Hey, here’s a stunning revelation; markets don’t like uncertainty. Speaking with Ben Stein a while ago (my foot aches from the name I just dropped), he mentioned he favors higher taxes on the super-wealthy for a specific purpose – to aide soldiers returning from Iraq and Afghanistan. Noble idea, but I asked him how we’d ensure the money was used for its intended purpose. “Even in the first year, if it was earmarked for the military, it would be hard to ensure that in future years it would be,” Stein said. “I agree that’s a problem, because politicians are slippery fellows.”
Slippery indeed. Forget a year, we haven’t even made it to two months and Paulson’s already diverting TARP funds from their intended purpose. Far be it from me to argue with the Secretary about the efficacy of doing so, but the markets don’t like it. We’ve got little else to go on, so consistency of purpose (at least) should be a no-brainer. The credit industry’s next, then possibly Detroit. If you’re na?ve enough to think that’s the end of the line, I’ve got a deal on a hot investment called a CDO I’d like to talk to you about.
Couple this lack of leadership in the current administration with concerns about the next, and the problem compounds itself. From today’s Wall Street Journal:
“The threat of higher tax rates, especially on capital gains and dividends, now may be getting priced into the market … Lower stock prices in turn reduce household net worth, thus slamming consumer confidence and contributing to what appears to be a consumer spending strike.”
Given their track record and how they’ve handled it so far, does anyone still think the solution is more government involvement rather than less? If we can’t drill our way out of the energy crisis, what makes us think we can tax our way (responsibly) out of anything else?