Tax Day Tea Parties
In case you managed to forget, today is Tax Day. And according to the Wall Street Journal, “Tax Day Becomes Protest Day.”
There will be rallies or “tea parties” taking place all over the United States today, to protest higher taxes and out-of-control government spending.
DR contributor, Gerald Celente, who is director of The Trends Research Institute, calls these tea parties and tax protests “harbingers of revolution.”
So who are these ‘revolutionaries’ that are organizing these events? Turns out, not a political party or a union…just ordinary people harnessing the power of the Information Superhighway. The WSJ reports:
“The protests began with bloggers in Seattle, Wash., who organized a demonstration on Feb. 16. As word of this spread, rallies in Denver and Mesa, Ariz., were quickly organized for the next day. Then came CNBC talker Rick Santelli’s Feb. 19 ‘rant heard round the world’ in which he called for a ‘Chicago tea party’ on July Fourth. The tea-party moniker stuck, but angry taxpayers weren’t willing to wait until July. Soon, tea-party protests were appearing in one city after another, drawing at first hundreds, and then thousands, to marches in cities from Orlando to Kansas City to Cincinnati.”
As the idea gained popularity, people wanted to synchronize these events on a certain day…and Tax Day became the obvious choice. Although these protests are focused on what may be seen as typical GOP issues, they are not a Republican effort, but a popular effort. People far and wide are coming out to show that they are fed up with incessant government spending and exorbitant bailouts.
And as it turns out, the bailout money is running low. There’s “only” $135 billion left at the Treasury Department for bailouts. To see which banks need the most money, the Obama administration has been doing a “stress test” of the country’s 19 largest banks to see who needs the moola the most.
The administration plans to disclose the conditions of these banks, hoping to restore confidence without unnerving investors…which will no doubt end up being a tight rope act. Even by admitting that some of the banks still aren’t stabilized, the government runs the risk of causing investors to panic – which is exactly what they are trying to avoid.
In his speech to the nation yesterday, President Obama covered these plans…and defended his administration’s decision to prop up the failing banks:
“Of course, there are some who argue that the government should stand back and simply let these banks fail – especially since in many cases it was their bad decisions that helped create the crisis in the first place,” he said. “The truth is that a dollar of capital in a bank can actually result in eight or ten dollars of loans to families and businesses, a multiplier effect that can ultimately lead to a faster pace of economic growth.”
But judging from these tea parties and tax protests, the American people remain unconvinced. Though there is no one organization putting on these rallies, those attending are unified on what they are up in arms about. Reports the Heritage Foundation:
“What does unite the protesting taxpayers is the unprecedented expansion of federal government power and spending that has taken place over the last 14 months. Starting with President Bush’s $168 billion economic stimulus, through the 2008 housing bailout, TARP I, TARP II, President Obama’s trillion-dollar stimulus, the auto bailout, etc. Americans have grown more and more wary of the ever expanding size and scope of the federal government.”
Gerald Celente sees these protests as a step in the right direction, but “Nothing short of total repudiation of our entrenched systems can rescue America,” he says. “We are under the control of a two-headed, one party political system. Wall Street controls our financial lives; the media manipulates our minds. These systems cannot be changed from within. There is no alternative. Without a revolution, these institutions will bankrupt the country, keep fighting failed wars, start new ones, and hold us in perpetual intellectual subjugation.”
Viva la revolución!
Now, we turn to Addison for more on everyone’s favorite day of the year:
“As could be expected – and just when Uncle Sam and his friends need it the most – total tax revenue among American states will be down this year by the largest percentage since the Great Depression,” writes Addison in today’s issue of The 5 Min. Forecast.
“State tax revenue fell 4% in the last quarter of 2008, the first decline in six years and the largest decline in over 50. Preliminary numbers suggest the first quarter of 2009 will be even worse…by a multiple of three. Average state tax collections in January and February were down 12.8% compared to the same time in 2008.
“Personal and corporate income are in the crapper. Property taxes are too. Taxes on investment profits? Heh, right. And with all the economic strife over the past year, we can only begin to imagine what tax evasion strategies, subversive returns and delayed filings must be sticking in the IRS’ craw on this fine day.”
Addison brings readers The 5 Min Forecast, an executive series e-letter that provides a quick and dirty analysis of daily economic and financial developments – in five minutes or less.
Now, back to Kate in Baltimore…where it is STILL raining:
Stocks fluctuated in midday trading. The Dow rose 0.3% to 7,941.29, while the broader stock indicators fell.
Looks like investors have a bad taste in their mouth following more downer data that points to signs that the economy is still in peril. The AP reports that “The Federal Reserve said production at the nation’s factories, mines and utilities fell 1.5 percent in March, the fifth straight month of decline and worse than the 1 percent dip analysts expected.”
On the other hand, you have the Consumer Price Index data, released today by the Labor Department. This key measure of inflation shows that consumer prices declined 0.1% in March. The index has decreased 0.4% over the last year, the first 12-month decline since August of 1955.
A lower CPI isn’t great news for our favorite yellow metal, which investors flock to when inflationary fears are running high. Gold for June delivery fell $1.40 to $890.60 an ounce today.
“The lower CPI print is certainly not friendly to gold,” said Brian Kelly, chief executive officer of Kanundrum Research, a commodities and macroeconomic research firm. “Couple that with a stronger dollar and we have significant headwind for the yellow metal.”
But, you can take the CPI number with a grain of salt…that’s what our friend Chuck Butler does. Writing in today’s issue of The Daily Pfennig he says, “The government accountants want us to believe that inflation is only running at 1.7% annualized…which is hogwash!”
Whether or not a government masseuse has handled the inflation number, we don’t expect the price of gold to stay this low for very long.
And lastly, our friends in the Far East keep popping up in the news lately…suggesting the creation of a new reserve currency…warning about U.S. Treasuries… They certainly seem a little skittish about the state of the U.S. economy in general.
But really – can you blame them? The Chinese are the largest holder of U.S. Treasury securities…totaling $744.2 billion. No wonder they want to protect their investments.
Yesterday, Dallas Fed President Richard Fisher hoped to ease fears that China would do anything to harm U.S. interests, such as dropping Treasuries. He denied that China would decouple economically from the United States, saying the relationship between China and the U.S. is ‘symbiotic.’
“China cannot succeed if the U.S. does not succeed,” Fisher said.
The Chinese do need Americans to keep up their appetite for geegaws and gadgets…but as we pointed out yesterday, the U.S. isn’t buying much of anything – and the Chinese economy is noticing.
“Recently, China injected close to $600 billion in a stimulus in their own economy,” writes colleague Bill Jenkins. “There is some evidence that it may be helping. It has also been reported that they hold close to $2 trillion U.S. dollars in their investment portfolio, and it has grown 16% over last year, a whole $7.7 billion. If the value of their U.S. holdings should fall 30%, it would roughly equal the size of its recent stimulus.
“If the whole thing went belly up, it would still only equal one-seventh of the whole U.S. GDP – and China would still be solvent. The striking facts about China relative to the United States are these: China has four times the people, but only a quarter of the GDP. If their holdings were to get washed away in a tidal wave of inflation, it would be like worrying about a roof leak while a whole tsunami is bearing down on their house. At that point stability is not likely on either side of the globe.”
The Daily Reckoning