Tax Hikes Good!

Crossposted from The Stars Hollow Gazette

Investors Say Tax Hike Needed to Cut Deficit

By Mike Dorning and David J. Lynch, Bloomberg News

May 13, 2011 12:00 AM ET

Global investors, by an almost 2-to-1 majority, believe the U.S. government won’t be able to substantially cut its budget deficit without raising taxes, rejecting a core stand of congressional Republicans.

…

Some suggest that tax increases are necessary because policy makers are unwilling to touch Social Security and health- entitlement programs such as Medicare, which together make up more than 40 percent of the federal budget.

“With entitlements sacrosanct by virtue of the electoral base (seniors and the poor), the only real option is higher marginal and progressive taxation,” Alfredo Viegas, director of emerging markets fixed-income strategy for Knight Libertas in Greenwich, Connecticut, says in an e-mail.

…

For all the concern about the deficit in Washington, bond market yields in the U.S. are lower now than when the government was running a budget surplus a decade ago. The yield on the benchmark 10-year U.S. Treasury note was 3.22 percent at 5 p.m., New York time, yesterday, below the average of 7 percent since 1980 and the average of 5.48 percent in the 1998 through 2001 period, according to Bloomberg Bond Trader.

Twenty-two percent of poll respondents say there is a “big risk” that the deficit in the next two years will trigger a market crisis resulting in dramatically higher interest rates. That figure is up from January’s 18 percent, yet lower than November’s 24 percent.

…

The “U.S. is spending too much on energy and defense,” says Ivaylo Penev, a portfolio manager with Elana Fund Management in Sofia, Bulgaria, and a poll participant.