There was not a two percent rise in the payroll tax. It was more like a rise of one-third from 4.2 to 6.2%. This is taking a large bite out of consumption for 99% of the country.
Most of the economic recovery can be attributed to the top 1% and large corporations, which are earning record profits. These two trends tend to prove the existence of the Cantillon effect.
Economist Richard Cantillon theorized in the 18th Century that cheap money raises the prospects of those who have access to it. The Federal Reserve does not make virtually free loans to working people or purchase their CDOs. All of this
free money liquidity flows first to the banks that finance large corporations that realize greater profits that are captured by the 1% who own most of the assets in this country. Meanwhile, wages remain stagnant while inflation slowly rises leaving the working classes worse off.
If you are a worker and derive virtually all of your income from your labor, you are experiencing a recession. If you are rich, then the Federal Reserve’s policies have resulted in a boom for you.
The existence of two Americas may be gleaned from the sales data from different sources. Wal-Mart, where working class people shop, is not doing very well. At the same time, high-end real estate and the collectibles market are setting records.
The Fed promises to continue purchases bonds for another year and maintaining its ZIRP into 2015. The 1% will continue to experience a boom while the rest of the country struggles.