As you are contemplating the idea of a (perhaps ) $300 billion surtax on wealthier Americans to help pay for healthcare reform, consider that ALREADY the potential growth rate of the US economy has been lowered by all the government intervention in the economy. In a recent research note, economist David Rosenberg said he was worried about the price-earnings ratio of the stock markets:
As an aside, with the U.S. government now putting its fingers into more than one-third of the economy (health, finance, autos, energy, housing), one would expect that the fair-value multiple in the future will be lower than it has been — given the implications for productivity and the potential non-inflationary growth potential.
Recall that already the top income rate is being raised to 40 percent … and higher investment taxes … and a possible cap-and-trade energy tax … and a possible Social Security tax hike. In addition, more of tax burden is being placed on a smaller segment of the population — nearly half of Americans pay no taxes. This is exactly one of the big problems California faces. In the end, Democrats are pusing for a costly healthcare reform measure at a time of huge deficits and tax increases during a terrible recession. Wrong formula, wrong model.