Perhaps the biggest concern: that President Bush's 2003 tax cuts, which lowered rates on capital gains and dividends to 15%, won't be renewed when they are set to expire at the end of 2010. McCain said he plans to extend the cuts, but both Democrats said they are likely to let at least some of the cuts expire.

Don Luskin, chief investment officer at TrendMacro, fears the Democrats will eliminate the lower tax rates before they expire. Higher tax rates reduce the after-tax returns of stocks, making them less-attractive investments. An analysis by Clifton suggests stocks could fall by as much as 10% if the capital gains tax rate returns to 20% and dividends are taxed at a person's normal income bracket.

Luskin says that with both Clinton and Obama having a good shot at defeating McCain, there is concern on Wall Street that Democrats will pursue anti-growth strategies if they capture the White House. He says Wall Street quakes at Clinton's proposal to freeze adjustable-rate mortgages for five years.

I've been enjoying Shelby Steele's remarkable book about Barack Obama, A Bound Man. Steele is a scholar at the Hoover Institution who, like Obama, had a black father and a white mother. Based on his reading of Obama's own writings, Steele argues that Obama seeks to identify himself as a black as part of a quest for his absent black father, enmeshing him in complicated ways in the demands of identity politics. Steele is frustrated that such politics -- which he believes keep blacks oppressed by causing them to view themselves in relation to white guilt -- are at odds with the revealed superiority of personal determination of the type that Obama has clearly exhibited in his own achievements.

Here's a sample:

...Barack Obama is a man who truly wants to be black, a man who is determined to resolve the ambiguity he was born into.

Does this disqualify Obama for the presidency? It may. There is a price to be paid for fellow-traveling with a racial identity as politicized and demanding as today's black identity. This identity wants to take over a greater proportion of the self than other racial identities do. It wants to have its collective truth -- its defining ideas of grievances and protest -- become personal truth. And then it wants to make loyalty to this truth a reflex within the self, within one's own thoughts, so that all competing thoughts are conceived in disloyalty...

...You must join a politics that keeps alive the idea of white obligations to blacks. Social determinism must be your worldview, so that you see blacks as "systematically" and "structurally" aggrieved even when no actual oppression is apparent. You may mention black responsibility in relation to black uplift, but to "be black" you must always land on a deterministic explanation of black difficulty. Determinism automatically blames and obligates white power for black problems, so it becomes the central faith of the black identity. When a black argues against it, he invokes the Uncle Tom label...

The point is not that Barack Obama is a blind and true-believing follower of this identity. Few blacks are. The point is that he is accountable to it. If, for example, Obama broke with this determinism by saying that blacks themselves were largely responsible for closing the academic achievement gap with whites, he would likely be seen as an Uncle Tom for letting whites "off the hook." So, in order to be black, he must pay tribute to a determinism that makes whites ultimately responsible for black uplift, even when it is obvious that only black responsibility will make a difference.

These are the identity pressures within which Barack Obama lives. He is vulnerable to them because he has hungered for a transparent black identity much of his life. He needs to "be black." And this hunger -- no matter how understandable it may be -- means that he is not in a position to reject the political liberalism inherent in his racial identity. For Obama, liberalism is blackness.

The number of poor people who can't afford food for their children is a lot smaller than it used to be -- thanks to capitalism. Capitalism didn't create malnutrition, it reduced it. The globalization of capitalism from 1950 to the present has increased annual average income in the world to $7,000 from $2,000. Contrary to popular legend, poor countries grew at about the same rate as the rich ones. This growth gave us the greatest mass exit from poverty in world history.

The parts of the world that are still poor are suffering from too little capitalism. Foreign direct investment in Africa today, although rising, amounts to only 1% of global flows. That's because the environment for private business in Africa is still hostile. There are some industry and country success stories in Africa, but not enough.

Mr. Gates also announced his foundation is starting "a partnership that gives African farmers access to the premium coffee market, with the goal of doubling their income from their coffee crops." This is fine as a modest endeavor to help a few Rwandan and Kenyan coffee farmers, but it's hardly going to remake capitalism. The main obstacles to exports in poor countries are domestic ones like corruption and political strife, not lack of interest from rich-country buyers for premium coffee.

Moreover, how do philanthropists choose just which product is going to be the growth engine of a country? Much research suggests that "picking winners" through government industrial policy hasn't worked. Winners are too unpredictable to be discovered by government bureaucrats, much less by outside philanthropists. Why did Egypt capture 94% of Italy's import market for bathroom ceramics? Why did India, an economy with scarce skilled labor, become a giant in skill-intensive IT and outsourcing? Why did Kenya capture 39% of the European market in cut flowers? Why did tiny Lesotho become a major textile exporter to the U.S.? Why did the Philippines take over 72% of the world market in electronic integrated circuits? Because for-profit capitalists embarked on a decentralized search for success.

Posted by Donald L. Luskin at 1:38 PM | link