WSJ ANDY KESSLER Aug. 24, 2015 7:13 p.m. - An excerpt . . .
Hillary Clinton’s big economic idea—ending corporate “short-termism,” as she calls it—will do more harm than good. On the campaign trail she rails against American corporations and the mysterious “tyranny of today’s earnings report.” Her solution is to raise capital-gains taxes and lengthen stockholding periods. Imagine anxiously waiting to unload during this month’s global selloff because of a holding period. Chalk it up as another misguided effort that will distort the information investors and companies rely on to make good decisions.
Markets run on signals. . . Anything that mucks up those signals will be disastrous for decision making and the productive fabric of the economy. . . Less trading means less information. Russia’s old stock exchange shut down amid the revolution in 1917 and eventually became a naval museum. Soviet planners embarked on five-year plan after five-year plan with no price signals. That experiment eventually failed.
The Chinese are about to unveil their 13th Five-Year Plan. None of the previous plans highlighted Alibaba and the importance of online commerce. That’s because progress happens by surprise, not government planning. Investors need report cards to judge progress, and thus there’s quarterly disclosure. . .
The Taxpayer Relief Act of 1997, passed by a Republican House and Senate and signed by a Democratic president, Bill Clinton, lowered capital gains rates to 20% and ushered in an era of innovative business models knocking out tired ones. That kind of reform would spur long-term corporate thinking. But Mrs. Clinton’s plan will simply penalize those being productive in the economy and hamstring innovation.