It looks like Paul Ryan, the new Speaker of the House of Representatives from Wisconsin, delivered the goods for manufacturers in the massive tax and spending bill released for public consumption on Tuesday.
The vital Section 179 allowing the depreciation of capital equipment to offset profits in a given year, up to $500,000, is in the package. The provision, rather than being good for only 2015, now has no expiration date. This will enable owners and managers to plan with some certainty and not have to scramble at year’s end to buy a machine or vehicle, which improves the company’s productivity.
Section 179 is extremely important to small companies, which may have the money to buy only one piece of necessary equipment all year – if they get the little push of a tax benefit. For the sellers of machine tools, the uncertainty of the last few years has played havoc with stocking decisions and forced all-nighters ahead of the Christmas holidays in order to deliver equipment before the end of the year.
The stupidity of waiting until mid-December to make a deal is apparent to both Republicans and Democrats. The pundits say that if John Boehner had remained Speaker we might have had a gunfight in Washington resulting in a government shutdown with both sides preferring suicide rather than being perceived as weak.
Paul Ryan is from Janesville, Wisconsin, a few miles north of Rockford, Illinois, once a machine tool Mecca with Sundstrand and Barber-Colman. Parker Pen used to make the T-Ball Jotter pen in Janesville. I think Ryan has some feel for the needs of manufacturers and the value of improving equipment in the face of world competition. I do not want to put a crown on Ryan’s head for passing Section 179, but just like a football coach or a baseball manager can set a positive tone in an unwieldy organization, a Speaker like Ryan, who is respected by Republicans and at least tolerated by Democrats, can move the ball.
I have been a fan of gridlock in DC because I thought it could prevent a lot of harm, but Section 179 is a case where gridlock would have been a killer.
It is early to predict the 2016 elections, but if the Republicans end up with an unelectable Donald Trump as the Presidential Candidate, yet manage to hold onto the House, Paul Ryan will be the clear leader of a Republican Party in shambles. I think that is a slightly hopeful thing for America.
The Federal Reserve finally raised interest rates by a quarter point. We have been waiting for it for seven years, so many people see it as smart and inevitable.
I see it as dumb and unnecessary.
The economy is on the verge of a commodities crash recession. We have deflation in a large swath of the economy. Banks are loaded with cash, yet slow to lend. Unemployment is statistically low, but in reality, quite high if you look at the weak labor participation rate. The dollar is killing virtually every other world currency making American goods and services hard to sell. Europe worries about deflation, and we should too.
Wages, except for skills like programming, are stagnant. Janet Yellen, head of the Fed, wants 2% inflation. We are at 1.3% and rate hikes will flatten that number further.
The rationale she gives for the rate rise is that if we were to go into a recession, she would then have room to lower rates. Idiotic reasoning.
Raise rates and possibly cause a recession, so you can then lower them to fight it. Brilliant.
Star Wars comes out today. Harrison Ford makes a cameo appearance. Hooray. I may see it when the crowds recede.
If you want to see a really good flick, I recommend Brooklyn, an amazing movie about an Irish immigrant to America in 1953, and her struggles with adapting, homesickness, and love.
I also loved Spotlight, about the three Boston Globe reporters who uncovered the cover-up of child abuse by the Catholic Church in Boston.
I’m sure Star Wars will be fun, but for me it’s in a Galaxy too far away to get excited about.
Question: Has it been a good year for you financially?