by Alexander Green, Chief Investment Strategist, The Oxford Club
Monday, November 5, 2012: Issue #1897
We can argue whether he deserves the reputation or not, but President Obama is viewed in many quarters as anti-business. Critics say his healthcare plan, regulations, mandates, and proposed tax increases stifle economic growth and prevent businesses from creating new jobs.
The Obama campaign counters that this simply isn’t true. And the President himself makes a point of calling the free-enterprise system the world’s greatest engine of prosperity.
He’s certainly right about that.
However, Obama’s reluctance to take credit for two great achievements indicates he is not only anti-business but anti-investor, as well. The first accomplishment is U.S. corporate profits. They aren’t just good. They aren’t just better than expected. They are an all-time record. No small feat.
This, in turn, has led to an equally formidable second development. Practically since he took office, the U.S. stock market has doubled – a decided plus for corporate shareholders and equity mutual fund investors – yet Obama never mentions either achievement. Ever. He makes no attempt to take credit.
It would be naïve to say Obama is just being humble. This is a man who told us he would make the seas recede and compared his achievements favorably to those of “any president” since Lincoln, with the “possible” exceptions of FDR and LBJ. Low self-esteem is not his problem.
Of course, whenever presidents of either party run for re-election, they routinely vacuum up the credit for everything good on their watch and explain away negative developments as circumstances beyond their control or the fault of an obstructionist opposition. Or, although this is fairly new, they lay the blame on their predecessor.
It’s a gross oversimplification, of course, to say George W. Bush (a disaster, in my view) caused the Great Recession or that Barack Obama is entirely responsible for today’s sputtering economy.
As much as pundits and the media like to say the man in the Oval Office is “running the country,” it simply isn’t so. What makes the country run is hundreds of millions of men and women getting out of bed each morning and making things happen. Yes, government policies and new legislation can affect the economy for better or worse, but the beautiful thing about the free-market system – since it’s based on the most durable of foundations: rational self-interest – is it’s awfully hard to wreck.
Yet the economy today is moving with a decided limp. Consumers are over-leveraged. Businesses feel like they are weighed down with federal regulations and mandates. To top it off, Obama is heralding a new round of tax increases.
Even Keynesians, who favor massive government intervention in the economy, oppose jacking up tax rates in a downturn. Yet look at Obama’s very specific proposals:
- He wants to raise the top marginal income tax from 35% to 39.6%.
- He wants to raise the top long-term capital gains rate from 15% to 20%.
- He wants to raise the top tax on dividends from 15% to 39.6%. And that’s in addition to the new 3.8% tax on dividends (to pay for ObamaCare) that goes into effect January 1. In other words, Obama will raise the top tax rate on dividends 189% to 43.4%.
- He wants to replace the alternative minimum tax with the Buffett Rule. That means the highest income earners will pay a minimum 30% tax rate on wages, interest, dividends and capital gains.
- You can’t even die unmolested. Obama also wants to tax more estates by lowering the exemption while raising the death tax rate from 35% to 45%.
This combination of specific tax hike proposals and utter silence about record corporate profits and sterling stock market performance lead to an inevitable conclusion:
These aren’t accomplishments he values. And business owners and investors aren’t his concern… or his constituents.