What Kind of Sacrifice?
Winning the economic war.

Mr. Moore is president of the Club for Growth
September 19, 2001 7:30 a.m.

ew York Senator Hillary Clinton announced Monday on the floor of the New York Stock Exchange that if her money (from cattle-future trading no doubt) weren’t tied up in a blind trust, that she would be buying stock today. This may be the first time in her political career that Hillary has expressed any concern for helping the stock market, but it turns out her strategy of buying share to pro-up stock values is misguided.

Many economic commentators have urged the same response from patriotic Americans this week. Buy stocks; invest in America. My friend Bruce Bartlett has recommended this strategy as a way to prevent a market free fall. Millions of Americans took this advice and bought stocks Monday. Good for them.

This may help boost confidence in the days ahead, and we all know that for long term investing, stocks always offer a terrific rate of return.

But the stock market is as close as it gets in this world to a perfect market. No one individual, or even large group of individuals — even a mass effort in the millions — can long influence market prices or hold them above or below their value based on future earnings potential. (The big industrialists tried to prop up the stock market after the crash of 1929. It was a grand failure.)

Take the situation of our airlines. No amount of buying stocks can alter the fundamental fact that these companies have lost tremendous value in the last week (airline stocks were down almost 40% on Monday). Running an airline is not going to produce profits for a long time to come. Travel agents say that air reservations are down almost 50%. If the future profits of these airlines fall to zero, it doesn’t matter how much of the stock we all buy — the price will eventually fall to zero. Buying United Airlines stock won’t get people to fly the friendly skies.

Here’s the good news. There is a step that Hillary Clinton could and should take with her congressional colleagues to boost stock values: Cut the capital-gains tax in half. Do it today. Make it retroactive to 9/11/2001. If you cut the capital-gains tax you will instantly increase the underlying value of every share of stock of every American company. People like economist Paul Krugman say that this is ludicrous. That we need sacrifice now — not “tax cuts for the rich.” The USA Today poll today asked Americans if they would be willing to pay more taxes to finance a war on terrorism. Raising taxes now, on this fragile economy, would be about as logical as taking another plane and flying it into the Empire State Building.

Krugman and the media don’t get it. If we can keep stock values high and reinvigorate the economy, every American gains: our soldiers, our union workers, our 100 million share holders, and our children.

Ronald Reagan proved in the 1980s in winning the Cold War that the optimal constellation of policies at a time of national emergency is a muscular military machine and a mighty economic engine to finance that defense system. That is a valuable line of defense against those murderous villains who want to destroy our economic way of life.

Finally, we ought to never forget the wise counsel of the great General Patton who said that the goal of war is not to die for one’s country but to make the other bastard die for his country. The best type of sacrifice is that required of our enemies, not of ourselves.