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Friday, October 31, 2008
Decreasing the investment class
James Pethokoukis of US Newslooks at several proposals that Democrats have been talking about that would have the effect of decreasing the number of Americans who are investing in the stock market. Why would they want to do this? Pure partisan advantage.There are at least two pretty effective ways to turn someone into a Republican: (1) get them married with kids and (2) get them to invest in the stock market. So, if I were a highly paid Democratic political strategist, I would make sure to spend a few minutes every day thinking of ways to get Americans out of the stock market—the faster, the better. And that's why if Barack Obama is elected president next week, 2009 may well bring a concerted and all-out effort by the Obama administration and a Democratically dominated Congress to turn the generally pro-Republican Investor Class into an endangered class by, among other tactics, raising investment taxes and ending the tax preferences for 401(k)'s, IRAs, and other retirement accounts.Pethokoukis points out that Obama has talked about increasing capital gains taxes even if doesn't raise revenue. Some Democrats as well as liberal policy advisers have started making noises about repealing the tax advantages for 401(k)'s, IRA's and other retirement plans.Not only would removing the preferential tax treatment of these vehicles raise investment taxes by $100 billion a year and affect Americans making less than $100,000, it would surely prompt many Americans, already shell-shocked by the market's recent losses, to flee stocks. All this ignores the fact that there are trillions of dollars in American retirement accounts, and abandoning the higher-returning stock market at a probable bottom is classic financial foolishness. If you believe long term in the American economy, then you have to believe in the stock market. If you don't, then you have to admit the government won't be able to afford its promises anyway.Then there are all the plans that Obama has to "invest" in all sorts of plans for energy, technology, and health care. The end result would be to replace private capital with public capital.All this makes smart political sense for Democrats. See, since the mid-1960s, stock ownership in the United States has risen from 10 percent of households to around 50 percent. And that growing Investor Class, a term coined and popularized by CNBC commentator and host Lawrence Kudlow, has helped nudge America evermore to the right. It sure helped George W. Bush get elected twice to the White House, voting for him by wide margins against John Kerry in 2004 and Al Gore in 2000. And it was those results that have helped ensure Democrats will fight to the death to prevent Social Security from being reimagined into a system of personal and high-return investment accounts. Privatization? Given its potential effect on voting patterns, Uncle Sam might as well send every American household a copy of Milton Friedman's Free to Choose on DVD.Watch for it. Don't say you weren't warned.
But now if the Democrats control both the White House and Capitol Hill, look for them to move hard in the other direction, from an Ownership Society to a Government Owns It Society that would perhaps nudge America back to the left.Labels: Economics
14 comments
James Pethokoukis of US Newslooks at several proposals that Democrats have been talking about that would have the effect of decreasing the number of Americans who are investing in the stock market. Why would they want to do this? Pure partisan advantage.
There are at least two pretty effective ways to turn someone into a Republican: (1) get them married with kids and (2) get them to invest in the stock market. So, if I were a highly paid Democratic political strategist, I would make sure to spend a few minutes every day thinking of ways to get Americans out of the stock market—the faster, the better. And that's why if Barack Obama is elected president next week, 2009 may well bring a concerted and all-out effort by the Obama administration and a Democratically dominated Congress to turn the generally pro-Republican Investor Class into an endangered class by, among other tactics, raising investment taxes and ending the tax preferences for 401(k)'s, IRAs, and other retirement accounts.Pethokoukis points out that Obama has talked about increasing capital gains taxes even if doesn't raise revenue. Some Democrats as well as liberal policy advisers have started making noises about repealing the tax advantages for 401(k)'s, IRA's and other retirement plans.
Not only would removing the preferential tax treatment of these vehicles raise investment taxes by $100 billion a year and affect Americans making less than $100,000, it would surely prompt many Americans, already shell-shocked by the market's recent losses, to flee stocks. All this ignores the fact that there are trillions of dollars in American retirement accounts, and abandoning the higher-returning stock market at a probable bottom is classic financial foolishness. If you believe long term in the American economy, then you have to believe in the stock market. If you don't, then you have to admit the government won't be able to afford its promises anyway.Then there are all the plans that Obama has to "invest" in all sorts of plans for energy, technology, and health care. The end result would be to replace private capital with public capital.
All this makes smart political sense for Democrats. See, since the mid-1960s, stock ownership in the United States has risen from 10 percent of households to around 50 percent. And that growing Investor Class, a term coined and popularized by CNBC commentator and host Lawrence Kudlow, has helped nudge America evermore to the right. It sure helped George W. Bush get elected twice to the White House, voting for him by wide margins against John Kerry in 2004 and Al Gore in 2000. And it was those results that have helped ensure Democrats will fight to the death to prevent Social Security from being reimagined into a system of personal and high-return investment accounts. Privatization? Given its potential effect on voting patterns, Uncle Sam might as well send every American household a copy of Milton Friedman's Free to Choose on DVD.Watch for it. Don't say you weren't warned.
But now if the Democrats control both the White House and Capitol Hill, look for them to move hard in the other direction, from an Ownership Society to a Government Owns It Society that would perhaps nudge America back to the left.
Labels: Economics
At some point you have to start looking at how things actually work in practice. The economic policies of the radical right have crashed the mighty American economy, and (as usual) it will be left to a Democrat to clean up the mess of the GOP.
Another fact, that I'm certain you've misplaced is that when Bush cut taxes revenues increased dramatically.
Underlying all of this is the unconcionable overspending by both Democrates and Depublicans.
Policy, Republican or Democrate had nothing to do with our economic plight. Huburis, hovever, has played a significan role.
I wonder why they were given that money and what they spen it for.
I don't want the same people who "managed" Fannie Mae and Freddie Mac "managing" my 401(k) or much of anything else outside of national defense, thank you. When the government says it's here to "help me," I get very, very nervous. When I hear Obama and Biden say it's my patriotic duty to spread the wealth around and they'll decide who gets it, I get very, very nauseous.
Oh please. Please provide the data that demonstrates that.
You won't of course, because it is just not true. At contemporary levels, cutting taxes leads to reduced revenues.
Thank god we're getting a democrat back in the White House, to clean up the economic disasters of GOP policies.
Bill Jefferson (D)Louisiana would advise them on how to store the money in their freezers.
So it appears that, under a Democratic president, if the economy grows then revenue will rise only by taking a bigger chunk of it in taxes. Which appears as a plus but isn't when the government causes interest rates to rise because of a larger presence in the capital pool.
While cutting taxes, as they were in 2002, leads to more revnue yet based on a smaller percentage of GDP taken for taxes. This has to be taken exclusive of the 25% loss the market suffered at 9/11 because only the looniest are blaming Bush for that event. But GDP was able to expand faster during the Bush years then under Clinton. A smaller percentage of GDP devoted to taxes is preferable when the GDP grows faster than when a larger percentage is taken causing the GDP to grow slower. The last year, 2007, the larger revenue collected was done by only taxing 18.8% of the GDP.
http://www.nytimes.com/2005/07/13/business/13deficit.html?pagewanted=print
Pat - at last you have to admit it - revenue does go up when more of the GDP is taxed by the government.
Unless you are as dumb as Joe-the-unlicensed-plumber, you'll see that higher taxes on higher profits is better than lower taxes on lower profits. It's called spreading the wealth. And we're starting on 8 years of Democratic prosperity.
I think its time comments were disabled, permanently. The site is blocked from work, so I visit less regularly. Betsy, I'm done with the comments. My advice is not to bother, the signal to noise ratio is extremely low.
Thanks heavens President Obama has committed to end the foolish, costly occupation of Iraq - a country that had no WMDs, no connection with 9/11, and never posed us a threat.
