“Any hint of a growth agenda has vanished since Democrats took Congress. Trade-expanding deals with Latin America and South Korea are stalled, and every week brings a new proposal to restrict trade with China.

“On fiscal policy, Democrats have proposed or discussed raising taxes on cigarettes, oil and gas companies, hedge funds, private equity, capital gains, dividends, the U.S. subsidiaries of foreign companies, and individuals earning more than $500,000 a year (which includes millions of small businesses filing under Subchapter S). Add the promise of every Democratic Presidential candidate to repeal the Bush tax cuts if he or she wins in 2008, and no wonder investors are growing more cautious.

“Six years into an expansion, and with the Fed having limited flexibility, Congress and the White House should if anything be talking about another tax cut.” — WSJ editorial, 9/10/07, http://online.wsj.com/article/SB118937417544521843.html?apl=y

I think we’re starting to feel the “Democrat effect”.
: Business is preparing for the possibility of a Dem prez and Congress combined with the minimum wage, the failure to make the minor tax rate cuts of 2001-3 permanent, the inevitability of higher tax rates, increased regulations (esp. environmental), and trial lawyers having free reign as well as other catastrophic policies. Risk is just to great to invest now.

It’s time for the Fed to cut rates and another round of real tax rate cuts, esp. on capital, not those dinky ones whose effect seems to be waning already. A one-year push for a conservative economic agenda before the elections would help stabilize the economy.