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Tax Hike Deja Vu

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Tax Hike Deja Vu
History repeats itself, but not always the good parts, says Texas A&M Real Estate Center  chief economist Dr. Mark Dotzour. In the 1930s, we had the “Hoover Maneuver” of raising taxes and tightening credit. It's back, but, unfortunately for historians, they've yet to find an appropriate word that rhymes with Obama.
 
Texas A&M Real Estate Center chief economist and research director Dr. Mark Dotzour.
Mark spoke recently at the  North Texas CCIM August luncheon about the economic outlook for real estate investors pointing to a repeat of the Hoover Maneuver  this year. “It didn't work well in the 1930s and it won't work well this time either.” Mark says Americans do not tolerate deferred consumption: “We're tired of hiding and hording cash. This fact is equally as valid as death and taxes.” Businesses are making money, but they're not reinvesting, he says. They're hording as insurance against uncertainty. But Mark's not all doom and gloom. He says consumers are fixing their balance sheets and returning to the stores while businesses have right-sized and returned to profitability.
North Texas CCIM
However, he believes federal policies are serving up another perfect storm: Tighter credit and higher taxes and the extend and pretend gambit in the banking system will retard growth until it's resolved. The “real” economy is trying to turn the corner, but small business hiring is essential to offset weakness in the public sector. “I'm confident about 2011,” he says. “We're going to do something in DC in the next four to six months. There has to be some confidence that the dance floor won't change.” If there aren't positive signals by February or March, there will be another year like this one. (Perhaps Punxsutawney Phil is an economist too.) “Everything hinges on the signals you get from DC," Mark says. "Will we see taxes on the rich people to take their wealth away or will we encourage the motto that the  business of America is business?”