THE INDIVIDUAL Investor’s Blog


This Congress has been unable to pass any long-term measure; no environmental policy, no energy plan, only a short-term 2-calendar-year infrastructure policy. So adding more uncertainty about another long-term policy – tax policy – will make matters worse for those likely to make investment decisions. And uncertainty leads to deferred investment decisions, which really is a move on the overall economy. The largest investment decisions for many people are buying or renting a car or a home. For Americans in the middle 60% of income – i.e. not the cheapest or highest 20% – a home symbolizes 40% to 50% of their entire asset foundation.

And part of the financial decisions of whether or not to buy a home is driven by the mortgage-interest deduction. If you borrow money to buy a genuine home, you pay interest on that debts. If you itemize your fees, you can deduct that interest from your total taxable income, reducing taxes with a few thousand dollars every year.

Individual investment decisions are barely the backbone of the overall economy. Private and public institutions and companies also make investment decisions – decisions to build a street or hospital, a wind plantation or a hydrogen herb, a stadium or a condominium – all predicated on expectations of long-term insurance policies. But changing the policy could impact home purchase decisions and then the value of the one largest asset for some American families. And that’s the fear, this season that there will be a change, and then next year, and then your year after, as each divisive Congress aspires to benefits its principal constituencies.

It’s impossible for investors to invest within the long term when there is absolutely no clear sight on policy. Municipalities can’t build new large infrastructure if they don’t really understand how much federal financing they will receive on their investment. Utilities can’t build new power vegetation if they don’t really know the long-term environmental policies.

Chemical companies can’t build new processing facilities if they don’t know how the plan will impact the availability of natural gas. We can not possibly move beyond an oil or gas-based energy system without a long-term 30- or 50-calendar year plan. The so-called Solyndra scandal wasn’t a scandal a lot for the government’s loan guarantees, as it was from the lack of any long-term energy plan, which stymied the demand for the facilities products.

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Businesses will adapt to whatever long-term policy you devote front of them. That’s what business owners do. Entrenched businesses fight teeth and nail to keep whatever plans are set up in order to keep up their advantages. Growing businesses aim to change policy to allow them to grow faster and more profitable in the short term (think Citicorp and Glass-Steagal. This is why Congress needs to get in equipment and set some long-term rational and realistic plans and let businesses work out how to benefit from them.

Unfortunately, until the attitude in DC changes, “long-term” is an election cycle, if not a media cycle. When plans established one year are reversed four years later, businesses can’t make rational long-term investment decisions. And without long-term investment decisions, businesses will simply lever up for financial not proper investments.