Tax hikes seem imminent
WASHINGTON, D.C. (AP) -- A top House Democrat said June 22 that tax increases will eventually be necessary to address the nation's mounting debt, raising a difficult election-year issue as Democrats fight to retain control of Congress.
In the near term, House Majority Leader Steny Hoyer raised the possibility that Congress will only temporarily extend middle-class tax cuts set to expire at the end of the year. He pointedly suggested that making them permanent would be too costly.
Tax cuts enacted under former President George W. Bush are scheduled to expire at the end of the year, affecting taxpayers at every income level.
President Barack Obama proposes to permanently extend them for individuals making less than $200,000 a year and families making less than $250,000 -- at a cost of about $2.5 trillion over the next decade.
"As the House and Senate debate what to do with the expiring Bush tax cuts in the coming weeks, we need to have a serious discussion about their implications for our fiscal outlook, including whether we can afford to permanently extend them before we have a real plan for long-term deficit reduction," Hoyer, a Maryland Democrat, told a forum on deficit reduction.
Bailout effects becoming clear
WASHINGTON, D.C. (AP) -- Members of a watchdog panel on june 22 pressed Treasury Secretary Timothy Geithner on looming losses for banks and foreclosure relief for struggling homeowners, as he assured them that taxpayers are recovering their investment from the $700 billion financial bailout.
Geithner told the Congressional Oversight Panel at a hearing that banks have repaid about 75 percent of the bailout money they received, and the government's investments in aided banks have brought taxpayers $21 billion.
He acknowledged there likely will be a partial loss from the rescue of giant insurer American International Group Inc., into which the government plowed $182 billion.
Geithner also said the auto industry has made significant structural changes, and the prospects that General Motors and Chrysler will repay the nearly $60 billion in bailout money have improved.
Housing sales plummet again
WASHINGTON, D.C. (AP) -- The housing market may be on the verge of taking another plunge that could weaken the broader economic recovery.
Sales of previously occupied homes dipped in May, even though buyers could receive government tax credits. Nearly one-third of sales in May were from foreclosures or other distressed properties.
That means home prices could soon be heading down after stabilizing over the past year.
Last month's sales fell 2.2 percent from the previous month to a seasonally adjusted annual rate of 5.66 million, the National Association of Realtors said June 22. Analysts who had expected sales to rise expressed concern that the real estate market could tumble once the benefit of the federal tax incentives is gone entirely, starting next month.
The report is "a worrisome sign for what will occur in July and thereafter when the effect of the tax credit is behind us," said Joshua Shapiro, chief U.S. economist at MFR Inc., an economic consulting firm in New York.