Bush Announces Budget Plan That Bets on an Investor Class

[Timber Loftis]

TL's obligatory OpEd:
I am NOT a Bush supporter, and am known on this board and elsewhere to be strictly against conservative BS rhetoric. But, this dividend cut could end up looking okay. My first gut reaction was that this was more money sent to those wealthy repug bastards who put Dubya in office, raped our retirement, and mucked up the name of the SEC and decent business practices. But, the bottom line matters, and at the very hint of this package the DOW rose 2% yesterday. Today it looks as if it will close about even - with lots of fluctuation during day trading (which is where day traders make their money, and is a good thing evidencing buying and selling, i.e. transactions).

Plus, the democratic plan is absolutely assinine. They want to give out a $300 tax credit. Whether or not that's a bad idea, it amounts to the exact same thing as Bush's refund when he took office - which the Dems bashed and bashed and bashed. Shame on them for being such blatant retard hypocrits.

{edit:} This is from today's New York Times, all the news that's fit to print, or at least all the news that fits.
Bush Announces Budget Plan That Bets on an Investor Class
By RICHARD W. STEVENSON

WASHINGTON, Jan. 7 — In calling for the elimination of taxes on stock dividends today, President Bush is embracing the idea that the financial health of investors, particularly the millions of people who got into the stock market for the first time over the last decade and are now suffering the consequences, will be vital both to renewed prosperity and to his own electoral success.

It is a gamble on both counts.

For all that is said of Wall Street as an important barometer of economic activity and national psychology, it is not clear that putting more cash in the hands of investors and trying to give the market a lift will provide much help to the economy in the short run, economists said.

Similarly, it is a matter of intense debate among political analysts whether investors make up a definable voting bloc that can be won over with a break on investment income or even a boost to the value of depleted portfolios. Some of Mr. Bush's Democratic critics even question the existence of a so-called investor class as anything other than an excuse for Republicans to cut taxes again for the wealthy.

For years, some Republican strategists have made a case that their party has an opportunity to attract the millions of middle-class people who make up the new investor class by emphasizing that its agenda of lower taxes, less regulation and more trade will be good for their efforts to build wealth. About half of all households now have some investments in stocks and bonds, either directly or through mutual funds and retirement accounts.

More important in political terms, about two-thirds of voters are investors, making the stock market an increasingly compelling subject — especially with stock prices having just completed their third consecutive year of losses.

"Bush is responding to Americans where they were hit hardest," said Frank Luntz, a Republican pollster. "Usually when you think of the economy getting worse, you think about unemployment, but this time it's stock-market driven. He has provided a tax relief package that will affect more voters than almost anything else he could have done. It will matter to them because they haven't seen their incomes go down, they've seen their retirement savings go down."

But some of the administration's critics dismiss the entire notion of a mass investor class. To the degree that anyone cares about taxation of dividends, Democrats said, it is a thin slice of the very richest Americans who are already the Republican Party's patrons rather than the average working families that determine the outcome of elections.

For all that investing became the national pastime when the market was rising, they said, stock market wealth is still so concentrated that Mr. Bush's proposal is nothing more than a new way of justifying tax cuts for wealthy Republican benefactors. They said the focus on dividends came about because other options appealing to conservatives, like corporate tax cuts, became politically problematic for the White House in the aftermath of last year's corporate accounting scandals.

"This is so flagrant," said Kevin Phillips, a political commentator and the author of "Wealth and Democracy: A Political History of the American Rich."

"It's not aimed at the little investor," Mr. Phillips said of the Bush plan. "It's aimed at the big investor and shrouded by a fog of phoniness. This isn't even trickle-down economics. It's mist-down economics."

Eliminating taxes on dividends paid by corporations to their shareholders would amount to a tax cut of around $300 billion over the next decade, roughly half the total value of the economic plan that Mr. Bush intends to unveil in Chicago today.

In remarks to reporters after a cabinet meeting at the White House on Monday afternoon, Mr. Bush cast his proposal on dividends as a potent way of getting the economy firing on all cylinders. Anticipating a rising chorus of Democratic charges that the Bush plan benefits only the wealthy, the president and his spokesman said the plan would help not only the economy but also a broad swath of the public.

"It will encourage investment, and that's what we want," Mr. Bush said. "Investment means jobs."

But he also said the change would be a matter of fairness, both in economic terms and for individuals, including many retirees, because it would end the practice of taxing dividend payments made by corporations to their shareholders after the same money has already been taxed as profit.

"There's a principle involved," the president said.

The White House spokesman Ari Fleischer said on Monday that there were 35 million people who received dividend income, including 10 million elderly people.

"The president does not think it is right to tax savings and to penalize people who save, and the president does not think it is right to penalize people who plan for their future," Mr. Fleischer said.

Responding to a question about whether Mr. Bush's proposal spread its benefits fairly among income groups, Mr. Fleischer responded that the president's plan would contain elements "that will help lower taxes for all Americans, give a boost to the economy, give a boost to growth."

Although White House officials have in the past estimated that eliminating the tax on dividends could send the stock market rising by as much as 20 percent — the Dow rose 171.88 points, or 2 percent, on Monday — Mr. Fleischer said it was "impossible to predict any kind of stock market performance based on announcements out of Washington."

But some liberal analysts said an investor class, at least as a mass phenomenon, was a political marketing myth. The Center on Budget and Policy Priorities, a liberal research group, cited an analysis of Federal Reserve data on Monday showing that 85 percent of the value of stocks and bonds was held by the top 10 percent of the income spectrum in 1998, the latest year for which comprehensive data is available.

Citing I.R.S. data from 2000, the group said 22 percent of taxpayers with incomes under $100,000 reported any dividend income, while 72 percent of filers between $100,000 and $1 million and nearly all filers above $1 million reported dividend income.

Mr. Bush's plan amounts to "an old, old Republican theory of trickle-down economics," said Representative George Miller, Democrat of California.

Democrats also tried to link Mr. Bush's actions to the corporate accounting scandals and political firestorm over the Securities and Exchange Commission last year. They said Mr. Bush would do better to grant a big budget increase to the commission and assure that the accounting oversight board would act aggressively to restore investor confidence.

"That's what will bring back confidence in the stock market," said Representative Robert T. Matsui, Democrat of California, "not some gimmick like dividend deduction."

[ 01-07-2003, 02:50 PM: Message edited by: Timber Loftis ]

[Rokenn]

Well so far his plan has been good for my portfolio, it's up nearly 11% today [img]tongue.gif[/img]

[Cloudbringer]

Sigh...so the $7.00 I probably earned in stock dividends won't be taxed? [img]tongue.gif[/img] Oh goody! LOL Now if someone wants to give me the funds to START a decent portfolio, I'm a happy camper! [img]smile.gif[/img]

[Sir Taliesin]

I kind of like the $1100 or so bucks I'll be getting back on my taxes!That always come in handy!

[Timber Loftis]

Stocks dropped 34 points today. The NYTimes attributed part of this to a backlash at Bush's economic plan, so popular at first (I think they say the corporate tax cuts and knew it would cost us regular folks).

But, IMHO, a 34-point drop in the middle of an oil stock slump only 1 day after a 2% (> 130 point) rise is acceptable. And tech stocks were up - which is the gem that was driving the 90s economy that we need to see sparkle again.

From NYTimes.com
Techs Rise but Oil Stocks Slow Blue Chips
By REUTERS
Filed at 3:03 p.m. ET

NEW YORK (Reuters) - A better-than-expected revenue outlook from data storage provider EMC Corp. (EMC.N) boosted technology stocks in late afternoon on Tuesday, while blue chips languished near unchanged as investors pored over President Bush's $674 billion economic plan.

In his speech to the Economic Club of Chicago, Bush called for cutting taxes that investors pay on dividends, as well as tax cuts for married couples and incentives for small business to invest in new equipment.

While stocks had soared about 2 percent on Monday after initial details of the program became available, investors were more wary on Tuesday as they calculated the plan's political chances and whether it would be effective in helping the lagging U.S. economy.

``The environment and outlook look a little murky,'' said Matthew Ruane, head of listed trading for Gerard Klauer Mattison. ``It's a great start, a humongous start. But whether or not it (helps) the economy remains to be seen.''

Declines in oil stocks also kept gains in blue chips muted.

The Dow Jones industrial average (.DJI) was down 0.68 points, or 0.01 percent, at 8,772.89. The broader Standard & Poor's 500 Index (.SPX) was down 1.79 points, or 0.19 percent, at 927.22. The technology-laced Nasdaq Composite Indexwas up 14.31 points, or 1.01 percent, at 1,435.63.

POCKETS OF STRENGTH

EMC rallied 64 cents, or 9.4 percent, to $7.44 after the company said fourth-quarter revenue will beat analyst expectations, citing improved corporate demand for its low-cost systems.

The statement helped boost other data storage companies. Network Appliance Inc. (NTAP.O) tacked on 47 cents, or 4 percent, to $12.10. Emulex Corp. (ELX.N) climbed $1.72, or more than 7 percent, to $23.65. QLogic Corp. (QLGC.O) rose 97 cents, or 2 percent, to $41.08.

International Business Machines Corp. (IBM.N) announced several deals.

Cisco Systems Corp. Inc. (CSCO.O) rose 32 cents to $14.53 after IBM said it will sell data storage switches just introduced by the Web equipment maker. Cisco was the most actively traded share on Nasdaq.

Contract manufacturer Sanmina-SCI Corp. (SANM.O) surged 49 cents, or 10 percent, to $5.07 after IBM said it would pay the company $3.6 billion to take over manufacturing of some lower-priced computers to cut costs.

And Solectron Corp. (SLR.N), another contract manufacturer, rallied 36 cents, or more than 9 percent, to $4.35, after IBM signed a 3-year, $120 million deal with Solectron to allow it to take over a computer and equipment refurbishing center.

OILS SLUMP

Exxon Mobil Corp. (XOM.N), the world's largest publicly traded oil company, fell 94 cents to $35.44 and dragged on the Dow. Oil prices were lower on signals the OPEC producer cartel is preparing to boost production to offset supplies from Venezuela that have been interrupted by a continuing strike.

The S&P 500 oil & gas index (.GSPOILD) had the biggest percentage decline in the S&P 500, dropping 4.7 percent.

Tyco International Ltd. (TYC.N) rose 54 cents to $17.06 and ranked as the most active stock on the New York Stock Exchange. The conglomerate unveiled plans to raise $4.75 billion through a new line of bank credit and the sale of securities that convert into company stock, as it works to close a funding shortfall that looms at the end of this year.