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We begin today by looking at a new demographic study from the Pew Research Center which contains some stark findings about the American middle class. The study concludes that the last 10 years have been the “worst decade in modern history” for the middle class. A lot of the findings will surprise you.

From there we look at some new projections from the Congressional Budget Office which warn what will happen if we fall off the “fiscal cliff.” The CBO predicts that the US will fall back into recession early next year if the automatic tax increases and mandatory spending cuts occur at the end of this year.

Next, the minutes from the Fed’s July 31/August 1 policy meeting (just released last week) revealed that the FOMC is indeed considering QE3, and an announcement may be forthcoming at the next meeting on September 12-13.

Finally, I will share my thoughts with you on the new documentary movie, “2016: Obama’s America.” I saw Dinesh D’Souza’s film over the weekend and am very glad I did – I learned some things I did not know. More comments appear at the end of today’s letter.

Back in 1948, President Harry Truman nicknamed the 80th Congress the 'do-nothing Congress.' Today, we sometimes find ourselves wishing that we could return to the days when Congress was accused of inaction. Unfortunately, the stage may now be set for that wish to be granted, but the consequences will be far from favorable. By allowing the Bush tax cuts to expire, Congress could levy one of the largest tax increases ever, all by just doing nothing.

While President Obama and the Democratic leadership claim that they want to keep all of the Bush tax cuts in place for everyone making under $250,000 per year, they also know that they are going to build up huge budget deficits unless they find ways of generating some tax revenues. With cap-and-trade legislation and its expected tax revenues all but dead, the Dems are going to have to figure out some other way to pay for their march toward socialism.

The expiration, or 'sunset', of the Bush tax cuts could provide the necessary tax revenues they seek and all without having to cast a vote in favor of a tax increase. This week, I'll discuss the possible effects of a huge tax increase during a fragile economic recovery as well as the possibility that Congress may just sit on their hands and do nothing in order to fill their insatiable need for tax revenues.