The more traders get a look at the Obama budget, the less they like it. Late in the campaign and even during the transition, the implication was that Obama would not seek to raise taxes if the economy was weak. Well the economy is on its back and not only is he raising taxes back to Clinton-era levels, he is raising them further by phasing out deductions on people earning above $250,000 pushing the effective tax rate to 42% from today’s 35%.
What is most breathtaking is that the largest deduction most people have is their mortgage. In the midst of the biggest real-estate bust in generations, Obama is making real estate an even less attractive proposition than it already is. This, amidst the deepest recession since the early 1980s. It is breathtakingly counter-intuitive to raise taxes during a recession and to raise them in-effect on real estate is just plain batty.
Stocks are falling as traders get a look at the specifics. This is helping undermine EUR/USD a bit. It now trades at 1.2745, down from afternoon highs at 1.2785.
UPDATE: If he can’t win over Olympia Snowe, one of the three Republican senators to vote for the stimulus bill, Obama’s got major public relations problems.
