Freedom Line Blog

In our latest Liberty Update, we highlight how a financial transaction tax and new market regulations would punish everyday American investors and retirees.   Yesterday witnessed significant movement on the issue, as CFIF joined a broad coalition of 27 organizations representing millions of Americans across the nation in urging Congress to reject any proposal to implement a financial transaction tax on Americans:

An FTT is the latest attempt by the left to take advantage of a ‘crisis’ to implement a massive new tax on the American people.  Contrary to their rhetoric, this tax would be borne by the American people, not Wall Street.  It would punish investment, leading to lower returns for American retirees and savers and increased market volatility.  It fails to raise as much revenue as supporters claim, and has failed everywhere it has been tried in past decades.”

Unfortunately, some in Congress nevertheless invite that potentially catastrophic risk.  Yesterday, Senator Chris Van Hollen (D – Maryland) advocated a financial transaction tax during a hearing before the Committee on Banking, Housing, and Urban Affairs.  Senator Van Hollen confirmed that Senators Elizabeth Warren (D – Massachusetts) and Brian Schatz (D – Hawaii) stand ready to introduce such legislation, falsely asserting that, “We know that Wall Street has made an art of high-frequency trading and rank speculation that’s fattened the wallets of a few, while putting everyday investors at greater risk.”

But as we noted specifically in our most recent piece on the matter, the exact opposite is true:

Any financial transaction tax will inevitably impact millions of Americans who rely upon investments to sustain their pensions, 401(k) plans, index funds and other retirement accounts.  Today, 53% of American households own stocks, while between 80 million and 100 million possess 401(k) accounts.  According to one recent analysis from the Modern Markets Initiative, the proposed financial transaction tax could mean a hit of $45,000 to $65,000 to 401(k) owners over the lifetime of their accounts.  Accordingly, the suggestion that a new tax on financial transactions won’t punish everyday Americans is flatly untrue.

In fact, the hardest-hit would be those who rely upon public sector employment pensions, such as police, firefighters, teachers and other public servants whose retirement accounts rely heavily on markets for retirement.  They stand to lose billions of dollars every year to the proposed tax, meaning significantly reduced savings and retirement incomes.”

Our broad coalition has it right, and Senators Van Hollen, Warren and Schatz have it wrong.  A financial transaction tax would sacrifice American consumer and investor wellbeing at the altar of a broader politically motivated agenda.

There may be no commentator more exposed and discredited in recent years than The New York Times’s Paul Krugman.

Where to even begin?  My personal favorite might be his call for a massive spending “stimulus” when Obama entered office, which he estimated should be approximately $600 billion, to return economic health to the nation.  “When I put this all together,” he said, “I conclude that the stimulus package should be at least 4% of GDP, or $600 billion.”  Obama ended up getting something much larger, closer to $1 trillion.  Yet when the U.S. proceeded to suffer the worst decade of economic performance in U.S. history and multiple failed “recovery summers,” Krugman just shamelessly published a later piece entitled “How Did We Know the Stimulus Was Too Small?”

Fast forward to election night, when he moped and went on record predicting that markets would never recover from Donald Trump’s victory.  You can’t make this stuff up:

It really does now look like President Donald Trump, and markets are plunging.  When might we expect them to recover?

Frankly, I find it hard to care much, even though this is my specialty.  The disaster for America and the world has so many aspects that the economic ramifications are way down my list of things to fear.  Still, I guess people want an answer:  If the question is when markets will recover, a first-pass answer is never.”

So what happened immediately after Krugman’s solemn prediction?  Well, markets reached another record high on Friday.

Perhaps Krugman simply recognizes the wreckage of Obama’s legacy, and masochistically seeks to outdo him?