Real world consequences of Obama’s taxation policies
No President-elect in the postwar era has been greeted with a more audible hiss from Wall Street. The Dow has lost 1,342 points, or about 14%, since the election, with the S&P 500 and Nasdaq hitting similar skids. The Dow fell another 4.7% yesterday. Much of this is due to hedge fund deleveraging, as well as dreadful corporate earnings reports and pessimism that the recession will be deeper than many had hoped. We also don’t want to read too much into short-term market moves. But there’s little doubt that uncertainty, and some fear, over Barack Obama’s economic agenda is also contributing to the downdraft.
Some commentators to this post are in denial that Obama’s stated taxation policies could have any correlation with the market’s downward trend since his election. To which I respond:
The country elects a president who promises to raise tax rates on capital gains, dividends, and income taxes as well as take off the $102,000 earnings cap on social security taxes…and you think there will be no adverse consequences in the financial markets?
To argue otherwise is to believe that explicit wealth-reducing financial disincentives or, at a minimum, the uncertainty about such [prospective] disincentives has no impact on human behavior.
TomW’s comment raises the additional adverse impact of “Employee Free Choice Act,” where the prospect of greater unionization and forced mediation can only make companies less competitive in a global marketplace. Anybody compared lately the unprofitable performance of unionized car companies in Detroit with their profitable, non-unionized competitors elsewhere in America?
It is a long-time habit of the Left to ignore how incentives drive human behavior and changes in incentives modify existing human behavior. Which is why they think politicians and bureaucrats in far-away Washington, D.C. – most of whom, like Obama, have never had to manage anything or meet a payroll – can be better economic policy-makers than the entrepreneurial small business owners who run much of America’s businesses. And why they perpetually ignore the intended and unintended consequences of the incentives created by their governmental actions.
To put it another way, who has the greater incentive to make better decisions for a business: The small business owner, who lives and breathes the business issues on a daily basis and whose personal wealth is directly invested in the business, or remote politicians and bureaucrats, who have nothing at risk and never have to live with the consequences of their actions?