Results for: Fiscal policy

Two fiscal news items highlighted the divergent paths taken by North Carolina and California: North Carolina celebrated projected revenue surpluses, while California is grappling with a large budget deficit. North Carolina’s conservative fiscal policies include low taxes, restrained spending, and debt reduction. California’s high tax rates and expansive spending have made its revenue volatile and led to budget deficits. Despite high tax revenue, California has frequently found itself in a fiscal crisis due to unfunded mandates and pension liabilities. North Carolina’s fiscal discipline offers a blueprint for other states, demonstrating that conservative fiscal policies can lead to economic stability and growth.

The proposed increase in the capital gains inclusion rate has been met with criticism as bad tax policy and cynical pre-legislation enforcement. The government’s implementation scheme, with an effective date of June 25, is likely to trigger a mass disposition of public company shares, as investors rush to sell their assets before the tax hike takes effect. This market manipulation is aimed at reducing the deficit in the short term, but it could have negative consequences for the stock market and the economy as a whole.

Former Dallas Fed President Robert Kaplan criticizes expansive fiscal policies, suggesting they are contributing to sustained inflation and limiting the Fed’s ability to lower interest rates. Kaplan highlights the contradiction between the Fed’s efforts to tighten monetary policy and the government’s fiscal actions, which continue to stimulate demand. He expresses concerns over the economic consequences of these policies, including rising debt-to-GDP ratios and interest payments that could surpass national defense spending. Kaplan suggests that the central bank might need to avoid lowering rates throughout this year due to persistent services inflation caused by loose fiscal measures.

Vanguard, a leading asset manager, anticipates less aggressive rate cuts from the Federal Reserve. The firm predicts a “deferred landing” for the US economy, characterized by ongoing growth and persistent inflation above the target. Vanguard also cautions against potential fiscal extravagance.