The Bull Market

The American economy really doesn't need the stimulus of a tax cut right now – but it does need a redistribution of wealth that is the exact opposite of what the Republicans are doing with their tax bill.  Don't worry though!  Stock values will continue to rise because inequality is really good for the market.

Corporate America has been quite profitable for years now, but new investments to expand production remain rare.  That's because corporate America has found "better" uses for its money.  With added wealth from tax savings, we can expect even more stock buybacks, more monopolistic mergers and acquisitions, and higher dividends paid.  All of those make stocks more valuable — but even so, most 401Ks still won't add up to enough to finance a worker's retirement.

Since the tax bill increases the deficit and the debt, the next "obvious" step is to reduce them with cuts to Social Security, Medicare, Medicaid, and other safety net programs that might come in handy even before your 401K is used up — and cuts to entitlements just might push the markets even higher.

 The temporary cuts to taxes on some less lofty incomes might create some temporary consumer demand; but short-term demand won't justify new investment and expanded production, and producers won't bet on the cuts being extended.  When demand falls again with the consumer's disposable income, corporate managers will respond with more stock buybacks.  The markets won't suffer — because the transfer of wealth will be complete.