Monday, October 25, 2010

An Absent Congress Is the Best Congress

from Louis Navellier:

The Wall Street and Politics Link Extends

For more proof that the market and politics have a strong connection, here is an interesting statistic that shows how the performance of the stock market is affected by Congressional sessions. As the chart below shows, if over the last 100 years you had invested $1 every time Congress started a session and took your money out every time it recessed, you would have doubled your investment to $2. If you had done the opposite and invested $1 every time Congress recessed and sold when it reconvened, your $1 would have turned into $216!

Kent comments:

Why, oh why, do you suppose that this is the case?  Why would people who invest in businesses be more likely to do so when Congress is not in session?  We must ask ourselves:  why?

Can we conceive of anything that Congress would do that might look good to those who invest in business via the stock market?  Of course we can.  Congress could cut taxes.  Right now, Congress taxes corporations at a rate much higher than most of the rest of the world.  A moment’s reflection tells us that when Congress taxes a corporation, it is, in effect, taxing the shareholders of that corporation twice -  Congress takes some of the profits that might have gone to shareholders via that corporate tax, and then a second cut is taken when the shareholders receive a dividend.

So Congress could stop doing that, and things like that, by passing a law to that effect when it is in session (assuming the executive cooperates or his veto can be overridden).

Congress could also decrease the regulation of business.  It is very difficult to pursue some kinds of business in the U. S., and almost impossible to pursue others, just because of regulation.  The cost of complying with regulations drains potential profits from business.  Congress could decrease this dramatically, and this would make people much more willing to invest in businesses.

The problem is that Congress almost never does such things.  Taxes and regulations almost always increase.  Rare decreases are usually temporary – witness the so-call Bush tax cuts.  The trend of taxes and regulation on businesses has been generally upward for many decades now, and this makes people – quite rationally – less willing to invest in business.

Why does Congress do those things it does in this regard?  Here is a simple, partial answer:  because most people we elect to Congress do not see themselves as guardians of liberty.  They instead usually see themselves as collectors of power.  They see the state as the ultimate institution to provide for people, and to control people.  They seem to forget that any resources the state has it must take from those who produce things.  They forget that the more they control people, the less people will produce.  And the less people produce, the less government will have available to confiscate.

The members of Congress tends to forget that they ought to be guardians of liberty, including the liberty of people to work, plan, produce, buy, sell, and invest without fear of inhibiting taxation or regulation.  So they need to be reminded of this.  And when they ignore our reminders, they need to be sent home.

Many of them need to be sent home.  Don’t forget to tell them this next Tuesday, November 2nd.

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