Biderman Busts The 'Sustainable' Deficit Reduction Meme

Tyler Durden's picture

While Tepper and his breathless team-mates celebrate a 'sustainable' euphoria-inducing drop in the deficit that heralds the new America, TrimTabs CEO Charles Biderman upsets the bull's apple-cart by explaining the three one-off items that created this smaller deficit and implicitly show its unsustainability. In his usual fact-based exclamations, he reminds us "do not confuse higher tax payments for liftoff." The bullish twist, he notes reported in the popular press, is "deficit reduction must mean we are having an economic liftoff," and has become an overnight "feel-good phenomenon for those long stocks and needing news to justify their positions." Sustainable? "If only it were true...", as he enthralls, "this is a tale of three one-off items masking a slow-growth economy." Here are the facts...

 

For a start $61bn of the $140bn tax gains came from higher withheld income from the 135 million US workers. Only a very small percentage is a result of increase in wages and salaries; the bulk of this year's pop is due to higher tax rates not higher income.

Secondly, the bulk of the gains this year are from capital gains (which grew 30%) for assets sold last year into the fiscal cliff debacle;

And third, the FNM/FRE kickbacks - which are at best unsustainable and at worst become a drag in a higher rate environment...

 

Biderman explains...