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To: Biomaven who wrote (94144)	9/17/2010 1:38:54 PM
From: Keith Feral	Read Replies (1) \| Respond to of 118717

Payroll tax cut? The guy is dreaming. It goes along with the theories regarding repatriation of cash for US companies. They need the cash in those markets to support export growth. The solution is the one we are dealing with. Let consumer credit contract as the housing market continues to grind out the losses from the housing bubble. Seasonally, I have no doubt that housing prices will pull back from the summer peaks again this fall. Hopefully, that will bring more buyers into the market looking to take advantage of low mortgage rates as prices take a breather from the big advance from the beginning of 2010. The median sales price in January was $164K, which jumped to $182,000 in July. Same thing happens every single year, before they back off towards $170K by the end of December. August is usually the biggest negative adjustment for the year price wise, although they will probably trail off through the end of the year before they bottom in December or January. As long as housing prices remain positive YOY in the next couple months, I don't see any big deal from the numbers as the housing market continues to stabilize. The double dip in housing sales has already been factored into the market last month when sales fell apart from 5.2 to 3.8 million sales annualized. As prices begin to normalize towards the baseline from the second half of last year, the pace of sales should accelerate into the 4th quarter.

To: Biomaven who wrote (94144)	9/17/2010 4:57:34 PM
From: IRWIN JAMES FRANKEL	Respond to of 118717

Thanks bio, That is interesting. The public debate is often misleading. Increasing taxes for anyone without spending it will have a contractionary effect on GDP, incomes and tax revenues. Raising taxes FASTER than tax revenues decline as demand contracts will be challenging at best and if ill-designed will lead to lower net tax revenues and bigger deficits. Just another side of the paradox of thrift. The idea of reducing payroll taxes is expansionary for GDP but also likely leads to immediate greater deficits in whatever programs are supported by the selectively reduced payroll taxes. Some may say that all these solutions are circular - taking out of one pocket and putting it in another pocket. Absent a level of efficiency that creates a multiplier effect, it is a game for the pols. It seems to me that to do something meaningful, we need to lower costs of production, increase exports and decrease imports (especially energy). Obama has the export idea right - even if execution seems to be lacking. (I have noticed his administration taking credit for rising exports though it is not clear to me they deserve the credit which may be due to the decline in exchange rates that are long gone now.) ij