U.S. companies have huge profits sitting offshore, and some in Congress want to give them a tax break as incentive to bring nearly $1 trillion back to America. The New York Times describes the plan this way:
The Dow industrials are up 2 percent today as Wall Street figures out what DC insiders know: All the Bush tax cuts will be temporarily extended, more than likely during the “lame duck” session in December. Robert Gibbs gave it all away today after Obama hinted as much yesterday:
American presidents usually win second terms, even if their parties suffer midterm blowouts. But President Barack Obama better not rely on history for a 2012 victory. To lift his political fortunes after Tuesday’s absolute shellacking — and those of the economy — he needs to work with incoming Republicans to do two big things: cut spending and cut taxes. Here’s why:
From my Reuters Breakingviews column:
President Barack Obama’s bipartisan deficit commission has a mandate to cut the U.S. budget gap. But the White House panel may surprise in another area: tax reform. Democrats and Republicans are taking a hard look at a plan that would simplify the code and cut corporate taxes. Although not perfect, it would be a big improvement.
There’s a brewing debate among conservatives over whether they should favor some tax increases to close the budget deficit. Some Republicans on Obama’s deficit panel are talking about cutting various tax breaks for individuals. Possible presidential candidate Governor Mitch Daniels of Indiana recently spoke favorably about a value-added tax and an energy tax. And here is Kevin Williamson of the National Review Online’s Exchequer blog:
In their must-read policy manifesto, “Seeds of Destruction,” Glenn Hubbard and Peter Navarro outline the biggest economic problems facing America and what can be done about them. Hubbard is the former head of the Council of Economic Advisers under George W. Bush and is now dean of Columbia Business School. Navarro, a Democrat, is a business professor at the University of California, Irvine and author of ”The Coming China Wars.” Here are some excerpt from a chat I had with Hubbard:
It’s the return of the inflation tax, as Ed Yardeni rightfully notes:
The rational for another round of QE is to boost economic growth and to avert deflation. In other words, Fed officials would welcome a pickup in the inflation rate. The problem is that they are stoking an inflationary fire in the commodity pits. I doubt that’s the sort of inflation they are rooting for. Presumably, they want prices for consumer goods and services to rise moderately to stimulate producers to expand their capacity and to hire more workers. Higher commodity prices are a tax on consumers and producers and can have the opposite effect.