Obama and Wall Street Fears
Taxes and Out-of-Control Government Spending Worries Investors
Oct 29, 2008
Obama has made many promises during the Presidential election season and most of them are scaring Wall Street investors.. Having the President and the Congress from the same party could mean that all the new tax programs and social spending will be rubber stamped with no control over either worries Wall Street.
Wall Street and One-Party Concerns
Obama and a Democratic controlled Congress have always been a concern to Wall Street. In the past it has preferred the political parties to split the White House and Congress because it tends to produce the sort of legislative gridlock that prevents costly, idealistic, social and financial engineering and experiments.
Investors Not Waiting Around
Investors in the stock market that are wealthy enough to be subject to large capital gains taxes from investments made over the past decade are not waiting around for Obama's increases. . This was anticipated in a Wall Street Journal article (7/14/08), "Why Wall Street Fears Obama" that investors would not wait to find out whether or not it was just election year rhetoric, they took their profits and found safe havens for it. Obama's plans for a "wealth distribution" quickened the pace.
Obama Share the Wealth Psychology
Obama told the Wall Street Journal that the United States has developed a "winner take all" economy in which profits from economic success have largely benefited the wealthy and left the middle class and poor behind. He said that "globalization, technology and automation all weaken the position of workers' and argued that the government needs to make sure the fruits of success are distributed in a more even handed manner." These are fighting words to those whose wealth is targeted for redistribution and these are the people who own most of the nation's stocks.
Obama's Capital Gains Tax Threats
Obama's tax plans concern investors because that would make the federal government even more reliant on relatively few high-income people to pay most U.S. taxes and thereby provide less incentive for business owners to augment their wealth by growing their companies. This translates into less hiring of new workers in an economy in which the unemployment rate increases every month. Creating a disincentive for the rich to get richer sounds great in an election year but it doesn't make for good policy during a time of broad economic stagnation.
Many are already calling the meltdown in the stock market, "The Obama Recession" as investors find ways to avoid paying the additional taxes that may be heaped upon them to meet his promises of spending on expanded welfare programs.
