It’s no news to you that it’s important to look beyond the headlines, especially when said headlines are coming out of television speakers, to learn the true import of any report or action that appears to affect your business and your clients’ financial plans. Take the unemployment report, for instance. On November 7, the Labor Department’s Bureau of Labor Statistics declared that the jobless rate for Americans in October rose to 6.5% from 6.1%. Sounds really bad, but let’s provide a little perspective here. During the worst recession since World War II saved us from the Great Depression, the jobless rate peaked at 10.8% during the 1981-1982 downturn. (By contrast, the unemployment rate hit 24.9% in 1933, when, a 2003 BLS article blithely notes, “the economy reached its trough,” before going on to point out that despite all the effort put into the New Deal, joblessness still stood at 14.6% in 1940.
My favorite statistic on the Labor Dept. jobless report is one you can use for your children, or your clients’ children, who want to foreswear going to college. The October 2008 unemployment rate for people who did not finish high school was 9.3%, for those who finished high school but didn’t have any college it was 5.9%, for a person with at least a bachelor’s degree it stood at 3.0%. Oh, it’s a pretty good argument for opening a 529, too.
With a new populist President elected partly on the traditional Democratic platform to cut taxes for the middle class while raising them for the wealthy–which President-Elect Obama currently describes as people with family incomes of $250,000 or more–you can expect the Democratic-controlled Congress to respond, eventually, with revisions of President Bush’s EGTRRA and JGTRRA legislation. While campaigning, Obama promised that “95% of working Americans” would receive a tax cut. Okay, but a 2006 Congressional Budget Office study, using Internal Revenue Service tax-returns data and Census Bureau population numbers, concluded that in the tax year 2004 the top 1% of taxpayers by income paid 25.3% of all federal taxes, that the top 10% paid 52.3%, and that the highest quintile–12.6 million American families–paid 67.1% of total Federal taxes. In 2004, the average pretax income for the top 1% of taxpayers was $1.05 million, for the top 10%, $243,900, and for the top quintile, $174,000 (see Web Extras at investmentadvisor.com for copies of the reports).