First, some numbers via The Wall Street Journal:
- Commerce Department: 2.2% growth for the first quarter of 2012.
- down from 3% at the end of last year.
- close to the 1.7% that all of 2011 had.
- Recession-created pent up demand for cars and trucks accounted for half of that increase in GDP—1.1%.
- “Real” growth in GDP, then, was 1.1%.
- Businesses building up inventories accounted for another 0.6 percentage points of GDP growth.
- Now we’re down to 0.5% “real” growth.
- Businesses, over the last six months, have added inventory by more than $120 billion.
- foretells lower business spending in the nearby future as that expanded inventory needs to be sold off.
As backdrop for all that, our GDP grew on the year by $600 billion, but Federal debt climbed by $1.3 trillion—more than twice GDP growth—in the same period.
Now, about President Obama’s enormous tax increase scheduled to take effect next January. A worker’s Social Security tax bill will go up by nearly 50% as the payroll tax holiday expires, and his income tax bill will go up drastically: a lower income worker will see his first marginal tax go from 10% to 15% as Obama simply erases that 10% bracket, while a high-income worker will see his top marginal rate run up from 35% to 39.6%.
And this doesn’t include Obama’s tax increases on capital gains and dividends—levied on those rich investors like retired grandma for whom dividend income plays such a major role, and on those middle class investors—the ones whose 401(k)s or whose company-provided pensions invest for dividend and cap gain income.
Imagine the impact on GDP—and on the practical economy in which we must live—of these tax explosions.