If I Had a Hammer - 09/21/09

September 21, 2009

If I Had a Hammer
By Doug Kass, The Edge

One thing anti-elitists and the current administration share is the pressing need to pay for the budget deficits.

Also, both are inspired to tax the wealthy in order to pay for our massive policy initiatives.


If I had a hammer
I'd hammer in the morning
I'd hammer in the evening
All over this land
I'd hammer out danger
I'd hammer out a warning
I'd hammer out love between my brothers and my sisters
All over this land.
-- Peter, Paul and Mary, "If I Had a Hammer"
Last week Mary Travers passed away. As the uplifting voice of Peter, Paul and Mary, her anthem provided a solid anchor of unity and positive messages throughout the chaos and violence of the 1960s. (The YouTube link above, which was filmed during the 1963 March on Washington, is a real treat.)
In contrast to Peter, Paul and Mary's words of unity, throughout last week and over the weekend, there has been a visible populist uprising that, at times, has bordered on hate. It is being led by an outspoken group (perhaps the most outspoken being Glenn Beck and South Carolina Congressman Joe Wilson) that seem to be suspicious of government power, of the educated and of the affluent. While there might or might not be a racial component to it, it seems to this observer to represent more of a cultural divide between rural, small town America and cosmopolitan America and is more anti-elitist rather than exclusively racial.
This increasingly vocal minority used to be on the periphery but is now in the wide open, in part, reflecting the proliferation of the Internet, a rapid 24-hour news cycle (featuring staccato-like sound bytes) and, generally speaking, the faster-moving flow of all information in the New Millennium.
Regardless of its genesis, the one thing that the anti-elitists and the current administration share in common is that there is a pressing need to pay for the budget deficits, and they both are inspired to tax the wealthy in order to pay for our massive policy initiatives.
Both corporations and the wealthy will increasingly carry the burden of the social programs and the large stimulus efforts put into place in 2008-2009. For corporations, higher taxes and the costs of regulatory initiatives will make it more expensive to do business in an economy providing less revenue. For wealthy individuals, the marginal tax rate is clearly moving towards 60% sooner than later. Both these developments represent an enormous headwind to economic prosperity and, in all likelihood, a P/E multiple bender/contractor.