Randall Forsyth of Barron’s gauges the importance of this year’s first presidential debate.
Pileup on the island.
Granted, it doesn’t have quite the ring of “The Rumble in the Jungle” or “The Thrilla in Manila,” but then again the combatants at Monday’s first presidential debate lack anything like the rhetorical jabs that Muhammad Ali used to sting his opponents before they even stepped into the ring. Still, the lead-up to the showdown between Hillary Clinton and Donald Trump at Hofstra University on New York’s Long Island has the feel of the hype preceding the heavyweight championship fights of yore.
The audience for the confrontation could exceed 100 million, not far short of the 112 million viewers for the biggest U.S. sporting event, the Super Bowl. And if folks get together for parties on Monday with chicken wings and beer, maybe this debate will match that total.
According to the Strategas political team led by Daniel Clifton, that would be about half again the 67 million viewers that Barack Obama and Mitt Romney drew in their first debate in 2012 and nearly twice as many as the 52.4 million who tuned into Obama’s first face-off with Sen. John McCain in 2008. Indeed, Monday’s face-off is likely to shatter the record set in 1980, when 80.6 million watched Ronald Reagan’s first bout with Jimmy Carter.
“With all that attention, the debate has the potential to shape not just political opinions, but also investor psychology,” writes Nicholas Colas, chief market strategist of Convergex. “Just look back to Secretary Clinton’s comments about the EpiPen pricing controversy last month and the subsequent drop in the Nasdaq Biotech Index for evidence that politics can touch asset prices as surely as the levers of a voting booth. And that was not an isolated case: One tweet from candidate Clinton last September had a similar effect on the sector,” he observes. …
… Another possible area of conflict is taxes, especially Clinton’s new proposal to boost the estate levy sharply, which contrasts with Trump’s call to eliminate the “death tax” altogether. Strategas’ Clifton calls Clinton’s plan a move by Democrats toward taxing wealth, now that income-tax rates are as high as 40%. He adds that they also might seek to tax capital gains and dividends at ordinary income rates.
Clinton’s proposal would surely please Bernie Sanders, the socialist Vermont senator who was her main rival for the Democratic presidential nomination.
She would cut the exemption to $3.5 million from the current $5.45 million, and replace the 40% tax on estates above that figure with a 50% rate over $10 million, 55% over $50 million, and 65% for more than $500 million. But here’s the real kicker: Clinton would also eliminate the step-up in basis, “which is a significant change in public policy by placing a new layer of double taxation on inherited assets,” Clifton adds. Under current law, the cost basis on inherited assets is increased, or stepped up, to current prices. That greatly reduces the capital-gains liability on older assets acquired at much lower prices—say, Apple stock bought when it was in single digits, adjusted for splits.
Clinton’s estate-tax plan would have zero chance getting through the House of Representatives, which is likely to remain controlled by Republicans. Trump’s plan probably wouldn’t be passed by the Senate, even if it stayed in GOP hands. But the dueling proposals could produce fireworks in Monday’s debates.
