It has become apparent to me that whichever candidate wins this fall, the country will take a dangerous turn towards the left. The reason behind my conclusion is both Obama and McCain--as well as many in congress--have adopted an anti-capitalist posture on what enables the free market to work effectively. The candidates have expressed a desire to manage and control the market that will have a negative impact on equity prices and the economy. It should come as no surprise that Senator Obama and the Democrats want to socialize parts of the economy like medicine and education but what's surprising is the rhetoric coming Senator McCain regarding energy and CEO pay.
On June 11, 2008 Mr. McCain appeared on The Today Show and agreed with Matt Lauer's contention that the amount of money oil companies are making is excessive. He then explained that as President he must help steer those exorbitant corporate earnings towards the development of alternative energy and bring the country away from its dependence on oil. He stopped short of directly saying that he would force energy companies to explore energy alternatives. But the implication was that he would get involved in the management of their profits rather than allowing the free market to dictate where those profits should be spent. What he does not understand is that when consumers can no longer afford skyrocketing oil prices, they will demand other forms of energy. It is at that juncture-and not by a mandate from government-- that companies will respond by developing and offering cheaper alternatives to the market.
If that's not scaring you then listen to a quote from a prepared speech John McCain delivered at a Small Business Conference. "Americans are right to be offended where extravagant salaries and severance deals of CEO's...bear no relation to the success of the company or the wishes of the shareholders." He continued "If I'm elected President, I intend to see that wrongdoing of this kind is called into account by Federal Prosecutors. And under my reforms, all aspects of CEO pay, including severance arrangements, must be approved by shareholders." This non-conservative view he takes ignores the fact that shareholders already vote and approve CEO compensation every time they buy and sell their stocks. The free market approach would continue to allow stock holders to sell a company's stock that was run by a CEO who in their view was receiving excessive pay. Under McCain's program the government would force another layer of bureaucracy on America's already overregulated and overtaxed corporations.
Back to Senator Obama, we find some of the more frightening examples of how the country is moving towards socialism. He wants to increase capital gains and dividend taxes as well allow the Bush tax cuts to expire. Barack also wants to lift the cap on social security taxes from the first $97,000 of income and apply it to all income. And then to further his folly, he wants to renegotiate NAFTA, which accounts for 35% of our exports. What advanced the great recession into the Great Depression was anti-free trade protectionism and higher taxes. He is following the play book of President Hoover who approved the Smoot-Hawley tariffs of 1930, which increased duties on 20,000 items, and enacted the Revenue act of 1932, which increased the top tax bracket to 63% from 25%. We know how that turned out.
The current assault against freedom comes not only from both sides of the isle but the middle as well. Connecticut's Independent Senator Joseph Lieberman is pulling the country further to the left with his proposal to bar institutional investors, such as pension and index funds, from investing in commodities. According to him, "There is excessive speculation in the commodity markets that is driving up the cost of food and energy. The question is, do large institutional investors play a positive role? They do not." Mr. Lieberman fails to recognize that preventing institutional investors and pension funds from trading in commodities may be able to subdue rising prices in the very short term but higher prices provide the support needed to bring increased supply to the market. Suppressing the natural market price level by barring legitimate investment causes producers to decrease exploration and production of that commodity. Eventually, the supply demand imbalance becomes deadly and hyperinflation in that commodity is the result.
I've only touched on some of the more egregious proposals that may become law next year. For example, I could go on about the chorus of Senators who are proposing a windfall profits tax on oil companies or how congress and the Fed want to become an integral part of the mortgage business. But the point has been made.
Regardless of whom our next president is and how far the left congress runs, there are no true conservatives running in this election. What you do not hear much at all these days is talk of strengthening our currency and lowering our debt-a crucial part of any true conservatives agenda. Unfortunately, investors should prepare now for an unfriendly environment for the economy and the markets.
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lharrington, it is BECAUSE no true conservatives are in this race that things are going to get a whole lot worse. Socialism is the most destructive force in the history of the world, impoverishing nations and butchering millions. It constantly pits "haves" against "have-nots" in ways that inevitably end up bloody. It leads one class of people (the have-nots) to believe that they have a RIGHT to something that doesn't belong to them and that they didn't earn by the sweat of their own brow. It leads the other class (the haves) to believe that they have no obligation to help those less fortunate. That obligation is moral, not legal. Both are wrong and both are destructive.
Those who tout socialism's (supposed) virtues have rarely had to live under its tyranny, and tend to think this error was in the "WHO" implemented it, rather than in the "WRONG" principles it codifies. They quickly accept its tantalizing promises without studying enough of its disastrous history to know that those promises are ALWAYS broken. It is incredibly seductive, which magnifies that it is so incredibly destructive.
I notice that you suggest (#2)that the candidates probably won't carry out their campaign rhetoric. For one thing, what does that say about their character that they would LIE for the sole sake of obtaining power?
I believed the same teaser deception in Jan 2000 when George W Bush criticized the Republican Party for its traditional stand on limited government. I voted for him anyway, thinking that the other Republicans would either hold him in check on the budget or that he would somehow be converted to the virtues of limited government written into Article 1, Section 8 of the Constitution. I was wrong. I didn't vote for him again. I realized what a waste of my vote it would be to vote for a man who wasn't a traditional conservative, and who wouldn't therefore support my conservative principles.
Don't make the mistake that I did by voting for someone who makes campaign promises and DOES keep them in a very destructive way.
This fall, I will likely vote for Dr. Chuck Baldwin, Presidential Candidate of the Constitution Party, even though I'm not a member of that party either. He stands for correct principles and a return to the Constitution.
It seems absurd that both Obama and McCain are committed to energy alternatives that are -- at best -- decades (15-20 years)away and unproven in practice, while opposing solutions that have worked before, claiming that they will take too long (3-10 years) to implement. Are we going to bet our entire civilization on unproven methods that will take 2-3 times as long just to test?
I remember when Pres. Carter took office and promised vast sums of money to alternative energy research. He poured monumental amounts of money and research into it. Nothing came of it! Great cause, poor results! Free markets work much better because they allocate capital more efficiently and over time, the best alternatives generally rise to the top as consumers make choice that provide the most benefit at the lowest cost. Politicians can't do that!
The whole philosophy of taking the gains earned by one person and forcibly redistributing them through the coercive power of government to another, regardless of the nobility of the cause, is still a violation of 2 of the 10 Commandments. Whether I steal using my hands from a neighbor's house, or by cowering behind my vote and a shameless politician, it is the same. The founders understood this:
"The moment the idea is admitted into society that property is not as sacred as the laws of God, and that there is not a force of law and public justice to protect it, anarchy and tyranny commence. If `Thou shalt not covet' and `Thou shalt not steal' were not commandments of Heaven, they must be made inviolable precepts in every society before it can be civilized or made free." -- John Adams (A Defense of the American Constitutions, 1787)
We had better prepare, because things are about to get a whole lot more painful. Very painful indeed, because if the desk in the Oval Office has a plaque that reads Obama or McCain on it, it won't matter much which.