James Pethokoukis

Politics and policy from inside Washington

Obama and the Investor Class

Oct 12, 2010 21:19 UTC

Larry Kudlow lays out a compelling case here:

A series of investor-related polls shows how totally detached the president is from the nearly 100 million folks who directly or indirectly own stocks.

A survey conducted by Citigroup Global Markets of 100 mutual-fund, hedge-fund, and pension-fund managers finds that institutional investors fear a government policy mistake far more than inflation, terrorism, a housing double-dip, poor earnings, or any other potential risk to the economy. (Hat tip to CNBC producer John Melloy.) One-third of the survey’s participants list government policy missteps as their biggest worry, ahead of the more than 15 percent who cite protectionism.

But these investors believe the chances of a big policy error will decrease if Republicans take back the House of Representatives in November.

In another poll conducted by Reuters, 75 percent of respondents believe the employment situation is the most important issue for Wall Street, followed by 41 percent who point to consumer confidence. Fleshing out the survey, nearly two-thirds of respondents say extending the Bush era tax cuts should be a high priority; just over a third say the budget deficit is the main concern; more than two-fifths say interest rates will start to rise and the dollar will weaken more if the deficit is not addressed; more than a quarter want Obamacare repealed; and only one-fifth say additional action by the Fed is crucial.

Then there’s a new poll from Investor’s Business Daily. It shows 56 percent of respondents saying they want tax cuts extended even for households with more than $250,000 in income. Only 39 percent in the poll want the rich to pay more, while support for making tax cuts for the rich permanent hit 63 percent for both Republicans and independents. By solid majorities, that includes taxes on capital gains, dividends, and estates, all to be frozen at current rates.

These polls reveal how utterly alien Obama is to the investor class. And it’s worth noting that investors are among the most likely voters to turn out for elections.

COMMENT

Of course Mr. Obama is alien to the investor class, always has been. The question is whether he and his advisors care in the slightest. Given his shameless sucking up to unions along with China-, bank-, big oil- and Wall Steet-bashing, the answer should be clear.

Posted by Gotthardbahn | Report as abusive

A $150 billion a year financial Tobin tax? Really?

Oct 12, 2009 14:15 UTC

The idea of a Tobin tax, a tax on financial transactions, is gaing some mo’ in Congress (via WSJ):

With federal budget deficits soaring, policy makers and other advocates are eyeing the huge sums that could be raised as a way to cover the costs of new initiatives.

Labor unions, in particular the AFL-CIO, have proposed a financial-transactions tax as a way to defray costs of a health-care overhaul. Lawmakers have discussed a similar fee as a way to cover the cost of future financial oversight. Liberal advocates are pushing the tax to pay for new stimulus spending.

Taxing Wall Street’s financial transactions is back on the table. … The left-leaning Economic Policy Institute floated the idea of a national transaction tax that would raise $100 billion to $150 billion a year. The tax, at a rate of 0.1% to 0.25% of the value of the trade, would be levied on all financial transactions such as stock trades, but not on consumer transactions such as with credit cards.

As I wrote last month:

1)  Even a 0.10 percent tax would double the cost of US stock trading where the average commission cost is just under a dime. Welcome back to the pre-Internet early 1990s.

2) It would reduce market volumes and make the equity market less attractive. Kind of dumb thing to do in a time of constrained credit markets where it is tough to raise money.

3) That supposed $100 billion-$150 billion in revenue wouldn’t appear out of thin air. It would come from investment firms who would pass along costs to customers.

4) It would drive trading activity to less costly trading centers, such as the Toronto Stock Exchange (at least if we are talking about the US). Goodbye US jobs.

COMMENT

Some proponents say the purpose of the tax is to shrink the financial sector back to the size of the 1980′s. They admit it will cost investors a “bit” more just like in the 80′s. A researcher found that the average spread in 1986 was $0.53, so that alone will cost the average investor around 2% up front. I would hate to see 90% of financial activity leave the US as it did when Sweden had a transaction tax for only 6 years.

Posted by TripleTaxThePoor | Report as abusive

More on the union-Dem plan for new investment taxes

Sep 1, 2009 17:57 UTC

I got some really great comments on that post

1) Don’t these idiots realize that a transaction tax makes a market even more volatile? Look at China for example, they have a 1/10 % transaction tax, which severely reduces liquidity. Look how their market girates UP 5% one day, DOWN 8% the next! If you want to generate some fees from trading profits, TAX the profit on on those who earn them. Like Goldman Sachs & Warren Buffet. Don’t let them weasel their way out!

2) Placing a tax on trades will dry up much liquidity, and drive most traders out of America’s mkts.

3) This tax AMOUNTS TO 5 TIMES all of my current trading cost combined!

Example:

5000 shares $50 per share costs $50 to buy and sell. At a low cost direct access broker. (Including commission, exchange fees, SEC fees, etc)

This tax would be an additional $250 for that trade. To add insult to injury you have to pay it even if you lose money on the trade. On top of that you have to pay taxes on any profit via capital gains tax!

There is no right time to have a tax like this. BUT ATER A MARKET CRASH THERE IS NO WORSE TIME TO CONSIDER SUCH A TAX!

4) Using the logic of this article, then the US should also levy an extra tax on all UAW members since tax money bailed out the union auto companies. Stop all bailouts and stop all goverment redistribution of wealth programs so that ALL people can have lower taxes.

COMMENT

America is going the way of a 3rd world communist country. This is what and who you have voted for.

People for this tax are too stupid to realize the broader effects this will have on our capital markets.

Posted by dan czab | Report as abusive

Obama and the Investor Class: more on the Great Coincidence

Jul 29, 2009 13:50 UTC

Obama agenda falters, stock market rallies. I like to call this the Great Coincidence since, of course, the Investor Class would have no problem during a recession with higher income, investment, corporate, healthcare and energy taxes plus more regulation and intervention into the private sector. But wait! This article from The Hill makes the case that there might be something real to the GC after all (bold is mine):

The Democratic agenda in Washington has gone off the rails just as markets are enjoying their best run of the Obama presidency, and there’s a school of thought on Wall Street that it’s no coincidence. … “In general, I do think it’s positive it’s slowing down in Washington,” Merk said. Brian Gardner, an analyst with Keefe, Bruyette & Woods, explains that when markets cratered in March, investors worried the Obama administration would nationalize the country’s banks, impose punitive rules on credit card issuers and allow judges to lower the principal and interest payments on mortgages … Since then, the bankruptcy bill has fizzled and nationalization talk has died out. President Barack Obama did sign a credit card bill into law, but its provisions were much weaker than the industry feared. … “It’s very much a factor in what’s driving the market over the last couple weeks,” Gardner said of the slowed agenda in Washington. … The rally also creates some opportunities for Obama, as millions of voters start to feel more optimistic about their 401(k)s. Gardner said this should provide some grounds for Obama’s administration to argue it saved the economy from utter collapse.

Me: A rising net worth is something tangible Team Obama can point to even as the jobless rate remains high.

COMMENT

A prime near socialist example of disintegration inside out would be Norway. Flush with oil profits and a huge sovereign account – their unemployed and disabled on the public tab is skyrocketing as their overall GDP plummets.

Stupidity [or acting stupidly] rushes like water to the lowest level.

If the youngest amongst us aren’t willing to contribute, what trajectory do we have?

Posted by Hank Reardon | Report as abusive
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