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Our top stories a big on the payroll tax -- hitting -- harder than expected now here on money.
We were one of the first to tell you yesterday how wal mart's feeling the pain due to payroll taxes and high gas prices that 2% payroll tax alone.
Is shifting 110 billion dollars out of the hands of consumers and every single working American.
Feels that blow.
Now Burger King -- Darden Restaurants and Tyson Foods are the latest companies expressing fear by lowering their forecasts.
Is this ripple effect going to control.
Today's money and our panel and we have Harry debt.
The great crash ahead.
Late my -- president of American wealth management.
And -- vector managing director of economic policy at the Center for American Progress.
Welcome to all of you and thank you for joining us I would start with Harry I wanna I just read something TU I believe you said that seventy to 80% of people think.
Don't think prices like home prices are getting any better only 28% of consumers say life is good it would seem to me.
That if that is accurate given the payroll increased to 2% less money in our pockets.
We are headed to not only an economic slowdown but maybe a recession.
Yeah I mean I don't let's say 7080% of people don't feel like we ever got out of the recession they are stretched.
They're real wages are going down of anything adjusted for inflation so this 2% increase after given -- taken back.
This could cut GDP 1% or a bit more alone any -- member and third and fourth quarter of the average the two out.
We already slowed to one and a half percent you add that some sort -- -- inflation cut from the government and a little more taxes on the rich you could be a negative growth.
By the end of this year.
-- let me turn delays and I'm I'm concerned.
You would -- a price cut is a good thing for instance Burger King cutting the price of its junior whopper whopper junior from two bucks -- about 29.
But is -- the beginning of what economists call a deflationary spiral you know -- you see prices go down asset prices follow very hard to dig out is that we're we're headed.
You know and not think I don't think we're quite there yet but what you do see is these companies really struggling.
To try to obviously keep their revenues up until they're becoming more creative which I guess as a consumer is a good thing.
But really it's just a really telltale sign that.
You know this is this 2% payroll tax increase really hit people in the wallet that Americans really haven't changed that they spend what's in their pocket book.
And that you know that consumers words saving this extra 2% as somehow suggest some have suggested.
Hello let me turn it got a -- first time on the program so welcome to you the fact that we weren't saving consumers weren't -- that 2% that we got a few years back in the payroll tax.
That we are now using that just for day to day living seems to me that this is a bad sign.
Sure it's a sign that the economy is still weak and that down any policies that take money out of the hands of the middle class.
And that reduce their disposable income.
Is gonna have a negative impact on the economy and -- at an opportune time for policy makers in Washington.
As they contemplate have a sequestration cuts which as they're currently constituted -- really.
Hit the middle class hard -- further weaken the economy if it's exactly the wrong thing we need to do right now what we can do is.
Well -- alternate ways okay alternate body I gotta ask -- It's a perfect storm of bad news we're about to cut you know the sequestration as -- cuts in government spending people don't lose jobs less money out there.
They can't cut taxes again or can they and should day.
What we need to.
Do right now is com.
Think about alternatives to the sequestration cuts -- the and the solution I think is for Republicans in congress to recognize.
That tax breaks and other spending programs in the tax cut are the equivalent of government spending programs.
And if they insist on cutting government and reducing the size of government.
That's -- we should be looking we should be looking at at tax expenditures and the opportunities there that would shrink government it would also.
As Israeli government's gonna be that cut the -- dedicated funds like Medicare Medicaid -- I mean what he's saying is you saying we have to cut.
Tax breaks I think that that the -- as tax breaks for the wealthy.
But nobody on either side of the political spectrum says that's the solution it's it's two -- and we have to cut spending.
And don't want to talk about Medicare Medicaid Social Security -- You know I think why are we just deciding that -- we've got to buckle up and let's make some hard decisions.
You don't why is retirement at 67 why why isn't it Social Security benefits coming out why are we see extending -- The goal line so what's now 7072.
Let's let's make some realistic decisions and then and -- of expectations.
Because we just know that under the current scenario.
It's not gonna it's not gonna fly.
Perrier let me ask you the great crash ahead that's your book is.
Are we facing that crash because we don't get to what they call the grand bargain because Washington doesn't deal with -- either of these issues.
No I think you get a short term correction could be eight to 10% in the next few months over that whole debate.
I think you get a final stock rally because it's probably gonna be some slowing in economy some more stimulus.
From central banks around the world and then I think the second half of this year yeah you start getting a bigger.
Downturn in stocks I think basically right you can't stretch economy this far and and we're already showing you're just the 2% rise in this tax and all of a sudden Wal-Mart doesn't.
How many customers in February and I'm gonna -- -- -- the last word let me give got -- the last word.
Okay you want investment you want spending from the government how do we pay for it because we're seeing consumers pull back -- gonna pull back tax revenues gonna pull back.
We cut spending in the tax -- you could come as the president's proposed limit tax deductions to 28%.
And you would raise.
500 billion dollars over ten years that's where you should be looking the first thing we should be doing is looking to cut wasteful and inefficient spending programs.
In the tax code that's so we should start it's what the American people want they want a balanced plan a combination of tax cuts and revenue increases that's who we should be going.
All right got a late -- Harry thank you very much for being here on money these are issues that we're all following.