Joe Biden is scooping up the lion’s share of big-money contributions from finance leaders on Wall Street.
People in the financial industry have given well over $50 million to back Biden, according to the nonpartisan Center for Responsive Politics, compared with some $10 million for Trump.
T he Dow Jones Average is now 54 percent higher than it was when Donald Trump was elected. That’s why it’s so striking that Joe Biden is scooping up the lion’s share of big-money contributions from finance leaders on Wall Street.
People in the financial industry have given well over $50 million to back Biden, according to the nonpartisan Center for Responsive Politics, compared with some $10 million for Trump.
Biden has benefited from large contributions from leaders at Blackstone, JPMorgan Chase, The Carlyle Group, and Kohlberg Kravis Roberts, among other firms.
Some of this money is no doubt an insurance policy in case Democrats control both the White House and Congress. But economists at UBS, Bank of America, and Goldman Sachs all assure us they are sincere that Joe Biden in the White House would be bullish for the stock market. UBS claims that a Democratic clean sweep would be “moderately bullish” for stocks.
In a note to clients in early October, Goldman Sachs wrote that a flood of deficit spending under a Biden White House and Democratic Congress could cushion the blow of higher taxes by helping to increase economic growth: Spending increases on infrastructure, climate, health care, and education that would “at least match the likely longer-term tax increases on corporations and upper-income earners.”
This is a fantasy. I checked the historical record over the past 40 years on what election outcome benefits stocks the most. The best outcome is divided control of Congress, followed by a Republican-controlled Congress. The worst outcome for stocks has traditionally been a Democratic clean sweep of the White House, Senate, and House. A Republican sweep is the second worst outcome.
Biden’s agenda is especially punitive for stocks. A major feature of the Biden tax plan is a raise in the corporate income tax from 21 percent to 28 percent and a raise in the capital-gains tax from roughly 24 percent to 40 percent.
These are direct taxes on stock ownership. If the government takes a larger share of corporate profits, then by definition the shareholders get a smaller share. This should get capitalized into the value of stock shares. Right now, because of the double tax on investment income, a shareholder collects, after tax, 60 percent on the returns on stock, with the other 40 percent going to government taxes. Under Biden’s tax plan, the after-tax-return on the stock would fall to about 48 percent for the shareholder with 52 percent snatched away by the government. How is this tax scheme good for investors, good for stocks, or good for the economy?
But Biden has no shortage of apologists for his plan on Wall Street, especially from those who desire a job in a Biden administration.
You’ve heard Biden say over and over that a leading economist from Wall Street predicts that his plan will create more than 6 million jobs. That economist is Mark Zandi of Moody’s Analytics. He claims that a $4 trillion tax increase would create millions of new jobs.
When he’s not wearing his political hat, Zandi is a competent economist. But the Washington Examiner noted a few days ago that Zandi “has a bad track record on his predictions.”
That’s putting it mildly. In 2016, he predicted that Trump’s policies would cause “a lengthy recession” and that unemployment rate would rise to 6 percent or higher. Whoops. We had a barn-burner economy in 2017, 2018, and 2019, and the unemployment rate hit its lowest level in 50 years, at 3.7 percent.
But even worse was Zandi’s cheerleading for Obama’s $1 trillion stimulus plan in 2009. Zandi said that it would get us to 4 percent annual growth and create millions of new jobs.
The Obama stimulus plan actually ended up keeping unemployment at 9 percent, and it lost jobs.
No one has a perfect record in predicting the economy, but someone’s track record counts for something. It speaks volumes about the competence or lack thereof of the Biden team that Zandi is their source for economic wisdom. His model assumes that every dollar of government spending will have a “multiplier effect” of $1.50, so the greater the government’s deficit spending, the richer we will get. So $4 trillion of new deficit spending will give us $6 trillion in GDP. Following this logic, if we run up the credit card by another $10 trillion, we will be rich beyond our wildest imaginations and then die and go to heaven. And that’s why Zandi rhymes with candy.
Joe Biden is trying to reassure middle-class voters that he will “cut their taxes” and that his multi-trillion-dollar tax hike will hit only those with an income over $400,000 a year. But a new study by the James Madison Institute in Florida reveals that the Biden-Harris plan is so top-heavy with spending that it would cost $30 trillion over the next decade. The major costs are the Biden health-care plan, which would dramatically expand government coverage. His green-energy plan has a price tag of some $2 trillion.
Despite his promises, “Biden’s plans would require a doubling of the middle-class tax burden on Americans,” Donna Arduin, a former state budget director in New York, California, and Florida, tells me. “You can’t pay for it just by taxing people you call rich.”