CAPITOL IDEAS: The Socialist Bacillus and the Investor Class
Bethell, Tom
Y WIFE AND I WENT to one of those free dinners that brokerage houses offer to attract clients. This was a Smith Barney affair, and I was glad to go because it was held at an Italian...
...Democrats were “taking cover...
...One difference between the U.S...
...So, more and more of us own stocks...
...It circumvents one of the great impediments to saving—the taxation of interest...
...Pretty soon, I guess, only government employees will have them...
...The tax code rewards you if you get into debt (with a mortgage), and punishes you if you save...
...If you want a pension, in other words, you had better start saving your own...
...But that’s the way things have been for many decades...
...and was illustrated with slides (way too manycharts and numbers), he actually wasn’t dull for a moment...
...Maybe we haven’t, yet...
...In the last 20 years, two-thirds of the traditional pensions have been frozen...
...We listened to an entertaining speech by Moshe A. Milevsky, an associate professor of finance in Toronto...
...The authors of the story, Jonathan Weisman and Jeffrey Birnbaum, seemed puzzled...
...One-third of poll respondents say they don’t have any retirement money saved at all...
...We may already have passed it...
...If the measure were to pass both houses, and Bush were to veto it, Democrats would be able to crow that the President had capitulated at last and raised taxes on the middle class...
...Obama, Edwards, and others may brag about how they intend to raise taxes on the rich...
...Because the rich are few and the needy are many, in their view, taking billions from the few and redistributing it to the many is a no-brainer in a democracy...
...I know it’s cockeyed...
...It makes them feel good and some spend their whole lives at it...
...And although his speech was about “risk and wealth management” (sounds so boring...
...And about 70 percent of that money goes into equities...
...Grover Norquist of Americans for Tax Reform tells me that about 60 percent of American adults now have money either directly invested in the stock market, or indirectly in retirement accounts...
...Some senators, even Democratic ones, do grasp the underlying hazard...
...If the government wants us to save for our retirement, whynot end the taxation of interest right away...
...Rangel’s bill abolished it completely, and “paid for it” with a new tax-the-rich scheme...
...BUT BECAUSE MORE AND MORE PEOPLE are invested in the market, and their retirement accounts will increasingly depend on the performance of that market, more and more people are figuring out the connection between tax changes in Washington and the value of their own retirement accounts...
...Rangel’s Ways and Means Committee, would subject hedge fund and private equity managers to higher tax rates...
...How many Americans have such accounts...
...But—important footnote—the Senate might not go along...
...So, to get around that unpleasantness, lawmakers have inserted this saving inducement into the law, named after subsection 401(k) of the tax code...
...Little pain, lots of gain, and justice for all...
...T O M B E T H E L L DECEMBER 2007/JANUARY 2008 THE AMERICAN SPECTATOR 6 1 If the tax rate is raised on investment income such as capital gains and dividends, then the stock market will certainly drop...
...Which is to say, into the stock market...
...The envy brigades don’t want to hear this and maybe don’t even understand it...
...The more important subheading was: “Rate Increase for Executives, Financiers Would Pay for Package...
...households—there are 110 million of them—have 401(k)s...
...They can talk about soaking the rich, Norquist has suggested, as long as they don’t think we really want them to do anything about it...
...Dopey Dem Sens...
...So why wasn’t the Senate on board...
...Capital is mobile and goes elsewhere if it’s not well treated...
...General Motors recently froze its pension plan...
...Lots of people still don’t think about these things...
...There’s evidence that Chuck and Hillary do understand that, unlike some journalists who should know better...
...Tom Bethell is a senior editor of The American Spectator and a media fellow at the Hoover Institution...
...In 1985, 89 percent did...
...You just got hired by one of the hundred largest companies in the U.S.,” he said...
...The bill, passed by Rep...
...Twenty or 30 years from now, it won’t buy nearly as much...
...And all Wall Street needs is one more hit to push it over the edge...
...By all means, talk the envy talk...
...If the tax rate is raised on investment income such as capital gains and dividends, then the stock market will certainly drop...
...But the untold back-story is that pulling the trigger may not be such a good idea...
...Milevsky was telling us was that the number of voters who will be in that position ten years from now will far exceed today’s...
...He didn’t give investment advice either...
...An important reason is that those who work on Wall Street are among the more important constituents of Sen...
...It can be explained in one word: London...
...There was (still is) an opportunity for the Democrats to raise tax rates here, because the Alternative Minimum Tax, intended for millionaires, is now reaching into the pockets of millions and needs to be adjusted...
...One Federal Reserve study said that about half of U.S...
...He talked about the rapid disappearance of company pensions—“definedbenefit plans...
...But I like to think that the ever-growing investor class will help to fight it off...
...That city is already threatening to become the financial capital of the world, because its tax and regulatory rules are more lenient than they are in New York...
...The Democratic Party “is supposed to be on the offensive,” they hinted, rather too broadly...
...Lots of high net-worth investors will find other ways (and places) to invest their money, rather than surrender even more of it to the government...
...Understandably, then, a lot of young people don’t even think about saving...
...I don’t think they’re allowed to on these occasions...
...So when we see that the DowJones Industrial average dropped 362 points, as it did on November 1, a C A P I T O L I D E A S 60 THE AMERICAN SPECTATOR DECEMBER 2007/JANUARY 2008 by Tom Bethell The Socialist Bacillus and the Investor Class M good many people out there, not just Wall Streeters, have reason to worry...
...Because the left would set up their customary howls of envy and resentment...
...Nancy Pelosi’s staff was “flummoxed...
...I like Maggiano’s because they don’t assume you’re on a diet, unlike so many places...
...Did they offer you a defined-benefit pension...
...So did many other companies: Dupont, IBM, Sears, Verizon, on and on...
...We are reaching the point where a majority of voters have a direct, personal interest in the performance of the stock market...
...There must have been 40 of us on hand...
...That’s why, even now—if I’m reading this correctly —the Democrats are wary of their own rhetoric...
...It may already be doing so, beneath the surface...
...Chuck Schumer and that other senator from New York whose name escapes me right now...
...And unless I am mistaken, that will transform politics in unexpected ways...
...On the day when the Dow Jones dropped 362 points, the Washington Post headline read: “House Panel Backs Tax Measure Offering Breaks for Middle Class...
...By 2005 that was down to 37 percent...
...Hit the rich and the whole stock market will fall, and that will affect those in the middle far more than the rich...
...The “difficulty and the political reluctance to tackle issues of ‘tax fairness’” was “striking...
...This was a Smith Barney affair, and I was glad to go because it was held at an Italian restaurant (one of a chain) called Maggiano’s...
...Y WIFE AND I WENT to one of those free dinners that brokerage houses offer to attract clients...
...That’s the upfront story...
...What Dr...
...Since the value of your money is also eroded by inflation, you cannot possibly get ahead of the game by saving money in a normal interest-bearing account...
...But many do, and what most people are doing is saving in a tax-deferred instrument called a 401(k...
...The disappearance of traditional pensions means the investor class is growing by millions every year...
...They won’t look kindly on pols who raise taxes but try to reassure us that they’re only going after the rich...
...George Bush wants the AMT to be “patched” for another year...
...and Britain (not to mention China—Shanghai should also be put into this equation), is that Britain has already been thoroughly exposed to the socialist bacillus and perhaps has a degree of immunity against it...
Vol. 40 • January 2008 • No. 10
