Morris R. Beschloss 2014-05-30 01:22:42
2014 Perfect Storm Will Underscore Economic Upward Surprise Growth While overly optimistic predictions carry a large risk factor, 2014 contains almost all the ingredients of the best year economically since the turn into the current millennium. Although this column’s previous analyses have carried strong elements of optimism since late last year, several factors have been added to the equation, leading to a gross domestic product growth reaching or even exceeding 3 percent for 2014. 1) The biggest positive surprise has been the unexpected rationale of Congress and the White House, displaying rare cooperation in quickly solidifying annual fiscal year-plus (October 2013-March 2015) expenditures and reaching an agreement on debt growth spanning the next 12 months. 2) With another major confrontation on the 2014 fiscal year-plus budget objectives and a 13-month Treasury debt off the table, America’s business and industry community can focus on the expansion that has been held back by fear of Another double-barreled debt-deficit “Beltway shutdown.” This means utilizing the multitrillion- dollar monetary cache that has been reposing on the balance sheets of business firms large and small, and all-time-high bank liquidity. 3) Although questions about health-care reform and threats of presidential executive decrees continue to hang over an otherwise bright outlook, America’s multifaceted growth capacity will be more unfettered than at any time since the late 1990s. Early indications of commercial, industrial and infrastructural growth projects signal an expansion momentum not seen in the past decade. 4) With a combination of unprecedented energy development, export acceleration, and massive infrastructural distribution projects high on the list, revenue growth, employment opportunities, and the solidification of the U.S. Manufacturing and construction base give every indication of an upward surprise. Although the anti-business thrusts of EPA, overburdening financial regulations, and demands for environmental action will continue, the combination of the upcoming midterm elections and an increasingly restrained overall federal government interference (largely because of the Nov. 4 voter showdown) will allow the renewed optimism of the business community to provide the sizzle that had so far been lacking in the post-recession recovery period. By accentuating the many emerging positions, while contemplating lessening of economic negatives previously anticipated, the 3 percent growth potential now appears more realistic than had previously been contemplated. Individual, Small-Business Tax Shelters Provide O set to Federal Stealth-Tax Growth As individual taxpayers and several hundred thousand small businesses brace for the impact of stealth taxes charged against them to offset the cost of Obamacare and other federal government subsidies, it’s incumbent on millions of Americans to know about the write-offs and deductions available to them. Several professional polls indicate that the average American is either not familiar with them, or instead uses the maximum deductions without itemization allowed by law to take advantage of this meager, but meaningful, offset to hard-earned individual income. While large, publicly held corporations have a bevy of experts on their payrolls, and financial advisers and lobbyists to back the sustenance of their massive Bottom lines, independent businesses and high-income individuals are left to seek out the best CPAs available to advise them on deductions and tax offsets under the ever-changing IRS laws. In my own contact with both individual and independent businesses, I’m surprised at the number of otherwise knowledgeable individuals who do not take full advantage of the substantial variety of tax offsets available. Some of the most common that tend to be missed are: 1) Business-related transportation, entertainment, and lodging expenses permitted under the law. Since these are periodically intertwined with personal expenditures, some of those interviewed about this deduction are often remiss to avoid an IRS investigation, and claim that the government always comes out ahead. 2) Home office use. Many thousands of Americans today are working out of homes fully equipped with the latest computer technology to transact business requiring extensive communications skills and advice. Here again, the latest Internal Revenue interpretations indicate allowances for expenses incurred in such office arrangements. 3) Investment loan interest. For decades, the U.S. government has encouraged individual loans to invest in liquid assets (stocks, bonds) as well as real estate. This is being helped by making interest on such loans deductible, and has recently been abetted by encouraging personal investment in such renewable energy opportunities as solar panels—supported also by utilities, which have high mandate levels imposed by the government to encourage consumers’ renewable energy electrical usage. 4) Home sales. Just about any profit made on the sale of the home’s original cost under most transactions will be free of capital gains taxes (up to $500,000 for a married couple filing jointly). 5) Capital losses. This write-off is now only available to coverage of contemporary capital gains, plus $3,000 of ordinary income, although it can be carried forward. Although these are only a random few of the tax offsets available to individual and small businesses facing the increasing onslaught of federal, state, and municipal taxes, access to the best tax accountants is strongly suggested. While empty talk of flat taxes—whose mailing could be reduced to postcard size for filing— fills the air, it is more likely that the patchwork of tax increases and lobbyists’ preferences will guide the U.S. tax collectors’ means of slowing the gargantuan U.S. Treasury debt. This is showing little sign of abating in the foreseeable future. Is Inflation or Deflation in the Global Economic Future? While the memory of the grinding, deep financial crisis continues to haunt the global economic recovery, the big question debated by the world’s pundits is whether the decades-long disinflation will be followed by an equally lengthy return to a 1960-70-early ’80s-type intensifying inflationary return. The preliminary answer might lie in the genesis of these economically debilitating phenomena: During a solid 20-year post-World War II recovery, the U.S. experienced a switch to its greatest economic growth ever, reversing all the losses of the Depression, and then some. With America’s multibillion-dollar Marshall Plan helping to rebuild Europe and assisting Japan’s dynamic economy, a domestic U.S. reconstruction effort via the GI bill allowed millions of college-educated military veterans to fill jobs, buy new houses, and create families. This not only created the greatest U.S. economic prosperity ever, but spread it among the 150-millionstrong population in wages, while most businesses used their increased profits to expand, upgrade, and acquire new companies. Although deterred by the Korean “police action” in the early 1950s, America’s unimpeded economic expansion did not hit a brick wall until President Lyndon B. Johnson employed a disastrous “guns and butter” policy that included A major debacle in Vietnam, as well as a costly “war on poverty,” both of which turned out to be multibillion-dollar losses. This precipitated a surge of intensely rising costs, exacerbated by major union wage demands in leading industries such as automotive, to which America’s big business agreed due to their bulging books. Since they were able to pass on rising prices, they acceded to inflationary double-digit demands, and a roaring inflation was on. With long-term interest rates imposing skyrocketing mortgages as well as other commercial labor demands, U.S. inflation peaked during the 1977-81 Carter administration, subsiding only two years after the election of President Ronald Reagan. After 25 years of this high interest-rate reversal, goods prices dropped precipitously. Currently, with the changing of the guard at the Fed and the rising prices of such necessities As milk, bread, and other staples, there is concern that a new wave of inflation may be in the offing—especially with unemployment slowly improving, and industrial production, especially in energy development, booming. This is causing inflationary concerns. Even billionaire super-investor George Soros’ record stock-short position is making the stock markets nervous in anticipation. However, a strong inflationary return is highly unlikely; neither in the U.S. or the world’s leading nations, such as Japan, Germany, the United Kingdom, France, or Canada. The ravages of recession, even though mild, indicate a surplus of available employment, commodities, and record corporate bottom-line monetary positions. With supply surpluses exceeding demand, at least in the intermediate term, a lengthy worldwide disinflation scenario is much more likely.
Published by SupplyHouseTimes. View All Articles.
This page can be found at http://digital.bnpmedia.com/article/Economic+Outlook/1725265/211858/article.html.