Wednesday, March 25, 2020

Q: What does it take to turn a conservative into a socialist?

A: A $1200 check. *

* this is just a joke :)

French economist Frederic Bastiat lived from 1801 to 1850. Here's a quote of his that might have some relevance....

"To rob the public, first we must deceive it. The trick consists in persuading the public that the theft is for its advantage; and by this means inducing it to accept, in exchange for its property, services which are fictitious, and often worse." 

It sounds like there is a some last minute haggling going on re: The Great Rescue and that's why we didn't get a vote on both the House and Senate bills today. 

I've covered some of the bailout goodies before, here are some of the smaller provisions in the bills so far:

1) Payroll tax deferral for employers.  I can't get a clear answer, but I assume that this is the 6.2% of payroll that employers are responsible for paying.  You, the employee, still get to pay yours, it's just that your employer gets to defer paying their portion until 2021/2022 (half in each year). In theory, this might provide a little extra cash flow. However, it takes a lot of payroll tax at 6% to equal saving one job. 

2) NOL carrybacks extended to 5 years.  Okay, we're getting in the weeds here but let's say you have $30 of income and $10 in tax in year 1, 2, 3, 4 and 5 ($150 in sales and $50 in total tax over 5 years) because you were a profitable business.  Now 2020 arrives and your business is crippled, you actually lose say $200.  Under the current rules, you can only go back 2 years to offset previous income or $60 dollars of revenue and claim a refund of $20.

By extending it back FIVE years, now your $200 loss offsets ALL $150 of previous income and magically the government will send you back all $50 of taxes you've previously paid in.  Sweet gig if you can get it (oh, and you still have $50 of credit to offset FUTURE INCOME).  Thankfully, I live with a CPA who can explain these things to me.

This is a popular plug into every bailout package but it destroys the Federal Budget.

3) Four months of unemployment. Surprisingly, this includes an odd self-certification clause that says if the employee "quits due to #COVID19" they are still eligible for unemployment.  This is a staggering departure from the historical role of unemployment which has served to protect those that were involuntarily separated from their job.
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Markets: 
I love this quote because it accurately describes the current state of our "markets" which are certainly in rough seas --- "if you know that you can die, don't get in the boat. Certainly don't put your kids and all of your money in the boat" @KeithMcCullough via Twitter.

If you remember, yesterday stocks caught that updraft and ended up above a critical price point, this lead to further chasing of the rally and people really want to believe pushing stocks up 4% or so by mid-afternoon.  However, a last minute snag in negotiations popped those hopes and stocks finished with relative modest gains.  I won't even bother talking about the overnight moves because they are pointless right now. 

There is some concern that since the bailout has been a foregone conclusion for over a week, when it's finally passed stocks may reverse in a "sell the news" event.  We won't know until the news hits the tape what type of reaction it will warrant.
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COVID19:
NY passed a somber milestone with 80 deaths attributed to the virus today.  I worry that by next week this might be approaching 1,000 people per day before the effects of our social isolation start to showing some positive impacts on new infections.  I'd be happy to be wrong on this forecast but so far everything has been fairly predictable with the progression of the virus in the US.

Via @AliceDreger (national journalist)
If you need a wake up call, here it is: My husband was on a large conference call of American Medical School Deans last night.  One asked about legal coverage for pulling people off ventilators to give them to others more likely to survive, ie, not being charged with murder. Here we are....

Humor of the Day:
A visual representation of how $1200 will help average Americans....

Cheers!

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