Briefly: “Fundamental reform unlikely” and more news

Taxing times ahead for the US as taxes are expected to head higher, but fundamental reform is unlikely until 2011, says UBS’s wealth management research presented (WMR) by Mike Ryan, CFA, Head WMR Americas.

The report says the political climate in the US is too heated to undertake fundamental changes. Some prominent Democrats have already voiced objections to raising taxes on Americans in upper income brackets, especially as these individuals often represent small businesses.

Regardless of how the tax debate progresses, the WMR asserts that fiscal policy will weigh on economic growth in coming quarters. “As the American Recovery and Reinvestment Act (ARRA) is phased out, it will begin to act as a net drag on real GDP growth, even if elements are extended.”

UBS’s economic forecast for the US economy anticipates that the Obama administration’s tax proposal will be adopted, as well as the drag from the phasing out of ARRA expenditures. “We expect 2.7% GDP growth in the US in 2010 and 2011,” says the report.

Although extending the tax cuts may appear expedient for sustaining the economic expansion at this delicate juncture, the long-term implications of higher deficits and a higher debt-to-GDP ratio are troublesome for the economic growth path in the US, says the report.

U.S. tax cuts should be extended for all Americans to help spur the economy, but even the middle-class cuts should end in two years, says former U.S. budget director Peter Orszag.

– Vikram Barat

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Taiwan’s exports surge 27%

Taiwan’s exports surged 27 per cent to US$24 billion in August amid strong demand for the island’s computers and other high-tech goods.

Imports for the month rose 28 per cent from a year earlier to $22 billion, the Finance Ministry said Tuesday.

Officials have predicted weaker export growth in the months ahead because of slowdowns in the U.S. and other major economies.

For the first eight months of this year, exports totalled $179 billion, a 44 per cent increase from a year earlier, the ministry said.

Imports for the eight months rose 55 per cent to $163 billion, with sharp increases in imported cars and other consumer goods as well as equipment for making semiconductors.

Exports to mainland China and Hong Kong rose 18 per cent to $9.8 billion in August, amid warming political ties between the rivals and efforts to bring the two economies closer.

– Associated Press

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Fourth quarter hiring to be ‘steady’: Manpower

A survey of more than 1,900 Canadian employers finds 21 per cent of them expect to increase their payrolls in the fourth quarter of 2010.

The survey, by Manpower Canada, says seven per cent of employers it surveyed anticipate making cutbacks.

Of those surveyed, 70 per cent of employers expect to maintain current staffing levels and two per cent are unsure of their intentions for the quarter.

Overall, says Manpower, the hiring climate for the fourth quarter is expected to be “steady.”

Of the 10 industries surveyed, employers in mining and manufacturing-durable goods report the most positive results for the fourth quarter, followed by finance, insurance and real estate.

Manpower Canada is a private-sector company that provides staffing services to employers.

– Canadian Press

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EU Commission president to tackle speculators

European Union Commission President Jose Manuel Barroso says he will field new proposals by the end of the month to tackle some of the actions of market speculators, who many have blamed for making the financial crisis worse.

In his first State of the Union address to parliament on Tuesday he also said that economic reform in the wake of the crisis must be accelerated and added he would propose taxes on financial activities in the next month or two.

He specifically promised measures to tackle abusive use of credit default swaps and naked short selling.

Short-selling is a way of betting an asset will go down by borrowing securities and selling them in the hope of buying them cheaper later.

Naked short-selling involves selling shares without first borrowing them.

– Associated Press

(09/07/10)