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Making Sense of Thursday's Democratic Debate
Tweet Share on Facebook June 29, 2007 CommentA few thoughts on Thursday's Democratic presidential forum at Howard University, here in steamy Washington, D.C.:
1) What happened to Bill Richardson? I mean, the New Mexico governor came into the race as a supposedly "different kind" of Democrat with a reputation as a pro-growth tax cutter back in his home state. And to be sure, he still throws around all the right buzzwords, as in this hunk from the debate: "We need to rebuild this economy by being pro-growth Democrats. We should be the party of innovation, of entrepreneurship, of building capital, getting capital for African-American small businesses."
That came right out of a 1988 Jack Kemp presidential campaign speech. But then Richardson veers into pure 1988 Mario Cuomo. For instance, he wants to raise taxes on wealthier Americans, as do his rivals. And as we found out in his answer to a question about outsourcing, Richardson is also, apparently, a believer in "an industrial policy where we invest in high-growth industries, in health industries, in high-tech, in renewable energy, to keep those jobs here."
Maybe he could make a government-directed industrial policy work, but government's track record doing that sort of thing is terrible. Venture capitalists have a tough enough time identifying future winners—do you think government bureaucrats or the commerce secretary could do a better job? Democrats used to point to Japan as a paragon of successful industrial policy, but its economy has been in a two-decade funk, and the latest academic thinking on its efforts to manage industry back in the 1970s and 1980s is that the policies were a failure.
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The Economy Gets No Respect
Tweet Share on Facebook June 28, 2007 CommentThe economy is reaccelerating after a bit of a soft patch, unemployment is low, and the stock market is near record highs. Yet poll after poll shows people are sour on the economy. An American Research Group survey last week found that 55 percent of respondents say the economy is "getting worse" vs. 16 percent who say it's "getting better." And the recent Conference Board numbers on consumer confidence fell to a 10-month low. To help figure out what is going on here, I dropped an E-mail to Bryan Caplan, an economist at George Mason University, coauthor of the EconLog blog and author of a new book, The Myth of the Rational Voter: Why Democracies Choose Bad Policies. Is it Iraq? Is it gas prices? Caplan gives me his two cents:
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Wall Street and the Secret History of Clintonomics
Tweet Share on Facebook June 27, 2007 Comment (2)Superstar investor Warren Buffett held a fundraiser last night for Hillary Clinton in Manhattan, an event that's been interpreted by some as Wall Street's endorsement of the Democratic frontrunner. (Side note: Buffett, who called at the event for higher taxes on corporations and wealthier Americans, pointed out that he had paid a lower tax rate in 2006 than one of his office secretaries and explained how wrong that was. So why doesn't he just cut a check to Uncle Sam to make up the difference? Just wondering.) Let's assume for a second that the Big Money crowd does love Hillary. Why might that be, given that Wall Street is often assumed to be a Republican stronghold? Three reasons:
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Does Business Really Love Hillary?
Tweet Share on Facebook June 26, 2007 Comment"Through persistence and patience, [Hillary] Clinton has assembled what is probably the broadest CEO support among the candidates, ranging from Wall Street to Hollywood," concludes an article in the most recent issue of Fortune. "Business Loves Hillary," is how the business magazine's cover—which features a photo of a bemused Clinton—puts it. Now a more accurate description might be "Big Business Loves Hillary," since the story is all about how Fortune 500-type business leaders and megarich Hollywood moguls are sweet on the junior U.S. senator from New York. But why is this surprising? To put a twist on a famous Dilbert quote, "Large corporations welcome change and risk-taking in the same way the dinosaurs welcomed large meteors." And in many ways Hillary looks like a safe bet.
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Gordon Gekko, Paris Hilton, and the Blackstone Tax
Tweet Share on Facebook June 22, 2007 Comment (1)"Greed—for lack of a better word—is good," declared corporate raider Gordon Gekko 20 years ago in the film Wall Street. "Greed is right. Greed works. Greed clarifies, cuts through, and captures the essence of the evolutionary spirit. Greed, in all of its forms—greed for life, for money, for love, knowledge—has marked the upward surge of mankind. And greed—you mark my words—will not only save Teldar Paper, but that other malfunctioning corporation called the U.S.A."
Of course, director-writer Oliver Stone meant just the opposite, that greed—or what others might call "self-interest" or even the "pursuit of happiness"—was destroying America. He wasn't alone in that opinion. When that movie came out in December 1987, the market had crashed on Black Monday two months earlier. A few days before that plunge, the House Ways and Means Committee had filed legislation to eliminate tax benefits associated with financing mergers. Greed seemed to be hurting America, and Congress was trying to do something about it.
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Larry Summers on China, Taxes, and Growth
Tweet Share on Facebook June 21, 2007 Comment"I think attempting to bludgeon China is a very risky course," is how Larry Summers, President Clinton's final Treasury secretary and former president of Harvard University, analyzed—in a chat with me this week—the wisdom of congressional attempts to push Beijing into quickly raising the value of its currency vs. the dollar in hopes of reducing America's massive trade deficit. Summers is currently working with his cabinet predecessor, Robert Rubin, to keep alive the embers of Clintonomics—balanced budgets, open trade—through the Hamilton Project, a public-policy initiative sponsored by the Brookings Institution.
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The Magic $50 Billion Tax Hike
Tweet Share on Facebook June 20, 2007 Comment"What other taxes will be hiked, under the guise of 'fairness,' in the next few years?" is the question that longtime Washington hand Greg Valliere of the Stanford Group asks in his latest piece of perceptive, inside-the-beltway analysis. That apt query is prompted by apparent widespread support on Capitol Hill for legislation that would boost taxes on private-equity firms taking themselves public, like Blackstone. As Valliere sees it, this is the opening gambit in an attempt to raise all sorts of taxes—"everything will be targeted" is how he puts it—in 2009. As he spells it out:
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Does Paying Taxes Give Us Pleasure?
Tweet Share on Facebook June 20, 2007 Comment (3)A while back, Democrats turned to George Lakoff, a University of California-Berkeley linguistics professor, for some verbal help on better framing their issues. Take taxes, for instance. Lakoff thinks Dems should refer to them as "membership fees." Sounds much friendlier. As he put it in an interview:
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Congress Could Play Havoc With Stocks
Tweet Share on Facebook June 18, 2007 CommentWhat's it going to be? Raising taxes on individuals making over $200,000? Punishing China unless its currency rises? Imposing higher tax rates on private-equity funds and hedge funds? What move by Congress is the one that could send financial markets tumbling? So far, the stock market has been amazingly resilient to those threats as well as to the recent surge in interest rates. But recall Black Monday, Oct. 19, 1987, and the ensuing stock market crash. In its analysis of those events, the Federal Reserve highlights the following:
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Mideast Turmoil? Surging Rates? Wall Street Shrugs
Tweet Share on Facebook June 15, 2007 Comment (1)So let's sum up this crazy week: 1) Hamas takes the Gaza Strip, putting a possible Iranian surrogate right on Israel's border; 2) interest rates surge to their highest levels in five years, raising fears that the global liquidity boom is at an end; 3) leading Democrats and Republicans introduce protectionist legislation to force China to free the yuan; and 4) new Labor Department data show that consumer prices in May rose at the fastest pace in 20 months.
Yet after some shakiness earlier this week, the Dow industrials surged Wednesday and Thursday and are up 100 points more as I write Friday morning. How can this be? Four problems, four explanations.
