PhillyDeals: Fiscal cliff talks bypass middle class

President Obama, at the K'Nex toy factory in Hatfield, and House Republican leader John Boehner, in Washington, said Friday they were far from agreeing how to boost taxes, cut spending, or prevent more extreme fiscal cliff government cuts and tax hikes.

Less spending? More taxes? Those will slow the U.S. economy, not speed it up. Is this all we have to hope for from Washington next year?

"Victory for the middle class is more jobs and higher wages," writes veteran stock-watcher James M. Meyer, of $1 billion-asset Tower Bridge Advisors, West Conshohocken, in a report for clients of Boenning & Scattergood.

Too bad, he writes of the fiscal cliff debate, that "there is absolutely nothing that will come out of this" to help the middle class.

There'll likely be a deal, after a lot of political drama and stock-market bounce. Expect lower corporate tax rates, with fewer tax breaks; higher tax-bracket limits, with fewer deductions; a higher alternative-minimum tax trigger; a new estate-tax schedule. Less likely are sweeping, Reagan-style cancellations of charity or home mortgage deductions or other real reforms.

The president does want the rich paying more; he wants a more balanced budget; he'd rather people work than collect unemployment. But Obama's "heart is more into environmental issues, immigration reform, and other social agenda items," writes Meyer.

And despite what Republicans insist, the problem isn't taxes so much. Most Americans aren't paying any more in taxes today than they were 10 or even 20 years ago, as Meyer notes.

But they are earning less, collectively, because there are "about 4 million fewer jobs than there were in 2007," and more Americans are trying to land them.

Too many workers and not enough jobs means few raises; so wages are increasingly "insufficient to cover inflation, the rising cost of health care, and surging prices for fuel and food," as Meyer puts it.

What to do? "If Washington wants to help the middle class for real, it should do whatever it could to create more jobs" - and "increase inflation."

Inflation? Federal Reserve boss Ben Bernanke's aggressive mortgage-buying and bank-reserving policies have set the nation up for inflation once the economy recovers. That scares Philadelphia Fed President Charles I. Plosser and other career inflation-fighters. But Meyer sees virtue in higher rates: "If wages keep up with inflation, 5 percent growth may somehow feel better than 2 percent growth." Higher rates would attract and reward savings, reinflate home values, reduce personal debt loads.

Job creation? Our tax policy has encouraged investment in buyout and junk bond funds that target weak companies. But venture investing in new and growing firms is way down. Well-intended but complex governance reforms have made it harder to raise money by selling stock. Government spending on roads, rails, and other basic infrastructure is weak.

If Congress and the president really want to help working people, they could fix those broken policies. (Meyer likes one of Obama's general goals, immigration reform. As a recent Pew review of U.S. census data noted, immigrants are more likely to own businesses, and to work, than native-born Americans are. But will Republicans vote to admit more likely Democrats?)

Instead, we're getting tax hikes and spending cuts. "So when you hear politicians on both sides fighting for the support of the middle class, listen closely and ask yourself whether what they are asking us to do helps the middle class one iota," Meyer concludes. Sure, we need to match taxes closer to spending. But that won't, by itself, create jobs soon. So "don't declare fiscal discipline as a victory for the middle class."

Blown whistle

The Securities and Exchange Commission said in a report last month its new Office of the Whistleblower in its first year received more than 3,000 tips about lies and fraud in corporate and municipal bond reporting and securities sales, investigated many of the tips, issued more than 100 "Notices of Covered Action" for whistle-blowers on cases involving losses of more than $1 million, and paid off just one tipster, awarding $150,000 to an unnamed person whose information helped speed a $1 million fraud penalty against an unnamed securities fraudster. Only one-third of the award was actually paid out.

"The Office of the Whistleblower employs eight lawyers, three paralegals, and a program-support specialist. The office has been funded with over $450 million . . . Twelve months, twelve professionals, a $450 million allocation, but only one award of $50,000?" writes Todd Cipperman, managing director of Cipperman Compliance Services, Wayne, in a brief report to clients.

"This is a pretty bleak picture for program advocates."

Contact Joseph N. DiStefano at 215-854-5194,, or follow @PhillyJoeD on Twitter.