on.

What are ways this cultural DNA can be created and sustained?

In essence, there are three criteria, or ingredients, needed to create a success culture:

- Trust. Employees trust their employers and their managers.
- Pride. Employees have pride in the work that they do.
- Joy. Employees enjoy the people with whom they work.

And my favorite tip for managers...

Finally, perhaps one of the most important strategies an employer can use to create a success culture is to “start to act in the way you want your organization to act,” says Erb. “The culture starts at the top and [employers] need to take personal action to change culture.”

NBER: Recession ended in June 2009

Recession officially ended in June 2009

The National Bureau of Economic Research (NBER) issued their findings today that the recent economic downturn in the United States was 18 months long and ended in June 2009. The longest and deepest recession since the Great Depression.

The NBER acknowledged the risk of double-dip recession in its statement, but said "The committee decided that any future downturn of the economy would be a new recession and not a continuation of the recession that began in December 2007. The basis for this decision was the length and strength of the recovery to date."

The committee that made the finding said it "did not conclude that economic conditions since that month have been favorable or that the economy has returned to operating at normal capacity." Rather, it decided that June was when the economy hit bottom, and that it has been slowly but steadily growing since then.

The NBER has been tracking business cycles since World War II.

The NBER typically takes a long time to declare the start and end of recessions, waiting for all the economic data to be revised and finalized and making sure that any change in direction of the economy is long-lasting. It didn't declare that the recession started in December of 2007 until a year later.

In addition to looking at gross domestic product, the broadest measure of the nation's economic health, the NBER also weighs employment, industrial production, income and sales for determining when the economy changes direction.

While this is interesting from an economic and business cycle perspective, many American's are still feeling the effects of slow recovery.

September 19th - The Week Ahead

Check out what is happening in business, markets, and politics this week at Fox News' The Week Ahead.

Highlights:

Numbers come out for housing data

Numbers are expected to show slight improvement from earlier in the summer.

Reports on housing data for August are due next week, with a number of metrics to show modest recovery from July, according to Briefing.com. July is typically the strongest sales month of the year, but tax credits had pulled sales forward into April. More broadly, the industry is suffering from the expiration of the credit, as well as high unemployment and low consumer confidence.

Warning: Tax Increases May be Bigger Than They Appear

New legislation for taxes are up for debate in Congress this week. As with all rounds of tax talks there are cuts and increases mingled together.

The American Enterprise Institute had this to say about it:

In 2010, the top income tax rate bracket for ordinary income is 35 percent. Besides wages and interest income, this income category includes profits from pass-through business firms—sole proprietorships, partnerships, and S-corporations. Under the president’s proposal, the top bracket will rise to 39.6 percent. A stealth provision that phases out high-income taxpayers’ itemized deductions will also be reinstated, adding another 1.2 percentage points to the effective tax rate, bringing it to 40.8 percent. Wages and some of the pass-through income will also remain subject to a 2.9 percent Medicare tax. These 40.8 and 43.7 percent tax rates, which will apply in 2011 and 2012, match the 1994 to 2000 rates—the same top bracket, stealth provision, and Medicare tax were in place then.

But the picture changes in 2013. Under the healthcare law adopted in March, the Medicare tax will rise that year, from 2.9 to 3.8 percent. Also, a new 3.8 percent tax, called the Unearned Income Medicare Contribution (UIMC), will be imposed on high-income taxpayers’ interest income and most of their pass-through business income that’s not subject to Medicare tax. So, under the president’s proposal, virtually all of top earners’ ordinary income will be taxed at 44.6 percent, starting in 2013. We’re not just going back to the Clinton-era rates of 40.8 and 43.7 percent.

A similar pattern holds for capital gains. Under the president’s plan, in 2011 and 2012, the top rate on gains, now 15 percent, will go to 20 percent, with the stealth provision adding 1.2 percentage points, sending the tax back to its 1997–2002 level of 21.2 percent. Starting in 2013, though, capital gains will also be hit by the UIMC, pushing the rate to 25.0 percent.

This will push the top tax rates for most income above Clinton-era levels by 2013.

Best Cities to Survive the Recession

CNNMoney.com reports on America's most recession-proof cities with the 20 strongest and 20 weakest cities.

Leading the "Strong" list: Omaha, Nebraska
Overall, the Wisconsin to Texas corridor is holding up quite well.

Leading the "Weak" list: Las Vegas, Nevada
Followed closely by major cities in California and Florida.

Apparently the Bible Belt is a better place to be during a recession than "Sin City". Just food for thought..

September 12th - The Week Ahead

Check out what is happening in business, markets, and politics this week at Fox News' The Week Ahead.

Some highlights include:

Congress Returns to The Hill

Investors will be watching Congress next week as lawmakers return from recess and begin their review of tax measures proposed by President Obama in an effort to get the economy growing again at a healthy rate.

The president this week proposed new tax credits and write-offs for business investments, but it is unclear whether Congress will come up with the votes before lawmakers leave Washington again after only a few weeks to campaign before the hotly contested midterm elections Nov. 2.

Consumer and Producer Price Indices Release

The government will release its August Producer Price Index, which measures wholesale inflation, and Consumer Price Index, which reflects changes in retail prices, on Thursday and next Friday, respectively. Out Wednesday are August figures on industrial production. Reports on regional economic activity are due Wednesday for New York and Thursday from the Philadelphia Fed.

Foreign Currency Hearings

Treasury Secretary Timothy Geithner is slated to appear Wednesday before the House Ways and Means Committee to discuss concerns about China's valuation of its currency. Lawmakers continue to express frustration about the slow appreciation of the yuan, which has risen less than half a percent since China's June decision to drop a de facto peg to the U.S. dollar.

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