With the market meltdown continuing (who wants to look at their account anymore?) our president elect is meeting with his new financial transition team, replete with many famous names. What will they tell Obama about his plans to raise the capital gains tax? My guess: some polite version of “You’re nuts, buddy!” Of all the eyerollers from the recent campaign from all the candidates, perhaps the biggest was Obama’s response to Charlie Gibson’s question about why Barack wanted to raise capital gains when it has been shown that to do so would actually decrease government revenues. Obama answered with his goofy version of “fairness,” as if he had never heard of the “Laffer Curve“ [Maybe he hadn't.-ed.] or that some 100,000,000 Americans were invested in stock.
Anyway, times have changed and I have a prediction: in the very near future, perhaps as soon as Friday, Barack Obama will retreat from any capital gains increase for the foreseeable future.
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18 Comments
1. Dee:Good prediction Roger. You are an optimist. That’s why I read you.
Nov 7, 2008 - 12:39 am 2. David Thomson:“Obama answered with his goofy version of “fairness,” as if he had never heard of the “Laffer Curve“
Barack Obama probably has not heard of the Laffer Curve. He is a poorly read man. Obama is simply another Chauncey Gardner. This will become more obvious before his inauguration. And yes, he won’t dare increase the capital gains tax. Obama has thankfully enough sense to listen to his financial advisors. He knows that the Saul Alinsky stuff will have to be put to the side for the foreseeable future.
“…or that some 100,000 Americans were invested in stock.”
Isn’t that actually 100,000,000 Americans?
Nov 7, 2008 - 12:42 am 3. Billigflüge:Jeah,sanguinity “par excellence”
Nov 7, 2008 - 2:55 am 4. Michael Smith:Good comment Roger..Special thx for your meaning.
greets
Well, you can hope for an outbreak of common sense, Roger, but to date, Obama’s done nothing but promote all sorts of preposterous economic fallacies that defy common sense.
For instance, he tried to tell “Joe the plumber” that he — Joe — should not object to having his taxes increased and his wealth “spread around” because, after all, if the middle class has more money to spend, they can do more business with Joe, thus making Joe better off overall.
Now, it should be manifestly obvious to anyone that you cannot make a profit by giving your money to other people so they can buy your product or service. If they do give the money back to you in exchange for your product or service, you are left with exactly the same money you had before Obama took it, but you are out whatever it cost you to produce the product or provide the service. You are worse off, not better. Yet Obama repeated this nonsense without challenge.
Or, to give you another example, Obama complains loudly about companies that “ship jobs overseas”. Yet, he plans to mandate that all employers provide for 100% of their employee’s healthcare, provide them a minimum of 7 paid sick days a year, continue to pay the employee when granting the leave that employers are already forced to grant under the Family and Medical Leave Act, raise the minimum wage to $9.50 and permit unions to intimidate employees into agreeing to a union without a secret ballot vote. How smart do you have to be to see that these moves only increase the cost of employing people and only increase the incentive to move the jobs overseas?
So we’ll see whether sanity prevails or not.
Nov 7, 2008 - 4:59 am 5. Palatine Dave:Who’s got capital gains anymore, anyway?
Nov 7, 2008 - 5:55 am 6. srlucado:What will they tell Obama about his plans to raise the capital gains tax?
I’ll bet they first have to explain to him what a capital gain actually is.
Obama’s ignorance is astounding. He knows nothing of world history (let alone American history), economics, the military, energy production, or a great many other things.
Anyone who wants to “bankrupt the coal industry”, when coal produces more than half the electricity in the country, is a simpleton or a madman. (Which does he want–half of the country without electricity all of the time, or all of the country without electricity half of the time?)
Scott
Nov 7, 2008 - 6:03 am 7. Glenn:Somebody also needs to tell Barry that one of his key support groups (the public employees) retirement plans are mostly equity based, these plans were underfunded before the latest “downturn” and simply aren’t going to have the money to pay all those generous benefits promised. The chapter 11 filing of Vallejo California is a preview of coming attractions.
Nov 7, 2008 - 6:33 am 8. david foster:Lots of people are now holding on the such big capital losses that the threat of a cap gain tax increase is pretty theoretical to them, even for taxable accounts. What they may not realize is that increased cap gains taxes will change the equation for those who *are* expecting future cap gains, and henceforth depress stock prices & the value of everyone’s portfolios. Ditto for corporate tax rate increases.
Nov 7, 2008 - 7:15 am 9. Barry Dauphin:I think the fact that so many Americans own stock (via mutual funds) and rely on it for retirement has an effect of its own weight regardless of the desire for some sort of ideological purity. Obama often answered questions in a way like a college debate where purity and consistency of position matters. Politicians deal with the messy world. Hopefully, he will realize this soon enough (especially as he starts receiving national security briefings).
But one bad sign about his judgment. One of the 17 economic advisors he’s assembling is Jennifer Granholm, governor of Michigan. Michigan’s economy is in the toilet. Although that is not all her fault, she is quite undistinguished as an economic “thinker”. She is there simply because of the auto industry. Second bad sign…what can possibily be accomplished when 17 yahoos meet as a committee to “advise” him. This is totally media driven.
One of my biggest concerns about Obama is a return to the Andre Agassi model of governance: “image is everything”. Looks will matter a lot. This will gladen the hearts of many, but it will undermine genuine accomplishments and risk dangers down the road. In that sense this could be Clinton II.
Nov 7, 2008 - 7:32 am 10. david foster:Barry…we recently had a Chicago Boyz discussion about Michigan as an example of Obama’s ideas in practice.
Nov 7, 2008 - 7:56 am 11. hermie:Funny thing, but aren’t Obama’s supporters the unions, have pension funds also invested in stocks, bonds and mutual funds?
Nov 7, 2008 - 8:31 am 12. Jim:The tax on capital gains has always been a losing proposition for governments imposing one. (And I would bet that there still are plenty of people who have been in employee stock purchase plans for decades who still have capital gains–most of which are due to inflation.) A bigger concern is the fact that the tax on dividends will increase once the Bush tax cuts die from 15% to whatever one’s marginal tax rate is on the first dollar of dividends received. That will really depress stock prices.
Nov 7, 2008 - 8:35 am 13. jedrury:Barry:
“This is totally media driven.”
Bingo, this is governance by celebrity; Caroline Kennedy is off the
UN, Bobby, Jr. is off to EPA head, Kerry off to State. But of course, there is a belief in this country, GOP and Dems alike, that there is
so treasure trove of brilliance/insight/wisdom in the minds of the celebrity. Well, guess what? Governing is a tough job requiring one
to delve into rules and regs and make policy choices impacting the national security, economy and the lives of Americans especially in this time of trouble and turbulence.
But, the media demands this type of summit meeting; where the best
Nov 7, 2008 - 8:45 am 14. Andrew Koenig:and the brightest (remember Halberstam’s famous book which coined the phrase leading to the elitist culture) meet, greet, ruminate, ponder and decide. The key to this all: a desire in the media for a return to Camelot.
Hermie notes that the unions that support Obama have pension funds that are invested the markets that Obama’s policies will destroy. He’s right — which is why Obama will argue that the unions need a bailout or tax break of some kind.
Nov 7, 2008 - 9:30 am 15. John Galt:The really loony lefties are not as much in control of the Dems as we expected, or they hoped. Obama is probably already working on his re-election campaign and leaving governance to his subordinates. It fits his “empty suit” pattern.
The real fear is that Waxman, Rangel, Reid, Pelosi et al. will force socialism and criminalize political differences. Obama is a man of very weak character and will be unable to resist them.
If Republican keep their mouths shut and their thinking caps on over the next few years, look for a resurgence. I am less than hopeful that they will be able to make inroads until 2016.
Nov 7, 2008 - 9:33 am 16. Observer:If Obama is smart, he will immediately pledge that there will be no increase in the capital gains tax for the first year of his term; and that Larry Summers is going to be Treasury Secretary. Summers was Treasury Secretary under Clinton, so he has the experience, and it would be to Obama’s advantage to remind people how well the economy did under Clinton, rather than remind people of Obama’s wealth-redistribution pledges. If he does those two things, I bet the stock market would shoot up, and BHO could take all the credit.
Nov 7, 2008 - 1:05 pm 17. hermie:Problem with that is, Obama has already committed himself to his ‘tax break’ scheme. He can’t take it back, or even delayed it as those who voted for him expect the One to perform miracles starting January 21st.
What will be interesting is how he’ll explain his not immediately ordering a 16 month complete pullout from Iraq as he promised he would do.
Nov 7, 2008 - 1:53 pm 18. Roger L. Simon » Obama’s Presser: I was wrong - again!:[...] the wrong side of the presidential election and on Prop 8 and now I made the wrong prediction about capital gains. So it goes. Of course, the almost comically complaisant media didn’t ask the [...]
Nov 7, 2008 - 1:58 pm