Wall Street Shocks Ripple Through the Economy
January 7, 2003
President Bush's announcement he will seek to end double taxation of stock dividends prompted Democrats, once again, to play the class warfare card -- claiming the tax cuts will only benefit the rich. But that claim ignores the fact that the stock market is not an isolated institution. What happens on Wall Street impacts the entire nation, economists point out.
The three-year bear market has resulted in:
- States collecting less revenue from taxes because capital gains and options have slowed to a trickle.
- Businesses having a harder time raising money because the market for initial public offerings is dead.
- Consumers spending less and saving more because they feel poorer -- while retirees talk about going back to work because their savings have evaporated.
- Job seekers confronted with fewer employment opportunities due to cutbacks in capital investment.
There is plenty of hard evidence to back up these assertions.
- The Wilshire 5000 -- the broadest stock market index -- plunged 43 percent from March 24, 2000, to December 31, 2002, vaporizing $7.4 trillion in market value.
- About one-third of the difference between the federal government's 2001 surplus and the projected 2002 deficit can be traced to lower revenues from capital gains taxes.
- The value of initial public stock offerings tumbled from $60.5 billion in 2000 to $22.5 billion in 2002.
- Venture capital to start new companies and create jobs declined from $107 billion in 2000 to just $17 billion in the first three quarters of 2002.
And the list goes on -- proving the very strong link between Main Street and Wall Street.
Source: John Waggoner, "How Wall Street Has Spread Its Misery Around," USA Today, January 7, 2003.
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