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Capital Investment: Risk Takers, Capital and Growth
About 91 million. 
Andrew Roth President Bush signed an executive order yesterday to lift the ban on offshore drilling. Smart move. Let's convince him to sign another executive order. We need him to authorize the indexing of capital gains to inflation. This would immediately goose the financial markets and push asset prices up. It would increase stock prices, it would increase house prices, and it would strengthen the dollar. And by doing this through an executive order, Bush can alleviate the damage recently done to our economy -- not with a big government bailout -- but with the government getting out of the way. That would be a powerful free market message. It would remind the public that we can solve a lot of our economic problems with economic liberty, not command-and-control collectivism. We can do other things now as well. We can cut corporate income taxes, for one, but large obstacles stand in the way. So in the meantime, let's get Bush to do the one thing he can do on his own -- index capital gains to inflation. We need it. And we need it now. WALL STREET JOURNAL CAPITAL JOURNAL By GERALD F. SEIB
Pump Prices Hurt Americans Not Just in Pocketbook July 8, 2008; Page A2 Full article Gerald Seib WSJ Excerpts: Both presidential candidates are focusing on the economy this week, and for good reason: $4-a-gallon gasoline has Americans sliding into pocketbook shock. But pain at the pump is only one reason energy now should be the central issue of this year's campaign. Here's the other, more insidious one: High oil prices are shredding America's financial independence and producing a massive transfer of wealth from U.S. pocketbooks into the hands of suspect actors around the world, including Iran, Venezuela and Russia.Gerald Seib on the presidential race and the favorable effects of higher oil prices on Iran, Russia and Venezuela. The U.S., in other words, now has an energy problem that is not only draining the bank accounts of its own citizens, but filling up the bank accounts of some who work against American interests around the globe. It's hard to imagine an issue that more deserves campaign prominence. KUDLOW'S MONEY POLITICS Thursday, May 29, 2008 Good News for Goldilocks Full article Lawrence Kudlow Excerpts: To recoin U.S. News blogger Jimmy Pethokoukis, “No Recession. No Bear Market. Bears Weep.” Today’s revised report on first-quarter GDP moved the number up to 0.9 percent at an annual rate versus a previous 0.6 percent. Year-over-year real GDP is 2.5 percent. Incidentally, brand new numbers on profits show a much-stronger-than-expected gain. Profits are the mother’s milk of stocks and the economy. So this is very positive. Also noteworthy is a low 2.1 percent core inflation rate, with the headline rate coming in at 3.5 percent. Look for these numbers to rise as a consequence of the cheap dollar and the commodities boom in energy and elsewhere. However, markets are smarter than GDP reports. And stocks are up over 100 today, continuing their gains of Tuesday and Wednesday. Even more significant, Treasury market rates are rising a lot, with the 10-year bond now all the way up to 4.11 percent. This is important because almost all the interest-rate gain comes from rising real rates, a signal of increased credit risk-taking and an end to the banking-crisis run for safety. REAL CLEAR POLITICS May 28, 2008 The Moral Challenge of Globalization
Full article Robert Samuelson RCP Excerpts: WASHINGTON -- What's the world's greatest moral challenge, as judged by its capacity to inflict human tragedy? It is not, I think, global warming, whose effects -- if they become as grim as predicted -- will occur over many years and provide societies time to adapt. A plausible case can be made for preventing nuclear proliferation, which threatens untold deaths and a collapse of the world economy. But the most urgent present moral challenge, I submit, is the most obvious: global poverty. There are roughly 6 billion people now alive; in 2004, perhaps 2.5 billion survived on $2 a day or less, says the World Bank. By 2050, the world may grow by another 3 billion; many will be similarly impoverished. What's baffling and frustrating about extreme poverty is that much of the world has eliminated it. In 1800, almost everyone was desperately poor. But the developed world has essentially abolished starvation, homelessness and material deprivation. The solution to being poor is getting rich. It's economic growth. We know this. The mystery is why all societies have not adopted the obvious remedies. Just recently, the 21-member Commission on Growth and Development -- including two Nobel-prize winning economists, former prime ministers of South Korea and Peru and a former president of Mexico -- examined the puzzle. VISIT: Club For Growth May 27, 2008 Huck Rejects Free-Market Capitalism Nachama Soloveichik In an interview last Thursday, Mike Huckabee laid out his vision for the Republican Party: Republicans need to be Republicans. The greatest threat to classic Republicanism is not liberalism; it's this new brand of libertarianism, which is social liberalism and economic conservatism, but it's a heartless, callous, soulless type of economic conservatism because it says "look, we want to cut taxes and eliminate government. If it means that elderly people don't get their Medicare drugs, so be it. If it means little kids go without education and healthcare, so be it." Well, that might be a quote pure economic conservative message, but it's not an American message. It doesn't fly. People aren't going to buy that, because that's not the way we are as a people. That's not historic Republicanism. Historic Republicanism does not hate government; it's just there to be as little of it as there can be. But they also recognize that government has to be paid for. Mike Huckabee misses the fundamental point of free-market capitalism, which is that free markets promote economic growth for all people, including the poor, in a way that government simply can't match. Historically, it has been free markets and private philanthropy--not government--that has generated prosperity, eliminated poverty, and fostered opportunity. When government interferes by trying to manipulate the economy to produce "desirable" results, it almost always ends up doing worse than the market could have done by itself. Huckabee is subscribing to the liberal, not to mention condescending, notion that people cannot better their lives without government holding their hand a good part of the way. Huckabee is entitled to his opinion, but he shouldn't pretend to be an economic conservative when he rejects the basic tenet upon which conservatism is based. VISIT: Club For Growth Nachama Soloveichik Sometimes it's the small things that make a difference. Today, SC Governor (and possible VP candidate) Mark Sanford signed a state law removing the legal requirement for shampooers to receive the same state-mandated 1,500 hours of training that cosmetologists receive. While this may seem insignificant to some, Sanford is highlighting the problem of overregulation in South Carolina. In his press release, the governor listed the state's top 10 crazy laws or proposals: Top 10 Crazy Laws or Proposals - Whatever happened to common sense? 1. State law requires an individual to complete 1,500 hours of instruction to become a cosmetologist. It takes more hours of licensing to become a cosmetologist in SC than it does to become a police officer (396 hours) or carry a concealed weapon (8 hours). 2. Caskets and Stones, a retail funeral store in Greenwood, submitted their license application, paid their fee, were scheduled to go before the Board of Funeral Directors, and were told they could open. But then the Board gave them a "cease and desist" order * essentially telling them to stop selling caskets. The Board fined them $1,500 for "opening before their Board appointment." They had to pay it before they could get their license. 3. Fortune Tellers are required to obtain a special permit in order to operate in South Carolina. 4. A proposed bill would require high school football and basketball playoff games to have replay for officials to use during these games. 5. Barbering schools are required by law to have at least ten instructional chairs *and those chairs are required by law to be upholstered and finished exactly the same way. 6. In 2003, a bill was introduced that would have required all drinking straws in South Carolina be sold in individual wrappers. The bill almost led to a fist fight on the House floor. 7. The fourth Friday in October in each year is designated by law in public schools as Frances Willard Day, and each public school is required "to prepare and render a suitable program on the day to the end that the children of the state may be taught the evils of intemperance." 8. Circuses cannot exceed 48 hours at one place in any one year. 9. If a menu or advertisement states "frozen dessert," it must correctly state the specific frozen dessert that is offered for sale so as not to mislead the consumer. 10. Musical instruments are not allowed to be sold on Sunday. Get Over The Gap INVESTOR'S BUSINESS DAILY Posted Friday, May 09, 2008 Trade Deficit: We have long been told that when the dollar "corrects," making our goods cheaper abroad, the trade deficit will begin to fall sharply. Well, it's finally happening. Now that it is, do you feel any better? You shouldn't. Because even though the trade gap narrowed by $3.5 billion, or 5.7%, to $58.2 billion in March from February, it was a sign of weakness rather than strength. Compared with a year earlier, March exports rose 15.5% — a good thing, we suppose. But imports increased just 7.9%, a gain that would have been a lot lower if not for oil. Full article Investor's Business Daily Visit: Club For Growth From Rasmussen Reports: A proposal has been made to increase the capital gains tax from 15% to 28%. Do you favor or oppose increasing the capital gains tax to 28%? 16% Favor 65% Oppose 20% Not sure If the capital gains tax is increased to 28%, will that help the economy or hurt the economy? 17% Help 52% Hurt 18% Neither 14% Not sure Visit: Club For Growth Why Sanford Is A Pro-Growth Star... Andrew Roth Here's one of the reasons why Mark Sanford is such a strong leader for the pro-growth movement: South Carolina governors have typically stayed out of primary Statehouse races, but Gov. Mark Sanford on Wednesday again bucked that tradition and endorsed a Republican challenging an incumbent GOP state senator. The Republican governor threw his support behind political newcomer Katrina Shealy in her bid against state Sen. Jake Knotts, a frequent Sanford critic. It's the second time in a month the Republican governor has endorsed a GOP challenger facing an incumbent Republican. Sanford earlier endorsed Tom Davis, a longtime friend and former chief of staff, in his bid against incumbent Sen. Catherine Ceips. "I'm endorsing because she's an engaged conservative," Sanford said Shealy, noting her involvement in Lexington County GOP politics. "Too often what we see are so-called RINO's, Republicans in name only, where somebody will carry the banner, but not walk the walk in pushing for that conservative philosophy." From: Rasmussen Reports February Key Findings: -- 34 percent of small business owners said they see economic conditions for their businesses getting better over the next six months, up from 31 percent who felt the same in January. -- 33 percent said they planned to increase spending on business development activities over the next six months, an increase over 28 percent in January who planned to do the same. -- 67 percent of small business owners feel that economic conditions in the U.S. are getting worse, a decrease from 74 percent who felt this way in January. -- 43 percent said they have experienced cash flow issues over the last 90 days, a slight decrease from 44 percent in January, but consistent with the past several months. The Bureau of Labor Statistics of the U.S. Department of Labor today reported preliminary productivity data--as measured by output per hour of all persons--for the fourth quarter and for the full year 2007. The seasonally adjusted annual rates of productivity change in the fourth quarter and the annual average changes were: Business Sector Fourth Quarter Productivity Increase-2007 0.6% Compared To Annual Increase in 2006 + 1.5% As Democratic Candidates continue to throw out ridiculously false numbers about jobs, wages, living standards and painting endless doom and gloom the latest numbers from the Department of Labor, Census Bureau, Treasury Department and others that are among the most reliable in the land, they tell us for instance that: Jobs created, total 8.35 million Consecutive months of expanded job force 51 New Net Jobs November 2007 94,000, many of those very high paying GDP 3rd quarter growth rate A hefty 4.9%
Capital Investment October 10, 2007. Income, dividend and capital gains tax rates were all cut in 2003. Look what's happened to revenues since Individual income tax receipts have gone up by 46.3% in four years. Most of this has come from the wealthy. The increase in individual income payments was 11.3%. This is more than double the rate of growth in nominal GDP. Will liberals ever admit to the benefits of tax cuts? Of course not. How else would they justify the massive distribution scheme that makes a Democrat what he is. Whenever you rob Peter to Pay Paul, you can always count on the support of Paul -------GEORGE BERNARD SHAW According to the Securities Industry Association, the typical investor today is a middle class person, saving for retirement, with a household income of about $65,000. When Congress passed President Bush’s Jobs and Growth Act of 2003, most of the attention went to his totally fair rate reductions in income taxes, which went to those who actually paid taxes (net taxpayers). Not as prominent in the whole debate, was the lowering of the capital gains tax rate to 15%. This of course lowered the cost of capital. Before the tax cuts, we had 9 consecutive quarters of declining business investment. Since then, we’ve had 12 straight quarters on the rise, with a growth rate of 4%, along with mild inflation. You do not have to own stock to benefit from Capital Investment, which is bound to increase, whenever there is a reduction in the cost of capital. An increase in investment of capital means more new businesses and expansion of existing businesses, which in turns leads to higher labor output and higher demand for labor. The present unemployment rate of 4.6 % is lower than the average of the 1970’s 1980’s and 1990’s. Second quarter wage gains were 4.6%, the fastest quarterly pace since 1997. Capital Investment Employment is at an all time high. To name just a small fraction of some of the other pluses in this blessed land, besides great employment opportunities, home ownership in America, including among minorities, is at an all time high and net worth is at an all time high among practically the entire population. All workers should back efforts to maintain, permanently, the 15% rate on capital gains. which has recently been extended to 2010. To allow class envy/class warfare arguments to prevail, could negatively impact jobs of every kind. Looking at the last two quarters, the economy roared ahead with 5.6% annualized growth and hundreds of thousands of new jobs added, in the quarter which ended March 31th, 2006. Had we not had the Capital Investment from the tax cuts, these numbers would not have been as favorable. The present quarter's growth is projected to be about 2.8%, which would give us growth for the first half of the year of 4%+. Slower, but overall, most signs are good.### WASHINGTON – A coalition of 36 citizen groups representing millions of grassroots activists, investors, and retirees today sent an open letter to the U.S. Senate and House, urging lawmakers to reject a hike in the 15 percent tax rate on capital gains for individuals or for partnerships, which would ultimately take a tax bite out of Americans’ retirement savings. The letter, which was organized by the grassroots free-market group Americans for Prosperity, clearly demonstrates the importance of the issue to center-right groups and their solidarity on the subject. No Less than 36 citizens groups consisting of activists, investors and retirees sent an open letter to the U.S. Senate and U.S. House of Representatives urging them to reject the proposed tax increase on the capital gains tax rate which now stands at 15 percent, claiming among othet things it would be a hit on the savings of retirees. Below is a copy of that letter Dear Representative, On behalf of the millions of grassroots investors who are members of our organizations, we strongly urge you to reject any increase in the 15 percent tax rate on capital gains for individuals or for partnerships. Raising the capital gains tax rate will dramatically reduce the after-tax return on stock investments, which would send markets reeling and adversely impact the 60 percent of American families who are now invested in individual stocks, mutual funds, 401(k) plans, Individual Retirement Accounts (IRAs), union pensions and other investment vehicles. It would significantly raise the cost of capital, drying up investment in many innovative, entrepreneurial companies, jeopardizing future job creation for millions of American workers. It also would hit the U.S. Treasury hard, contrary to the conclusions of the static-revenue scorekeepers. Every capital gains rate hike in the past 30 years has led to lower federal revenues, while every capital gains rate cut has led tohigher revenues. Partnership carried interests are capital gains. They represent a return on risk capital, in the form of the sweat equity of the general partners who put together these deals. General partners who sell a portion of their profits to limited partners are no different from any entrepreneur with an idea to build a company who uses equity financing to build that company with other people’s money. General partners in investment partnerships, like other entrepreneurs, typically retain an ownership stake based on the human capital they put into the deal, even if they put in little or no money of their own. Congress Members calling this capital income wages doesn’t make it so. The primary rationales for taxing capital income at a 15 percent rate are that it alleviates double-taxation of corporate profits and that it encourages risk-taking by rewarding it, when it is successful, with higher after-tax returns. Both of these rationales weigh in favor of a capital gains tax rate of zero, as former Federal Reserve Chairman Alan Greenspan repeatedly advised Congress. Capital income should be taxed at the lowest possible rate without respect to who the taxpayer is. Characterizing the treatment of capital gains as a loophole for some taxpayers will lead to it being called a loophole for everyone. Any concession to advocates of higher capital gains taxes is therefore more likely to embolden than to appease them. We therefore urge you to strongly oppose any attempt to increase the capital gains tax rate for partnerships or individuals. IRS Update: Issue Number: TT-2007-34 Inside This Issue TAX FACTS ABOUT CAPITAL GAINS AND LOSSES Almost everything you own and use for personal purposes, pleasure or investment is a capital asset. When you sell a capital asset, the difference between the amounts you sell it for and your basis, which is usually what you paid for it, is a capital gain or a capital loss. While you must report all capital gains, you may deduct only capital losses on investment property, not personal property. Here are a few tax facts about capital gains and losses: * Capital gains and losses are reported on Schedule D, Capital Gains and Losses, and then transferred to line 13 of Form 1040. * Capital gains and losses are classified as long-term or short-term, depending on how long you hold the property before you sell it. If you hold it more than one year, your capital gain or loss is long-term. If you hold it one year or less, your capital gain or loss is short-term. * Net capital gain is the amount by which your net long-term capital gain is more than your net short-term capital loss. * The tax rates that apply to net capital gain are generally lower than the tax rates that apply to other income and are called the maximum capital gains rates. For 2006, the maximum capital gains rates are 5%, 15%, 25% or 28%. * If your capital losses exceed your capital gains, the excess is subtracted from other income on your tax return, up to an annual limit of $3,000 ($1,500 if you are married filing separately).
As revenues continue to pour into the Treasury, the deficit and deficit projections keep going down. Last year's deficit of $248 billion is one of the smallest in the world and among industrial nations. The new projection takes it lower than that down to $205 billion. As a percent of GDP, that brings the deficit down to a tiny 1 1/2%. If the president and Republicans had acted like Republicans on the spending side, we would now be running healthy surpluses and could be cutting the debt. This is further proof that doublespeak by the Democrats is not going to work. Proof of the benefits of the tax cuts and the cut on capital gains is overwhelming. Capital Investment almost certainly has a great deal to do with this long bull market run. When Capital Investment was more costly prior to the 2003 tax cuts, there were nine successive sluggish quarters. Since the cost of Capital Investment has been reduced, we are now in our fourth straight year of a rising stock market. The stock market is not the only entity that benefits from a lower cost for Capital Investment. Retirees have seen a great benefit, along with the 60% of American families who are invested in 401 K'S. In every instance when the cost of Capital Investment has been lowered, revenues to the government have increased. More than once , including the present,they have soared . Congress is attempting to raise taxes on certain types of Capital Investment. That would be a mistake.
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