TrimTabs’ Biderman: US Wages Are Bound to Fall Now

Friday, 04 Jan 2013 07:52 AM

By John Morgan

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Wages and salaries for American workers are likely headed for a first quarter 2013 decline on account of higher taxes and a host of other factors, according to Charles Biderman, CEO of TrimTabs Investment Research.

Because income and employment taxes are set to rise by approximately $150 billion with the fiscal cliff deal, it should nudge worker pay downward.

“Despite the hoopla that Congress saved us from going over the so-called fiscal cliff, reality is that a key component — lower government spending — is not being addressed,” Biderman wrote on his blog.

Editor's Note:
Use This Single Loophole to Pay Zero Taxes in 2013

“I personally believe that Obama will keep spending our money until it runs out.”

Biderman said the higher taxes will reduce by more than 40 percent all of 2012’s $360 billion in after-tax wages and salaries.

Another reason there will be a decrease in wages is that some of the 2012 gain was the result of high-tax bracket types who, in anticipation of higher taxes, took early bonuses in 2012 that normally would have been paid in 2013.

“The reason I think income actually will be down in the first quarter of this year also includes Europe,” he added. “Remember Europe? The total European economy is in free fall.”

In addition, year-over-year growth comparisons in the housing market will be tougher, Biderman noted, adding that 2012’s first-quarter economic growth was partly due to a pickup in housing, but that recent home sales reports now show a declining trend.

“All this leads to the real question: Will there be a pickup in the economy in Q2 from a likely first-quarter drop in after tax income? I do not think so, although it is possible,” he wrote.

Regarding this week’s limited fiscal cliff deal, Biderman said, “Did anyone else notice that [President Barack] Obama has no friends in Congress and it took [Vice President] Joe Biden to work out a deal?

“Joe Biden? Is this what the financial future of the U.S. has come to: Joe Biden and [New York Times columnist] Paul Krugman saying deficits do not matter and The New Yorker pooh-poohing the entitlement gap?”

He maintained that, even after the new hikes in payroll taxes, the entitlement deficit for programs such as Social Security and Medicare “will still be a half trillion dollars.”

At the same time, Biderman said the Federal Reserve continues to print more money in order to keep interest rates low.

“So while income growth drops to zero and the government borrows and prints over $1.5 trillion, how can the credit agencies not downgrade this financial disaster in the making?” he asked.

Many American who lost middle-class jobs during the recession have been forced into low-paying positions, leading to a clamor for hikes in the minimum wage and more worker activism, according to the Los Angeles Times.

The National Employment Project calculated that of the 1.9 million jobs created during the recovery, 43 percent are in the low-wage industries of retail, food and employment services.

And according to the Bureau of Labor Statistics, about one-third of the 3 million Americans who lost their jobs from 2009 to 2011 saw their earnings drop by 20 percent or more upon finding new work.

Editor's Note: Use This Single Loophole to Pay Zero Taxes in 2013

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