Taxes and Bombs Jude Wanniski April 16, 1999

The sudden sell-off in Internet stocks either is being ascribed to disappointing earnings here and there in the high-tech corporate world or to a correction of excessive speculation. Because we do not believe the Internet stocks have been discounting the next quarter's earnings anyway, we can't worry about such spot news as having much meaning. And we don't believe the Internet stocks have been driven up by speculators, except insofar as those speculations that see big things for the industry deep into the future are outweighing those who speculate that it is all overblown and that most of these high-fliers will not be around in five or six years. The one thing that immediately affects the long-term future of the telecosm industry is the near term prospects for economic growth. The companies that comprise the Dow Jones Industrial Average have less interest in capital formation than do the companies that make up the Hambricht & Quist index. A baby needs mother's milk. A grownup can get by with black coffee and toast.

In our previous reports on the bombing campaign, we noted that it had not yet affected the financial markets, but now it is, first and foremost in trimming back values in those enterprises that have been expecting further downward adjustments in the tax rates that inhibit capital formation. This is because of the determination of the Republicans to cover their behinds on Social Security and Medicare to a point where they cannot be accused of using the current SS surplus for tax cuts. The NYTimes today reports the GOP has done exactly that, positioning itself as a more ardent champion of budget austerity than the White House. Of course, the White House gets the credit for being smart enough to talk the GOP dimwits into painting themselves into that corner. Republicans still plan to use the additional surpluses being projected by the Congressional Budget Office for tax cutting, but there now are warnings from the CBO that President Clinton is in effect bombing the tax cuts with the military expenses he is running up in the Balkans.

The bombing campaign is relatively cheap thus far, merely running into the billions. Commander-in-chief Clinton, egged on by the maniacal Bombers in the GOP and the WSJournal editorial page, is now inserting ground troops into Albania. Who can doubt that he will soon arrange a pretext to send a few divisions into Serbia? As Robert Novak pointed out in his Thursday syndicated column, the Republicans who oppose the operation may be in the majority, but without leadership they are running in different directions and caving in one at a time. The only really forceful opponent thus far is Pat Buchanan, now a GOP presidential candidate. Because he is not seen as a major player, the weight of his views scarcely offsets those of Arizona Sen. John McCain, who is itching to blow everyone up to prove his manhood as well as Madeleine Albright's. Former Veep Dan Quayle supports renewed negotiations with Slobodan Milosevic, but his position still seems to be evolving. He at least has distinguished himself from George W. Bush and Elizabeth Dole, who are humanitarian bombers, as Attorney General Janet Reno was at Waco in 1993. Jack Kemp, who has publicly called the idea of sending ground troops as "insane,"sent Quayle a long memo on the subject a week ago, which is now circulating on Capitol Hill. But Kemp, who has taken himself out of elective politics, even has less leverage than Buchanan in these matters. The weekend talk shows could be important, with Quayle on Saturday the guest on CNN's Evans&Novak. Next thing you know, if the bombers can't be stopped, we will be hearing talk of a war tax.