Goodnight Mrs. Calabash … wherever you are

For many years come­dian Jimmy Durante signed off from his radio and tele­vi­sion shows with the state­ment “Good­night Mrs. Cal­abash … wher­ever you are.” I am some­times reminded of that Jimmy Durante quote at the end of some­thing. And there are a few “some­things” that have brought that goodbye-statement to mind.

One thing obvi­ously com­ing to an end is the year 2012, with many peo­ple hop­ing that 2013 will offer more oppor­tu­ni­ties for hap­pi­ness, suc­cess and eco­nomic secu­rity. That leads to another thing that will end Dec. 31; any imme­di­ate hope for eco­nomic cer­tainty. Mem­bers of Con­gress are now home for the hol­i­days with­out a “fis­cal cliff” res­o­lu­tion. The final fac­tor that reminded me of Jimmy Durante? I’ll get to that shortly.

Ear­lier this fall I listed the major ele­ments of the fis­cal cliff and how they would col­lec­tively pro­duce a down­ward influ­ence on the nation’s econ­omy amount­ing to approx­i­mately $600 bil­lion in tax increases and spend­ing cuts that auto­mat­i­cally take place as the New Year begins. As the past cou­ple of months have unfolded, peo­ple and busi­nesses have become increas­ingly aware of the eco­nomic cat­a­clysm that is nearly upon us. And I don’t use the words “eco­nomic cat­a­clysm” lightly; with the Con­gres­sional Bud­get Office fore­cast­ing a reces­sion and mil­lions of lost jobs if the coun­try totally falls off the cliff.

So what does all of this sug­gest about the (in)security of people’s lives as 2013 begins? Clearly, that will depend upon what spe­cific polit­i­cal com­pro­mises will be made over the next sev­eral weeks. Even a cynic such as me does not believe politi­cians are so repul­sive as to allow this dis­as­trous sce­nario to unfold in all of its excru­ci­at­ingly painful glory. So, what are the imme­di­ate ele­ments that could impact people’s lives?

First, there is the issue of tax rates. With­out a doubt, mil­lion­aires and bil­lion­aires are going to see fed­eral mar­ginal income tax rates go up in 2013; it’s just a mat­ter of whether the thresh­olds begin at $200,00/$250,000 (for single/joint fil­ers) — rather odd def­i­n­i­tions of mil­lion­aires and bil­lion­aires — or some other start­ing point. Regard­less, the tax rate tables used by employ­ers for with­hold­ing are not likely to change imme­di­ately, so this fac­tor prob­a­bly will not have a quick impact on take-home pay. What will change Jan­u­ary 1st is the pay­roll tax rate for Social Secu­rity, ris­ing from 4.2 per­cent to 6.2 per­cent. So, for those work­ers who pay into Social Secu­rity, after tax income will drop two per­cent­age points, with the pay­roll rate likely to remain at this higher (nor­mal) level.

Also tak­ing place will be an end to monies received by unem­ployed peo­ple via extended (fed­eral) unem­ploy­ment ben­e­fits. So, for any per­son who started draw­ing unem­ploy­ment ben­e­fits before the sec­ond half of 2012, such funds will cease. And for those who became unem­ployed in the year’s sec­ond half, only twenty-six weeks of ben­e­fits will be avail­able, specif­i­cally, those pro­vided by the state one resides within.

Also hav­ing an impact will be some­thing many peo­ple know lit­tle about, the Alter­na­tive Min­i­mum Tax. It was orig­i­nally con­ceived back in the late 1960s to keep the rich from being able to dodge tax oblig­a­tions. Sadly, it was not well-structured, and as time pro­gressed, more and more middle-income fil­ers were poten­tially impacted. To keep this from occur­ring, Con­gress usu­ally passes a “patch” to alle­vi­ate the unwanted con­se­quences. Well, no patch has been crafted for 2012; so some 20-plus mil­lion addi­tional fam­i­lies may be gouged by the fed­eral gov­ern­ment. While a patch will likely occur even­tu­ally, it will ham­per the abil­ity of the IRS to process tax returns and refunds may be delayed by months for huge num­bers of tax filers.

The few fac­tors listed above do not rep­re­sent every­thing that may impact people’s lives adversely. But space lim­i­ta­tions for this col­umn do not per­mit me to dis­cuss everything.

And speak­ing of this col­umn, that brings me to the final issue remind­ing me of Jimmy Durante’s farewell to Mrs. Cal­abash. With this col­umn, I will be sign­ing off as a weekly colum­nist for The Delaware Gazette. Per­haps I will be back from time to time if the paper and its read­ers per­mit. But after nearly seven years, this seems like a good time to depart from my weekly writ­ing rit­ual. In so doing, I would like to take the oppor­tu­nity to thank every­one for their will­ing­ness to let me bend their ears (and eyes) for the past sev­eral years. It has truly been an honor and a pleasure.

Dr. James New­ton serves as Chief Eco­nomic Advi­sor to Com­merce National Bank and is an aux­il­iary fac­ulty mem­ber in eco­nom­ics and sta­tis­tics at OSU-Marion and OSU-Newark. Dr. Newton’s views do not nec­es­sar­ily reflect those of Com­merce National Bank or OSU-Marion/Newark.

Posted by Jim Newton on Dec 25 2012. You can follow any responses to this entry through the RSS Feed. Comments can be made below.