Last week the inside pages of the daily newspapers mentioned something that should alarm every American taxpayer. The little noted expiration of the two year old payroll tax break of 2011-12, and the consequent increase of the Social Security payroll tax from 4.2% of wages paid to 6.2% of wages paid became effective on New Years Day, 2013. The roughly 140 million Americans on corporate payrolls will see their take-home pay shrink commensurate with their income. Those earners at the poverty level will see a $ 234.00 yearly tax increase, while those in the highest income bracket subject to the tax will see a yearly increase of $ 2,425. (Your humble TH correspondent has been told to expect an increase of $720-750.00) So, lost in all of the tumult and shouting over the “fiscal cliff”, and President Obama’s insistence that his tax increase will only penalize the wealthy, we have a stealth tax increase that hits every wage earner in the USA, including the poorest.
How did the financial sector react to this news? Early last week the economists at JP Morgan, Chase & Co. lowered their forecasts for first quarter economic growth to an anemic 1% down from a hardly robust 1.5%. This fact escaped the notice of commentators who trumpeted the news that the Dow Jones, NASDAQ, and S&P 500 averages ticked upward after the resolution of the fiscal cliff melodrama.
Regardless of these developments this nation is still dancing on the edge of a volcano, not a fiscal cliff. The two parties have begun preliminary skirmishing in the debt limit battle, and the hapless GOP appears set to be out maneuvered by Barack the Audacious and his media allies once again. Despite the new tax increases the deficit will easily top a trillion dollars for the fourth consecutive year as Obama has added more to the national debt than all of his predecessors combined.
The new health care bill, the President’s signature achievement, is growing in cost estimates, with current Medicare actuarial estimates placing the program’s expense at $180 billion, which is three times the $60 billion that Obama and the Democrats claimed in 2009-10. Health care spending in America totals 16% of the Gross Domestic Product, and is the highest in the world, yet it is projected to rise to 24% once Obamacare is fully implemented.