The lowest bracket for the personal income tax, for instance, moves up 50% ”” to 15% from 10%. The next lowest bracket ”” 25% ”” will rise to 28%, and the old 28% bracket will be 31%. At the higher end, the 33% bracket is pushed to 36% and the 35% bracket becomes 39.6%.

But the damage doesn’t stop there.

The marriage penalty also makes a comeback, and the capital gains tax will jump 33% ”” to 20% from 15%. The tax on dividends will go all the way from 15% to 39.6% ”” a 164% increase….
The HSA Withdrawal Tax Hike. “This provision of ObamaCare,” according to ATR, “increases the additional tax on nonmedical early withdrawals from an HSA from 10% to 20%, disadvantaging them relative to IRAs and other tax-advantaged accounts, which remain at 10%.”

Brand Name Drug Tax. Makers and importers of brand-name drugs will be liable for a tax of $2.5 billion in 2011. The tax goes to $3 billion a year from 2012 to 2016, then $3.5 billion in 2017 and $4.2 billion in 2018. Beginning in 2019 it falls to $2.8 billion and stays there. And who pays the new drug tax? Patients, in the form of higher prices.

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Battered by high unemployment and record home foreclosures, most Americans seem to have lost faith in another fundamental part of their personal finances: Social Security.

A USA TODAY/Gallup Poll finds that a majority of retirees say they expect their current benefits to be cut, a dramatic increase in the number who hold that view. And a record six of 10 non-retirees predict Social Security won’t be able to pay them benefits when they stop working.

Skepticism is highest among the youngest workers: Three-fourths of those 18 to 34 don’t expect to get a Social Security check when they retire.

The public’s views are more dire than the calculations of Social Security’s trustees. Last year, they projected the system would begin running in the red in 2016, as the Baby Boom generation retired, and the trust fund would be exhausted in 2037.

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U.S. officials need to outline more clearly their plans to reduce the nation’s fiscal deficit, said Stephen Roach, Morgan Stanley’s non-executive chairman for Asia.

“What the markets are ultimately going to want is far more specificity and credibility on deficit reduction and normalization of Fed policy,” Roach, 64, said during a radio interview with Tom Keene on Bloomberg Surveillance.

President Barack Obama said on July 15 his economic- stimulus program is gradually pulling the U.S. out of the economic slump. The nation’s budget deficit is forecast to swell 14 percent this year to a record $1.6 trillion. Obama has said he will offset spending by more than $1.2 trillion over 10 years, partly through a freeze on many domestic programs and more than $800 million in higher taxes and fees on households earning more than $250,000.

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…there is skepticism over the president’s commitment to reducing the huge and dangerous budget deficits which America now faces. A strong step toward deficit reduction next year ”” like undertaking the difficult task of trying to fix Social Security ”” would earn deeper credibility with business and with all Americans.

Another problem is that the administration’s rhetoric ”” which too often employs inflammatory words like “reckless” ”” has the effect of tarring all of business with the same brush. The White House might better distinguish between Wall Street, Big Oil and health insurers, which have all incurred public wrath, and the majority of businesses, which haven’t.

The tension between President Obama and the business community is hurting both sides and may hamper economic recovery. Closing that divide requires the business community to mute its criticism, and the administration to make personnel and policy adjustments. Neither should be hard.

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America is struggling with a sputtering economy and high unemployment ”” but times are booming for Washington’s governing class.

The massive expansion of government under President Barack Obama has basically guaranteed a robust job market for policy professionals, regulators and contractors for years to come. The housing market, boosted by the large number of high-income earners in the area, many working in politics and government, is easily outpacing the markets in most of the country. And there are few signs of economic distress in hotels, restaurants or stores in the D.C. metro area.

As a result, there is a yawning gap between the American people and D.C.’s powerful when it comes to their economic reality ”” and their economic perceptions.

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A new Time poll reveals just how hard the task is: Two-thirds of respondents say they oppose a second government stimulus package. And 53% say the country would have been better off without the first one.

The result is a White House pulled in three directions at once as it tries to repair the economy ”” and ensure that Obama and the Democrats can survive a rising tide of public anger. First, the Obama team is improvising ways to pass piecemeal spending items through a Congress where stimulus has become a toxic word. At the same time, the White House is signaling its concern about that budget deficit that has Tea Partyers raging ”” both through token gestures, like a White House contest that lets the public vote on cost-cutting ideas submitted by federal employees (the winner gets to meet Obama and see his or her idea go in the President’s next budget), and through Obama’s support for the work of a bipartisan deficit commission. And finally, the White House is trying to explain to angry liberals that it’s doing everything possible to keep the economy moving and fight Republican resistance to new spending.

It’s a delicate balancing act, on a par with Obama’s effort to pass health care reform without appearing to get too involved in the details. And just as it did in the health care battle, the future of Obama’s presidency ”” as well as the fate of the American economy ”” may hang on the outcome.

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A major political clash is brewing in New York over a planned mosque near Ground Zero, with Republicans demanding an investigation into the mosque’s funding and New York City Mayor Michael Bloomberg calling such a probe “un-American.”

Long Island Rep. Peter King, the top Republican on the House Homeland Security Committee, wants a probe of the $100 million project, as does GOP gubernatorial candidate Rick Lazio.

“That just is so out of character for what this nation stands for,” Bloomberg said at a Monday (July 12) press conference.

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In the past few days polls have shown Republican challengers taking the lead over previously safe Democratic incumbents, such as Barbara Boxer in California and Russ Feingold in Wisconsin. Indeed, given the uniformly negative direction in the numbers, it is now quite possible the Republicans could win the Senate seats formerly held by both President Obama in Illinois, and Joe Biden, vice-president, in Delaware.

Add to that the continuing woes of Harry Reid, the Senate Democratic majority leader, in Nevada, where the Republican party’s recent nomination of Sharron Angle, a far-right and highly eccentric Tea Party supporter, appear to have had no positive effect on Mr Reid’s prospects, and the Grand Old party has a good shot at taking control of both houses of Congress. Worse for Mr Obama, political scientists say that at this stage in the calendar, there is almost nothing he can do about it.

“If you ask me where the silver lining is for President Obama, I have to say I cannot see one,” says Bill Galston, a former Clinton official, who has been predicting for months the Democrats could lose the House. “Just as BP’s failure to cap the well has been so damaging, Obama’s failure to cap unemployment will be his undoing. There is nothing he can do to affect the jobless rate before November.”

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Farmer Jim Kreutz uses derivatives to soften the blow should the price of feed corn drop before harvest. His brother-in-law, feedlot owner Jon Reeson, turns to them to hedge the price of his steer. The local farmers’ co-op uses derivatives to finance fixed-price diesel for truckers who carry cattle to slaughter. And the packing plant employs derivatives to stabilize costs from natural gas to foreign currencies.

Far from Wall Street, President Barack Obama’s financial regulatory overhaul, which may pass Congress as early as Thursday, will leave tracks across the wide-open landscape of American industry.

Designed to fix problems that helped cause the financial crisis, the bill will touch storefront check cashiers, city governments, small manufacturers, home buyers and credit bureaus, attesting to the sweeping nature of the legislation, the broadest revamp of finance rules since the 1930s.

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I hope the White House is paying attention to the latest annual Congressional Budget Office Long-Term Budget Outlook, which offers a truly frightening picture of the scale of America’s national debt, with huge implications for the country’s future prosperity. According to the non-partisan CBO, “the federal government has been recording the largest budget deficits, as a share of the economy, since the end of World War II”….

Read it all and follow the link to the important CBO report.

The national debt will reach 62 percent of gross domestic product (GDP) by the end of this year, the nonpartisan Congressional Budget Office (CBO) said Wednesday.

The budget office said the debt will reach its highest percentage of GDP since the end of World War II. The jump is driven by lower tax revenues and higher federal spending in the recent recession.

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After more than a year of work and two weeks of negotiations, lawmakers early Friday finished melding different versions of Wall Street reform.

The final bill won’t be ready for a few days, but here’s CNNMoney.com’s breakdown of key provisions that aim to protect consumers, prevent firms from getting too big to fail and crack down on risky bets that leave taxpayers on the hook.

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Republican voters in South Carolina made political history on Tuesday with two nominations that broke with longstanding racial, cultural and gender trends.

Tim Scott was chosen overwhelmingly as the party’s candidate in the 1st District congressional race, and Nikki Haley became the party’s first female nominee for governor. Each is considered the favorite for November’s general election.

If Mr. Scott wins, he would be the first black Republican in the House of Representatives since Oklahoma’s J.C. Watts retired in 2003. The last black Republican representative from South Carolina was Robert Smalls of Beaufort, who left office in the 1880s.

Mrs. Haley would be the state’s first female governor and the country’s second Indian-American governor. A staunch conservative, state Rep. Haley beat Gresham Barrett handily. But on the road to winning, her gender and her ethnicity were issues.

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Nikki Haley trounced Gresham Barrett on Tuesday to win the GOP’s nomination for governor, breaking gender and ethnic boundaries, and sending a message to the Republican establishment: Conservatives are tired of entrenched politicians and they’re sick of the status quo.

Haley, a 38-year-old married mother of two who overcame unsubstantiated accusations of adultery, is the daughter of immigrant parents from India and the first woman in South Carolina’s history to win the nomination for governor from one of the two major parties.

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Exhibit A: The deeply flawed mortgage giants Fannie Mae and Freddie Mac that have yet to be overhauled despite endless calls for an overhaul.

As Deal Journal pointed out post earlier today, Washington is seemingly paralyzed by a fear that ending the government guarantee of Fannie and Freddie would bring the housing recovery to a screeching halt.

Well, Exhibit B has to be an amendment to a bill winding its way through Congress. The bill is called the “Small Business Lending Fund Act of 2010,” and it would extend $30 billion to small banks to facilitate small-business lending. But the last minute amendment, which was sponsored by Democratic Reps. Brad Miller (N.C.), Joe Baca (Calif.) and Majority Leader Steny Hoyer (Md.), would allow builders to tap into the $30 billion to build more houses.

For more than two years, banks have practically shut off all financing to small and mid-size home builders as they pare back their exposure to construction and development loans. The National Association of Home Builders lobbied hard for the amendment to be included in the bill. “The Miller/Baca amendment will expand the flow of credit to residential builders and help promote the sustained growth and vitality of the nation,” the NAHB said in a letter sent to all House members.

The amendment passed 418 to 3.

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That said, the most worrisome long-term economic impact of the Gulf spill lies elsewhere: The catastrophe is adding to the gradual erosion in trust in U.S. professional elites and major institutions, from government to business. It has hardly inspired confidence to watch the White House scramble to prove that President Barack Obama wasn’t as detached from the crisis as he often seemed, or to witness the inability of the world’s best oil engineers to stop the underwater gusher.

Confidence in the economy’s commanding heights has taken a beating following a long run of scandals and malfeasance. The list includes everything from the Enron and Worldcom failures, Bernie Madoff’s massive fraud, the subprime loan mess, the government rescues of Fannie Mae, Freddie Mac, and AIG (AIG), the controversy surrounding Goldman Sachs’ (GS) collateralized debt obligations, and so on. The Tea Party movement may grab all the attention with its antigovernment rhetoric, but surveys have repeatedly shown that its sentiment is widely shared. For instance, a series of long-run surveys by the Pew Research Center find that only 22 percent of those surveyed say they can trust government. That’s about the lowest measure in half a century. The ratings are similarly abysmal for large corporations and banks and other financial institutions: respectively 25 percent and 22 percent.

Trust isn’t as easy to measure as land, labor, and capital. It’s more like a recipe or a software protocol that allows for economic exchange and all kinds of innovation. Nobel Prize Laureate Kenneth Arrow famously remarked that “virtually every commercial transaction has within itself an element of trust.” Societies with high levels of trust are fertile ground for developing large corporations and innovative enterprises. Low-trust societies feature people who don’t like to do business with folks outside their family or community; smaller, family-run companies are the norm.

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The cost of fixing Fannie Mae and Freddie Mac, the mortgage companies that last year bought or guaranteed three-quarters of all U.S. home loans, will be at least $160 billion and could grow to as much as $1 trillion after the biggest bailout in American history.

Fannie and Freddie, now 80 percent owned by U.S. taxpayers, already have drawn $145 billion from an unlimited line of government credit granted to ensure that home buyers can get loans while the private housing-finance industry is moribund. That surpasses the amount spent on rescues of American International Group Inc., General Motors Co. or Citigroup Inc., which have begun repaying their debts.

“It is the mother of all bailouts,” said Edward Pinto, a former chief credit officer at Fannie Mae, who is now a consultant to the mortgage-finance industry.

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The popular tax break for mortgage interest, once considered untouchable, is falling under the scrutiny of policymakers and economic experts seeking ways to close huge deficits.

Although Congress last year rejected the White House’s proposed cut to the amount wealthier taxpayers can deduct for home mortgage interest payments, the administration included it again in its 2010 budget ”” saying it could save $208 billion over the next decade.

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“My best guess is that we’ll have a continued recovery, but it won’t feel terrific,” Ben S. Bernanke, the Fed chairman, said at a dinner at the Woodrow Wilson International Center for Scholars on Monday night. “And the reason it won’t feel terrific is that it’s not going to be fast enough to put back eight million people who lost their jobs within a few years.”

One could almost envision the winces in the White House as Mr. Bernanke observed that the unemployment rate “will stay high for some time.” He went on to note that even if the economy grew at 3 percent, which would be considered a healthy pace, it would do little more than keep pace with the normal rate of growth of the work force.

Virtually every day of late, White House officials have struggled to explain how their strategies to provide economic stimulus to bring down the unemployment rate square with Mr. Obama’s oft-expressed commitment to tackle a record budget deficit. They talk about spending this year ”” in modest amounts ”” while waiting for the prescriptions of the president’s commission on debt reduction, which reports, conveniently, a few weeks after the midterm elections.

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That said, I think part of the business community’s complaint about Obama has merit. Although there are many “innovation” initiatives ongoing in this administration, they are not well coordinated or a top priority or championed by knowledgeable leadership. This administration is heavily staffed by academics, lawyers and political types. There is no senior person who has run a large company or built and sold globally a new innovative product. And that partly explains why this administration has been mostly interested in pushing taxes, social spending and regulation ”” not pushing trade expansion, competitiveness and new company formation. Innovation and competitiveness don’t seem to float Obama’s boat. He could use a buoyant growth strategy.

What might that include? I asked two of the best people on this subject, Robert Litan, vice president of research and policy at the Kauffman Foundation, which specializes in innovation, and Curtis Carlson, the chief executive of SRI International, the Silicon Valley-based innovation specialists.

Carlson said he would begin by creating a cabinet position exclusively for promoting innovation and competitiveness to ensure that America remains “the world’s new company formation leader.” “Secretary Newco” would be focused on pushing through initiatives ”” including lower corporate taxes for start-ups, reducing costly regulations (like Sarbanes-Oxley reporting for new companies), and expanding tax breaks for research and development to make it cheaper and faster to start new firms. We need to unleash millions of entrepreneurs.

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Senator Blanche Lincoln of Arkansas survived a tough challenge from her party’s left wing on Tuesday to capture the Democratic nomination in a runoff primary election, resisting the anti-incumbent wave that has defined the midterm election year.

Mrs. Lincoln withstood a multi-million-dollar campaign against her from organized labor, environmental groups and liberal advocacy organizations from outside Arkansas as she prevailed over Lt. Gov. Bill Halter. She faces a difficult contest in the fall, but her victory challenges the suggestion that voters are poised to oust all officeholders.

“We proved that this senator’s vote is not for sale and neither is yours,” Mrs. Lincoln said. “We took on the outside groups seeking to manipulate our votes.”

In California, Republican primary voters chose female business executives to run for Senate and for governor after both crushed their opponents.

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Brushing aside allegations of extramarital affairs, tea party favorite Nikki Haley pushed aside a tough group of political stalwarts and nearly won outright the GOP primary race for governor. Just shy of the 50 percent needed to earn the Republican bid, Haley now faces U.S. Rep. Gresham Barrett in a runoff June 22.

Meanwhile, Democrats overwhelmingly chose Vincent Sheheen as their nominee for governor. Sheheen, a state senator from Camden, took 59 percent of the vote, topping Jim Rex, state superintendent of education, with 23 percent. State Sen. Robert Ford of Charleston finished with 18 percent.

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Of all the incumbents on the ballot across the nation Tuesday, of all the establishment figures whose careers are on the line in this midterm election year, there is no bigger target than Senator Harry Reid of Nevada, the Democratic majority leader.

But will Mr. Reid’s prospects rise after Tuesday night?

That’s one of the questions that will be answered when the outcome of primary contests in 11 states ”” the biggest day so far this election season ”” provides a layer of clarity as to how Republicans and Democrats will be positioned in their battle for control of Congress over the next five months.

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We are drifting. We take comfort in bits of good news, but we are in dangerous waters; the Great Recession is being starkly revealed as a global crisis with the US, the traditional engine of recovery, sputtering on every cylinder. The US government responded with dramatic financial support by transferring money to the household sector. But outside of these transfers the personal income of Americans is still declining; the residential market remains stagnant at best; consumer growth is nominal. The only real energy in the economy has come from the cessation of inventory liquidation, which is now the main factor in rising industrial output and any modest improvement in the economy.

The mood of US households is despondent. In May only 11.3 per cent believed they would see their income rise in the following six months, while 16.6 per cent thought they would see it decline. This is the first time in over four decades that more people believe they will be worse off than better. Any massive fiscal and monetary stimulus that might reverse the trend is likely to be politically unsustainable given the growing concern over the exploding national deficit.

Wherever you look the scene is bleak. Leading economic indicators fell in April ”“ unusual at such an early stage in the up-cycle. Jobless claims were up by 25,000 to 471,000. And up again above expectations in the first three weeks of May ”“ raising the four-week moving average to a level consistent with 100,000, or more, net job losses. For the past several months, claims have been nowhere near the levels of 400,000 and less that in the past were consistent with sustained job creation. We are not enjoying the normal cycle of economic improvement.

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(Please note that the title above is from the print edition–KSH)

But while the research compiled in the Dartmouth Atlas of Health Care has been widely interpreted as showing the country’s best and worst care, the Dartmouth researchers themselves acknowledged in interviews that in fact it mainly shows the varying costs of care in the government’s Medicare program. Measures of the quality of care are not part of the formula.

For all anyone knows, patients could be dying in far greater numbers in hospitals in the beige regions than hospitals in the brown ones, and Dartmouth’s maps would not pick up that difference. As any shopper knows, cheaper does not always mean better.

Even Dartmouth’s claims about which hospitals and regions are cheapest may be suspect. The principal argument behind Dartmouth’s research is that doctors in the Upper Midwest offer consistently better and cheaper care than their counterparts in the South and in big cities, and if Southern and urban doctors would be less greedy and act more like ones in Minnesota, the country would be both healthier and wealthier.

Read it all from Thursday’s New York Times.

Are you worried that we are passing our debt on to future generations? Well, you need not worry.

Before this recession it appeared that absent action, the government’s long-term commitments would become a problem in a few decades. I believe the government response to the recession has created budgetary stress sufficient to bring about the crisis much sooner. Our generation ”” not our grandchildren’s ”” will have to deal with the consequences….

The question we need to ask is this: If we don’t change direction, how long can we travel down this path without having a crisis? The answer lies in two critical issues. First, how long will the capital markets continue to finance government borrowings that may be refinanced but never repaid on reasonable terms? And second, to what extent can obligations that are not financed through traditional fiscal means be satisfied through central bank monetization of debts ”” that is, by the printing of money?

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Prodded by national anger at Wall Street, the Senate on Thursday passed the most far-reaching restraints on big banks since the Great Depression. In its broad sweep, the massive bill would touch Wall Street CEOs and first-time homebuyers, high-flying traders and small town lenders.

The 59-39 vote represents an important achievement for President Barack Obama, and comes just two months after his health care overhaul became law. The bill must now be reconciled with a House version that passed in December. A key House negotiator predicted the legislation would reach Obama’s desk before the Fourth of July.

The legislation aims to prevent a recurrence of the near-meltdown of big Wall Street investment banks and the resulting costly bailouts. It calls for new ways to watch for risks in the financial system and makes it easier to liquidate large failing financial firms. It also writes new rules for complex securities blamed for helping precipitate the 2008 economic crisis, and it creates a new consumer protection agency.

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Senator Arlen Specter of Pennsylvania, who left the Republican Party a year ago in hopes of salvaging a 30-year career, was rejected on Tuesday by Democratic primary voters, with Representative Joe Sestak winning the party’s nomination on an anti-incumbent wave that is defining the midterm elections.

In Kentucky, Rand Paul, the most visible symbol of the Tea Party movement, easily won the Republican Senate primary and delivered a significant blow to the Republican establishment. His 24-point victory over Trey Grayson, who was supported by the most powerful Republican on Capitol Hill, Senator Mitch McConnell of Kentucky, underscored the anti-Washington sentiment echoing across the country.

The outcomes of both contests, along with a Democratic primary in Arkansas that pushed Senator Blanche Lincoln into a runoff election in June, illustrated anew the serious threats both parties face from candidates who are able to portray themselves as outsiders and eager to shake up the system.

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Grilled by skeptical lawmakers, Interior Secretary Ken Salazar on Tuesday acknowledged his agency had been lax in overseeing offshore drilling activities and that may have contributed to the disastrous oil spill in the Gulf of Mexico.

“There will be tremendous lessons to be learned here,” Salazar told a Senate panel in his first appearance before Congress since the April 20 blowout and explosion on the Deepwater Horizon rig.

His appearances before two of the three Senate panels holding hearings Tuesday on the giant oil spill came as federal officials kept a wary eye on the expanding dimensions of the problem. The government increased the area of the Gulf where fishing is shut down to 46,000 square miles, or about 19 percent of federal waters. That’s up from about 7 percent before.

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Herein lies the challenge: Small businesses, half of the private sector (and the most important part as far as jobs are concerned), have been heavily impacted by this credit crisis. Small businesses created 64% of new jobs over the past 15 years, but they have cut five million jobs since the onset of this credit crisis. Large businesses, by comparison, have shed three million jobs in the past two years.

Small businesses continue to struggle to gain access to credit and cannot hire in this environment. Thus, the full weight of job creation falls upon large businesses. It would take large businesses rehiring 100% of the three million workers laid off over the past two years to make a substantial change in jobless numbers. Given the productivity gains enjoyed recently, it is improbable that anything near this will occur.

Unless real focus is afforded to re-engaging small businesses in this country, we will have a tragic and dangerous unemployment level for an extended period of time. Small businesses fund themselves exactly the way consumers do, with credit cards and home equity lines. Over the past two years, more than $1.5 trillion in credit-card lines have been cut, and those cuts are increasing by the day….

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