These numbers are deeply disturbing to most [people who believe in our old American economic system of free enterprise.] The reasons should be obvious, and the trends are not in our favor.

Today we look at a PewResearchCentersurvey that polled Americans for their feelings about capitalism versus socialism. The survey included all races, different ages and various income groups. I think it’s safe to say, this survey will SHOCK YOU!

Pew Research Survey – CAPITALISM vs. SOCIALISM

Since the re-election of President Obama by a comfortable margin, a great deal of energy has been focused on the changing American electorate and the role of minorities in particular. So much so that aPewResearchCentersurvey from late last year has resurfaced and is getting a lot of attention.

Pew asked Americans of all races and various age groups to give their views (positive or negative) on Capitalism and Socialism. Let me warn you in advance: The survey results shown in the table below may shock you. Take a few minutes to let the data shown below soak in.  

 

While whites are firmly positive on capitalism and overwhelmingly negative on socialism, other categories are troublesome. Going down the list, a slim majority of blacks (51%) are negative on capitalism and 55% are positive on socialism. Hispanics are also negative on capitalism (55%) but are net negative on socialism too.

Perhaps most surprising, young people (18-29) are about even on capitalism but are net positive (49-43) on socialism. This is so sad! Those ages 30-65+ are all net positive for capitalism and comfortably net negative on socialism. Still, the negatives for capitalism were higher than I would have expected for this older group.

Not surprising, those with higher family income were decidedly positive on capitalism and negative on socialism. Those with family income of less than $30,000 were clearly negative on capitalism (47%) and too close for comfort on socialism (43-46).

These numbers are deeply disturbing to most [people who believe in our old American economic system of free enterprise.] The reasons should be obvious, and the trends are not in our favor.

Fiscal Cliff – Obama Won Big!

As for the fiscal cliff battle, virtually everyone believes it was a big win for President Obama. He succeeded in getting almost everything he wanted, and did so without any spending cuts. Most conservatives believe the bill that just passed in Congress is a disaster and are angry that more Republicans didn’t vote against it. Count me as one of them!

Let’s take a look at the highlights (or lowlights) of the bill that passed in both houses of Congress on Tuesday.

  • Income Tax Rates: Permanently extends the Bush tax cuts on incomes up to $400,000 for individuals and $450,000 for couples. Earnings above those amounts would be taxed at a rate of 39.6%, up from the current 35%. Extends Clinton-era caps on itemized deductions and the phase-out of the personal exemption for individuals making more than $250,000 and couples earning more than $300,000.
  • Estate Tax: Estates will be taxed at a top rate of 40%, with the first $5 million in value exempted for individual estates and $10 million for family estates. In 2012, such estates were subject to a top rate of 35%.
  • Capital Gains & Dividends: Taxes on capital gains and dividend income will increase from 15% to 20% for those with income exceeding $400,000 for individuals and $450,000 for families. For everyone else, the rate will remain at 15%.
  • Alternative Minimum Tax: Permanently addresses the alternative minimum tax and indexes it for inflation to prevent nearly 30 million middle and upper-middle income taxpayers from being hit with higher tax bills averaging almost $3,000. The tax was originally designed to ensure that the wealthy did not avoid owing taxes by using loopholes.
  • Other Tax Changes: Extends for five years the expansion of the child tax credit, the earned income tax credit, and an up-to-$2,500 tax credit for college tuition. Also extends for one year the accelerated “bonus” depreciation of business investments in new property and equipment, a tax credit for research and development costs and a tax credit for renewable energy such as wind-generated electricity.
  • Unemployment Benefits: Extends jobless benefits for the long-term unemployed for one more year.
  • Cuts in Medicare Reimbursements to Doctors: The so-called “Doc Fix” blocks a 27% cut in Medicare payments to doctors for one year. The cut is the product of an obsolete 1997 budget formula that has never been reformed.
  • Social Security Payroll Tax Cut: Allows a two-percentage-point cut in the payroll tax first enacted two years ago to lapse, which restores the employee’s part of the payroll tax to 6.2%.
  • Across-the-Board Spending Cuts (Sequester): Delays for two months $109 billion worth of across-the-board spending cuts set to start striking the Pentagon and domestic agencies this week. This will be yet another political battle later this month.

What you may not have heard is that the Senate snuck in tens of billions in new pork barrel spending in what was intended to be a bill that only dealt with the tax code. An estimated $75 billion in “earmarks” were deceptively hidden in the 157-page bill. The House approved it, too.

So, President Obama came out the big winner on this one. Round Two will unfold later this month most likely and will include battles over the Sequester noted just above and the next debt ceiling battle. Only this time, the Debt Ceiling battle will be very different.

Obama Wants the Debt Ceiling Eliminated

Treasury Secretary Geithner announced that theUSwould officially reach the statutory debt limit of $16.4 trillion on December 31, but added that the government could employ “extraordinary measures” to keep paying its bills for a couple more months.

At the same time, President Obama let it be known that he will push for the abolishment of the debt ceiling altogether. He no longer wants any congressional limit on how much the government can spend. He wanted it eliminated in the fiscal cliff bill, but due to strong opposition, he had to back off. He will go for it again in the debt ceiling battle in February.

If you watched the movie 2016: Obama’s America (as I repeatedly urged my readers to do), you know exactly why Obama wants the debt ceiling abolished. If you didn’t watch 2016, I again urge you to rent it – especially if you are an Obama supporter. Trust me, watch it.

Another gut-wrenching political battle is sure to ensue, much as we saw in 2011 when we last hit the debt ceiling. That battle pushed theUSdangerously close to defaulting on its debt and, as you will recall, resulted in the first credit rating downgrade in the history of our nation.

This time, the battle will be even more intense, especially if Obama pushes for the elimination of the debt ceiling altogether. And I think he will. I hope I am wrong.

The argument will once again boil down to the Republicans fighting hard for spending cuts in exchange for raising the debt ceiling. President Obama will fight the spending cuts tooth-and-nail. We could once again see the USon the verge of default. Moody’s warnsthat our credit rating could fall yet again. Stocks will plunge… again, only to rebound if an 11th-hour deal is finally struck.

That assumes, of course, that Obama is not successful in eliminating the debt ceiling. If somehow he gets his wish that the debt ceiling is abolished, all hell could break loose in the financial markets. Foreign buyers of our Treasury securities could revolt! Watch the movie.

Gary D. Halbert is the president and chairman of Profutures, Inc.  Subscription rates for Forecasts & Trends is $197 for 12 issues and may be obtained by visiting his website at www.profutures.com.

 

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