I really don't want to get fired up about taxes right now. But what you will continue to see over the next decade is a slow bleeding of wealth. Tax cuts to 95% of the American People is a stealth way of raising taxes on the other 5%. Let's not kid ourselves here, just like the banks, surplus money to the consumer at this point will go straight towards debt. Just like we can't force the banks to lend you aren't going to force the consumer to spend money that you would like to lend them. You can't force them to into buying a new Chevy Volt. And when it's all said and done there isn't much wealth left to recover. Who wins here? Well let me first start by saying debt is real. Over time this debt is being shifted from one balance sheet to another and will all ultimately end up at Fed. This debt will be either be paid by future tax revenue or defaulted on. Taxes will have to be raised and wealth will be depleted. In the end (10-20 years) you will have witnessed a complete balance in power away from the United States. The redistribution of wealth will not be among our classes, but to the rest of the world.
On top of that our government will continue to support, and enhance, poverty programs which history has proven only keeps them in poverty. Rather than give them an opportunity to get out of poverty we chose to just support them. "Spread the wealth"
And when Barney Franks finally gets his dream of doing mortgage modifications there are going to be another 100,000 homeowners right behind them in trouble. Fixing housing will not fix the economy, it's the other way around. But then again Barney Frank was the one supporting Phoney Mae and Fraudie Mac. If housing were to bottom right now the banks are still insolvent. Make no mistake about it when the day comes that housing does bottom don't expect any real appreciation thereafter for at least twice as long as they fall.
