Goodbye, Blue Monday!
Due to some screwy html loopback error, I’m unable to embed images in the usual manner for the moment – so, for a few days, this is (I’m afraid) going to look a bit different.
Here is one of the best descriptions of the oncoming fiscal train wreck that I’ve seen in a while: Stanley Druckenmiller: How Washington Really Redistributes Income. And no, it’s not what you think; this redistribution is between generations, as I’ve been saying for years. Excerpt:
Stan Druckenmiller makes an unlikely class warrior. He’s a member of the 1%—make that the 0.001%—one of the most successful money managers of all time, and 60 years old to boot. But lately he has been touring college campuses promoting a message of income redistribution you don’t hear out of Washington. It’s how federal entitlements like Medicare and Social Security are letting Mr. Druckenmiller’s generation rip off all those doting Barack Obama voters in Generation X, Y and Z.
“I have been shocked at the reception. I had planned to only visit Bowdoin, ” his alma mater in Maine, he says. But he has since been invited to multiple campuses, and even the kids at Stanford and Berkeley have welcomed his theme of generational theft. Harlem Children’s Zone President Geoffrey Canada and former Federal Reserve Governor Kevin Warsh have joined him at stops along the tour.
What is most striking – and in line with another thing I’ve been saying for years – is one of Druckenmiller’s recommendations for growing our way out of this mess:
Ah, but what about the destructive double taxation on corporate income? The Druckenmiller plan is to raise tax rates on investors while at the same time cutting the corporate tax rate to zero.
“Who owns corporations? Shareholders. But who makes the decisions at corporations? The guys running the companies. So if you tax the shareholder at ordinary income [rates] but you tax the economic actors at zero,” he explains, “you get the actual economic actors incented to hire people, to do capital spending. It’s not the coupon clippers that are making those decisions. It’s the people at the operating level.”
As an added bonus, wiping out the corporate tax eliminates myriad opportunities for crony capitalism and corporate welfare. “How do the lobbying groups and the special interests work in Washington? Through the tax code. There’s no more building plants in Puerto Rico or Ireland and double-leasebacks and all this stuff. If you take corporate tax rates to zero, that’s gone. But in terms of the fairness argument, you are taxing the shareholder. So you eliminate double taxation. To me it could be very, very good for growth, which is a huge part of the solution to the debt problem long-term. You can’t do it without growth.”
I have a hard time agreeing with raising taxes on capital gains and investments, as that’s another restriction on growth. But as a tradeoff to eliminating the punitive and insane corporate income tax? It might be worth doing.
That’s an idea that will require some thought.