Thursday, June 17, 2010

Are We Headed For An Economic Collapse in 2011?

I heard about Arthur Laffer's article in the Wall Street Journal on the radio last week and was reminded of it by Fredd Spews post.  Mr. Laffer has a theory that we are headed for an economic collapse in 2011.  I don't know if many people have been thinking about this, but it's worth a reminder:

On or about Jan. 1, 2011, federal, state and local tax rates are scheduled to rise quite sharply. President George W. Bush's tax cuts expire on that date, meaning that the highest federal personal income tax rate will go to 39.6% from 35%, the highest federal dividend tax rate pops up to 39.6% from 15%, the capital gains tax rate to 20% from 15%, and the estate tax rate to 55% from zero. Lots and lots of other changes will also occur as a result of the sunset provision in the Bush tax cuts.

 Seniors who depend on stock dividends to supplement their income are going to be pretty unhappy with that huge increase.  And if you're going to die, this is the year to do least for your heir's sake.

And on top of these tax hikes, President Obama is on a mission to pass more taxes on us.  If he gets his way, we'll be dishing out the bucks for Obamacare, a Value Added Tax, an energy tax...and who knows what else into the future and beyond.

Personally, I think it's a huge mistake to let the Bush tax cuts expire.  Unfortunately, it doesn't look like Obama really cares...he needs the tax revenue to pay for his give-away programs.

Mr. Laffer's theory about how we are headed for an economic collapse in 2011 is very interesting and plausible.  Take a few minutes to read through his article and see what you think.  We all need to be aware of what may be in our future.

Tax Hikes and the 2011 Economic Collapse

Today's corporate profits reflect an income shift into 2010. These profits will tumble next year, preceded most likely by the stock market.

People can change the volume, the location and the composition of their income, and they can do so in response to changes in government policies.

It shouldn't surprise anyone that the nine states without an income tax are growing far faster and attracting more people than are the nine states with the highest income tax rates. People and businesses change the location of income based on incentives.

Mr. Laffer is the chairman of Laffer Associates and co-author of "Return to Prosperity: How America Can Regain Its Economic Superpower Status" (Threshold, 2010).


  1. There is no telling what will happen as the Obama agenda for wealth redistribution swings into high gear in 2011 - except that the little guy will be crushed even further as taxes increase, fuel cost (which means everything cost) increases due to cap/trade tax increases, etc.

    I can't see a bottom to the recession in this presidency and whoever takes over from barack hussein obama in 2012 will have a mess of epic proportions. The economy, foreign affairs, crushing debt, the US Border, etc.

  2. Thanks for posting this - I heard it mentioned on the radio last week too and meant to read it. My husband and I are living examples of Mr. Laffer's theory and are pulling in as much income to 2010 as we can.
    P.S. I love the quote you have at the top of your blog. So poignant!

  3. Hi LL:
    I heard Jim DeMint do an interview last night where he said the Senate GOP is working on stopping at least some of the Bush tax cuts from expiring. I wish them luck, but I think a miracle is what they really need.
    And you're right, whoever is the next president (and I pray to God it is not a re-elected Obama) is going to have it very bad. I can't imagine why anyone would want to take it on. All I know is that the GOP better have a good candidate this time, or we might as well pack it in.
    Thanks for stopping by!

  4. Hi Lisa:
    As I told LL, the Senate GOP is working on stopping some of the Bush tax cuts from expiring. I wonder if there are any Dems left in Congress who have a brain cell left and will side with the GOP on this??? We knew (even if the sheeple didn't) that Obama wanted to "fundamentally transform" America, and not in a good way. He is on the fast track now to accomplishing as much as he can because I'm sure he sees the Nov. 2010 elections looming in the background.
    I, too, love that comment by Edmund Burke. The first time I saw it a few years ago, I applied it to the threat of Islamic terror. Now that Obama is our President, I think it applies even more.
    Thanks for stopping by.

  5. scarey stuff CL would u believe this Oil spill fiasco..billions and there ANYTHING Hussein O doesnt want to control!!! argg!!!!

  6. Yes Ma Lady, This is exactly why my financial adviser and I are getting together tomorrow. The future needs to be mapped out.

  7. Lady:

    I appreciate the footnote, as I was just commenting on Mark Belling's chilling spiel as guest host on Rush Limbaugh last week.

    Chicken Little always grabs headlines, and I have to admit I considered structuring a cash out of our portfolio towards Christmas this year to ride out the 'collapse,' during the first few hours after I heard that awful gloom and doom synopsis of Laffer's op ed by Belling. It stopped my heart for a moment or two, I gotta admit.

    However, the sky seldom if ever falls, even when Chicken Little clucks with the voice of Arthur Laffer (whom I revere, and would offer him one of my kidneys if he needs it).

    Ever the optimist, I think that this incoming Republican 112th congress in November will nip all of this idiocy in the bud, as they will most certainly have an unmistakeable and overwhelming public mandate to do so.

    Call me Pollyanna, but the Zeitgeist will not stand for this crazyiness to continue. It just won't. And I'm sticking to my equity positions for the duration.

    Of course, that's just me.

  8. I know that this is slightly off topic, but I remember that Maryland (?) passed a law taxing millionaires. The next year, there were so many fewer millionaires in the state, that it screwed up all of their budget projections.

    Whenever you implement or raise a tax, people will find a way to avoid it.

  9. Umm.. I say sooner, be ready for 2010

  10. I don't know if it would have really made a difference,
    but, I can't help but wonder why this wasn't brought up, more, during the presidential election.

  11. Odie:
    We all need to have our "ducks in a row", but it's really hard to plan with the uncertainty. We need a crystal ball.

  12. Fredd:
    The thought crossed our minds, too, but so far we haven't made any rash decisions. As time goes on, things will get clearer and maybe our prayers for some sanity will be heard.

  13. Trestin:
    Problem is figuring out what to do to prepare.

  14. Pedaling:
    Unfortunately, the Bush tax cuts were always vilified as being "tax cuts for the rich" by the media and the Dems. The truth of the matter is:
    ...the top 1 percent is comprised of just 1.4 million taxpayers and they pay a larger share of the income tax burden now than the bottom 134 million taxpayers combined.
    That's why they get the cuts...they're the ones paying the taxes.

    Apparently, the subject did come up during the 2008 campaign:
    McCain, who did not agree with Pres. Bush on the tax cuts when he was running against Bush, changed his tune when running against Obama. Obama continued to bash the Bush tax cuts as "for the rich", and we all know how things turned out.
    Sorry for the long-winded answer, but your comment sparked my curiosity.


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