Naples39 wrote:My point is that there is a a thousand factors that dictate levels of capital investment. Government only directly controls one of those factors, and that is taxes.
You can argue the magnitude of the effect of taxes on capital investment, but the effect of higher taxes, ceteris paribus, driving down capital investment is beyond reproach.
wco81 wrote:Where is the evidence that there's been a shortage in capital investment? There's certainly been a lack of investment in creating new jobs, certainly.
I think we'd all agree that unlike the 90s, or any other time in recent memory, we are in a uniquely bad time for capital formation. The credit crisis, the stock market crashing. Investors aren't exactly lining up at the doorstep of businesses. IMO, it is indefensible for government to compound this problem at this time by raising these taxes to historical levels which are even higher than those 'socialist' nations.
The govt. is going to be injecting hundreds of billions. The Fed cut the rates by 1/2 point a week or two ago. The Europeans are injecting even more and the ECB is expected to cut rates as well.
Some are investing, seeing bargains, like Buffett (who is supporting Obama). Even conservative investors who fear that socialist Obama are looking to see if the market stabilizes. There's a lot of cash on the sidelines.
I'm not saying the stock markets or the economy will turn around quickly. For one thing, the finance sector has lost some institutions and will be under regulation (like capital reserve ratios being enforced) which won't let them use the kind of leverage they've been used to.
Before predicting disaster, lets see how it plays out. The capitalists on CNBC sounded a hopeful note that Obama won't be led by the House Democrats, whatever that means.
Naples39 wrote:
wco81 wrote:Most big companies are multinational. They derive about half their revenues and profits overseas.
Absolutely true, which is why it is increasingly futile to practice protectionism these days as Obama espouses. You can practically guarantee with these higher tax rates that capital investment that once would go into the United States will now be put into foreign investments in countries like Ireland, where the corporate tax rate is less than a third of the United States'.
First of all, the dollar has gained against the Euro recently, by something like 20%, because the dollar is seen as a safe haven. That's despite the higher rates you cite.
Sure some American companies have set up operations in places like Ireland in recent years. Do you know for a fact however that they're going there for lower tax rates or lower labor costs?
AFAIK, no American company has left the US completely for Ireland, as Haliburton for instance did when it moved to UAE.
Do you really believe American companies are exporting jobs to China and India for lower taxes over there?
Obama has talked about offering tax incentives to keep jobs in the US. But I suspect that won't be enough given the labor cost savings available in countries where the per capita income is less than 1/20th of our per capita income.
Otherwise, his economic advisors include Volker and Rubin, not exactly anti-capitalists. An early advisor is Austan Goolsbee, an economist from that hotbed of socialism, the University of Chicago.
And The Economist, that Socialist organ and found of Robin Hood economics, has endorsed Obama.