Masonry Magazine June 1988 Page. 22
Washington Wire
continued from page 21
Many economists are now looking for a really brisk second half of 1988-with real growth advancing at a 3% to 4% annual rate. That's too fast for the economy's good, threatening inflation.
INTEREST RATES HAVE INCHED UP IN RECENT MONTHS and can rise further. The banks' prime lending rate will increase moderately in months just ahead. The decline in mortgage rates has probably come to an abrupt end, for now. In fact, these rates are likely to increase steadily over the rest of 1988.
THE ECONOMY'S RECENT VIGOR MAKES A RECESSION VERY UNLIKELY this year, but analysts are not ruling out the possibility of such a downturn in 1989. The present expansion has gone on for more than 5% years- a new record ..more than four times the actual duration of the recession that preceded it. The economy, for better or worse, will continue to move in cyclical fashion. Inevitable downturns will follow sustained up-phases in activity, as always.
Many economists think the next recession may occur some time next year. But predicting the timing of the next downswing has proven difficult. Constraint to further expansion may be physical-say, a labor shortage. Or it may be financial, when money is scarce. It may be external an oil shut-off.
THE ADMINISTRATION IS TAKING STEPS TO BEEF UP TRADE with the Soviets. The plan calls for the U.S. and Russia to spur exchanges in five key areas-food- processing, energy, construction equipment, medical items and services. This country and the Soviet Union had trade hitting some $2 billion in 1987, down from $4.5 billion in 1979 and consisting mostly of U.S. sales of grain. The hope is that bilateral trade will soon reach $5 to $10 billion annually.
Efforts to increase trade could mean elimination of some U.S. barriers. Washington levies higher tariffs on imports from Russia than other nations and keeps the Soviets from getting American trade and commodity credits. U.S. business would welcome some clearer guidelines on U.S.-Soviet trading. It has been hurt in the past by U.S. embargoes on Russian trade. There are big economic benefits for the U.S. in more Soviet trade. Russia is the second largest market in the world.
BUSINESS SHOULD KEEP CLOSE TABS ON A MEASURE to correct the tax laws. Tax-writers in Congress are pushing a bill making "technical corrections," hundreds of changes in the 1986 Tax Reform Act as well as last year's law. They are mainly intended to correct errors in the drafting of the two laws, but substantive changes are likely to be added as the measure moves along.
A major provision would close a loophole in the 1987 statute on "greenmail," a raider's profit realized when a firm buys his stock to prevent a take- over. Last year's law imposed a nondeductible 50% excise tax on these profits. But a raider avoids the tax if the shares are bought by a "white knight"- by a friendly investor who comes to the rescue of the target. The bill would extend the tax to cover this type of sell-out.
A TAXPAYER BILL OF RIGHTS IS MOVING IN CONGRESS, but faces opposition. The measure would give people protection from the Internal Revenue Service. IRS would have to tell them their rights, in writing, before auditing them. Taxpayers would be permitted to sue IRS in an unreasonable collection action and to recover legal fees if they win, unless IRS shows clear justification. The bill would extend to 30 days IRS notice before the seizure of property. Also, IRS would have to waive penalties resulting from its erroneous advice.
But the legislation faces several obstacles. There is some opposition to its provisions from the IRS itself. And some question restricting the agency's ability to collect taxes.
SOCIAL WELFARE BILLS ARE BOGGED DOWN IN CONGRESS amid cost concerns. Measures to require parental leave, worker notification of safety hazards, and employee health insurance seem unlikely to be enacted in this session. Overhaul of the welfare system also is faltering and may die for this year. The House may okay a long- term health measure, but for political reasons. But the Senate isn't expected to consider the multi-billion-dollar measure.
Some proposed employer-requirements don't seem to be going anywhere in this session. They are being undermined by the complaints about costs from small business. The lawmakers want to see some action, but there's no money to pay for it.
Ninety-eight percent of the adults in this country are decent, hard-working, honest Americans. It's the other lousy two percent that get all the publicity. But then we elect them."
Lily Tomlin
22 MASONRY-MAY/JUNE, 1988