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Brian Wesbury
Chief Economist
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Bob Stein
Deputy Chief Economist
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 | Waving the White Flag on Tax Hikes |
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Back on February 1, 2010, we wrote, "No matter how big of a drift toward populism it appears the country has taken, it is also clear that President Obama is losing ground with his agenda. The Democratic majority is shrinking and should shrink more in the months to come. As a result, the odds of repeating anything like the Great Depression are low and shrinking by the day. It's not the 1930s, it's not even close."
These words are similar to others we have written and many we have spoken in the past year. Fear of a certain policy needs to be backed up by two things. First: the actual implementation of that policy. And second: the true impact of the policy itself.
For the expiration of the Bush 2003 tax cuts, we have argued that both of these factors are reason to be hopeful. First: because American voters have had enough of big government, the tax cuts may not be allowed to expire on December 31, 2010. And second: the tax hikes themselves are actually smaller than the 1993 Clinton tax hikes, which did not cause a recession.
With key Democratic Senators (Bayh, Nelson and Conrad) all suggesting that a tax hike in 2011 would be a bad idea and that extending the Bush tax cuts would be a good idea, the risk to future growth and equity values is falling. This change of heart is not shared by all Democrats...yet. But expect the pressure against these tax hikes to build in the months ahead. This is good news for equities.
Hang in there. The American voter has reacted strongly enough that politicians are listening. A shift toward the middle is underway.
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These posts were prepared by First Trust Advisors L.P., and reflect the current opinion of the authors. They are based upon sources and data believed to be accurate and reliable. Opinions and forward looking statements expressed are subject to change without notice. This information does not constitute a solicitation or an offer to buy or sell any security.
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The information presented is not intended to constitute an investment recommendation for, or advice to, any specific person. By providing this information, First Trust is not undertaking to give advice in any fiduciary capacity within the meaning of ERISA, the Internal Revenue Code or any other regulatory framework. Financial professionals are responsible for evaluating investment risks independently and for exercising independent judgment in determining whether investments are appropriate for their clients.
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