Redistributionists

Conservatives consistently refer to most Democrats as “tax and spend” and, more recently, as “redistributionists”. They do this almost out of habit. Relative to “cut taxes” and “less government” Republicans, most Democrats can probably be characterized as “redistributionists” on a relative basis. I find it interesting that, while Republicans and fiscal conservatives in general have maintained the “high road” on taxes historically, they have also been the most fiscally irresponsible by running up massive budget deficits. This is because they cut taxes but don’t have the political will to cut spending proportionally in order to come close to balancing the budget. It is ironic that Republicans talk tough about Democratic spending, but consistently fail to make the tough choices needed to cut spending on social programs and pork barrel projects.

We live in a country with some of the lowest tax burdens in the civilized world. So my conclusion is that “tax and spend” (aka “redistributionist”) is probably better than “don’t tax but spend”. In other words, aren’t we better off trying to take in as much as we spend, or shall we just keep printing money without regard to our ever-expanding deficit? With the U.S. economy now in recession, even the Republicans can’t possibly still believe that we can magically grow tax revenues enough to cut taxes further.

Buy Stocks Now!

I think the recent 30-50% slide in equities already prices in a severe and protracted recession. Assuming credit flows do stabilize (and the trend is positive), we are basically left with a stagnant economy. Most companies however will still be around and most will still make profits. The current "irrational" market however is valuing many stocks at ridiculously low valuations. Some are even near their cash values which means the market doesn't think they're worth anything. Clearly much of the recent selling is liquidity-based and I figure seniors and others who MUST have some cash to hold them over are mostly done selling by now (or will be very soon). And after the non-serious investors have exited via panic selling, the remaining investors will begin to see stocks for their intrinsic value again. At that point, and this is where I think we are, it will be apparent that many many stocks are bargains. This is not to say we will recover our huge losses (if we do, it will probably take a long time)--just that the equity market has clearly overshot a value target on the way down.