If Hillary Clinton recognizes that the Shanghai flu currently infecting U.S. and world markets was in part caused by rumors of a capital gains tax increase in China, then why doesn’t she apply that same logic to tax policy here in the United States?
Because just as sure as day follows night, Hillary will undoubtedly try to raise tax rates on capital gains and dividends by not extending the Bush tax cuts if she were elected president.
Similarly, Hillary’s idea that this stock market correction is caused by too many Chinese or foreign purchases of U.S. bonds is pure insanity. In addition, her ridiculous claim that trade deficits are causing this correction is equal insanity.
Mrs. Clinton cited Sen. Byron Dorgan’s bill, which would trigger some kind of punitive action if our trade deficit exceeds 5 percent of GDP, and if foreign bond ownership exceeds 25 percent of GDP. Well here’s a news flash: Our trade gap today is already 7 percent of GDP and the economy has been prosperous for years.
Foreign owned Treasury bonds are only 16 ½ percent of GDP. Who really cares? Foreigners own $2.2 trillion of our bonds. Compare that to $54 trillion of family wealth.
And what’s more, OPEC and China only own 20 percent ($450 billion) of total foreign ownership. The lion’s share is actually owned by Britain, Japan, and other clear U.S. allies. These countries own the other 80 percent ($1.8 trillion).
So where’s the great threat?
All this bluster from Mrs. Clinton reeks of trade protectionism and capital controls. It belongs in a third world statist economy like Hugo Chavez’s Venezuela. It’s Pat Buchanan/Lou Dobbs stuff that would be devastating to the U.S. and world economy.
Mrs. Clinton has positioned herself substantially to the left of her husband on these issues. She will be laughed out of the ballpark by the left liberal academic community. In fact, moderate Democrats of the Jason Furman ilk, don’t even agree with this extremist nonsense.
Try to imagine the United States imposing capital controls. And try to imagine the United States trying to deglobalize from the world economy.
That’s as dumb as well, nationalized, socialized healthcare, or seizing oil company profits.