The Daily Dish

Good Morning –

BREAKING: Second Quarter GDP growth down to 1.5%. DHE’s take below.

Next week the House will return to Washington to vote on an extension of all of the 2001/2003 tax rates – part of the looming $600 billion fiscal cliff. This comes on the heels of a Senate vote to extend the rates only for those earning $250,000 or less. As the latest @AAF study explains, raising the top two tax rates would threaten pass-through entities’ (sole-proprietorships, partnerships, or S-corporations) ability to grow, hire, and compete. Together pass-throughs account for 86% of our $15 trillion economy. Complete study and info graphic here and below.

On our radar: Consumer Sentiment data out at 9:55 AM; July unemployment report next Friday at 8:30 AM. Sign up for The U-6 Fix here.

Doug’s Daily Economic Outlook

The Commerce Department announced today that GDP grew at an annual rate of 1.5 percent in the 2nd quarter — in line with expectations. Notably, households drew back their spending; personal consumption expenditures grew at a 1.5 percent rate compared with 2.4 percent in the 1st quarter. Business investment remained solid, contributing about half the measured growth, with a boost from inventory accumulation. Overall, the report is consistent with a pattern off household retrenchment and overall slowing growth. In light of the new data, the odds of the Fed undertaking additional quantitative easing are increased, perhaps as soon as the next meeting.

What we’re reading

AMERICANACTIONFORUM.ORG Spain unemployment edges up to 24.6% – The number of people out of work in Spain shows no sign of dropping, with almost one in four people unemployed and half of those under the age of 25 out of work, the National Statistics Institute said Friday. (USA Today)

Congress nears year-end funding deal – House and Senate leadership Thursday approached a deal to fund the government for six months – a move that would avert a Sept. 30 shutdown, and keep the federal government operating through March. (POLITICO)

Insight: Banks bristle at breakup call from Sandy Weill – The former Citigroup Inc CEO, who was in many ways the architect of the “too big to fail” giant bank system, dropped a bombshell on Wall Street on Wednesday by proposing that universal banks should be broken up because they are too big and complex to manage. But the idea is hardly resonating with top bankers and dealmakers of the past 20 years. (Reuters)

Geithner’s ‘Best Rate Available’ – Facing Congress this week, the Treasury Secretary stuck to his story that as president of the New York Federal Reserve in 2008 he was blowing the whistle on Libor manipulations even as he let everyone in the world continue to use Libor as a benchmark—including his own Fed. (WSJ)

Hospitals Are Worried About Cut in Fund for the Uninsured – President Obama’s health care law is putting new strains on some of the nation’s most hard-pressed hospitals, by cutting aid they use to pay for emergency care for illegal immigrants, which they have long been required to provide. (NY Times)

US Treasury tells how to comply with offshore account law – The U.S. Treasury Department on Thursday spelled out different ways for countries and foreign financial institutions to comply with new U.S. disclosure rules on offshore accounts controlled by Americans, ramping up a crackdown on tax evasion. (Reuters)

Orders Signal Slowdown in U.S. Business Spending: Economy – A slump in June orders for equipment such as computers and machinery signals U.S. business investment will probably cool in the second half of the year and contribute less to the economic expansion. (Bloomberg)

On the Job Hunt: Boom in oil industry creates wealth of jobs in North Dakota – Technical advances in energy exploration and production have made it possible to get much more out of the ground here. As North Dakota has outrun Alaska and leaped into the No. 2 spot for production, it’s feeding all sorts of demand in the state with the lowest unemployment in the nation. (Fox News)

Pending Home Sales Fall in June Due to ‘Fewer Listings’ – Home buyers signed fewer contracts to buy existing homes in June, despite renewed optimism in the overall housing recovery. The pending home sales index from the National Association of Realtors fell 1.4 percent from May. It is up 9.5% from June of 2011. (CNBC)

Draghi’s Pledge to Save Euro Sends Markets, Euro Higher – He said the central bank could fight unreasonably

AMERICANACTIONFORUM.ORG high government borrowing costs. This week has seen Spanish bonds yields hit dangerously high levels. (CNBC )

Also From the Forum

The Taxation of Small Business: Pass-Through Entities – Sole-proprietorships, partnerships, or S-corporations comprise 86 percent of our $15 trillion economy. Income for these types of businesses is “passed through” to the individual’s tax return to be taxed at the individual tax rate – thus these entities being referred to as “pass- through” entities. The current tax rates affecting these businesses – the top two individual tax brackets – are set to increase in 2013 from 33 to 36 percent and 35 to 39.6 percent respectively. As is demonstrated at left, the impact of such an increase on these already-struggling small businesses would be severe, with output falling by roughly the current rate of economic growth and the unemployment rate jumping to nine percent. (Study here)

Economic Effects of the Fiscal Cliff – Assuming cur rent policy stays intact and the country goes straight over the fiscal cliff, based off Dr. Christina Romer’s GDP economic multipliers, the U.S. economy could lose from 2.8 million jobs to as much as 10 million jobs. (Study here)

Leaving you with this great moment in Olympic history. USA!

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