This morning, news came out of Japan where they announced they had a negative GDP report for the quarter. Although a recession is technically 2 quarters in a row of negative GDP growth, this is not good news for the global economy. With most of Europe already in a recession with the possibility of contagion to other European countries, the question is are we next?
While most pundits would say no, we are growing at such a low rate that any setback could push us into a recession. As so many have talked about, the fiscal cliff situation could send us in that direction. Additionally, there are other headwinds like debt ceiling increases coming out of Washington that could expedite a recession as well.
Some small things that could be done to help bolster our economy is the repatriation of corporate cash from their foreign entities. We have discussed this before but nothing was done and it is now time to act. Most largeU.S. conglomerates make a good portion of their earnings from overseas operations. This cash could easily come back to the U.S. if our congress would offer some type of lighter tax burden or a tax holiday for the repatriation of the cash. At the current tax rates, corporations would probably lose roughly 30% of those earnings if they bring back the cash so they don’t do it. The Federal government needs to realize that even 1% of something is better than 30% of nothing and let them get this money into our economy. This is a simple thing that can be done very quickly and probably with a lot of support. It is time to act or we will be the next country to join the recession party.