Fixing the Economy’s Problems

Why is President Obama so determined to reduce private sector economic activity?

Weeks after abandoning his proposed tax increase on college savings, President Obama is back with a plan to raise the cost of investing. On Monday the White House dusted off its proposal to limit retirement options that was hooted down in 2011 by a bipartisan coalition in Congress.

The White House says that many stock brokers are recommending products that generate fat commissions for themselves, rather than products that best serve their customers. It claims workers are particularly vulnerable to this “conflicted advice” when they roll over their 401(k) workplace savings into Individual Retirement Accounts.

Brokers are already heavily regulated by the Securities and Exchange Commission, which imposes myriad rules to prevent fraud, ensure that fees are disclosed and protect clients from “unsuitable” investments. But the President wants to require investors to use advisers who are even more heavily regulated. Specifically, he wants retirement savers seeking advice to use fiduciaries, who are legally bound to act in the client’s best interest.

That’s the most direct effect of taxation: it reduces private sector economic activity. Taxation and interest rates are the two main levers that the federal government and Federal Reserve, respectively, have to regulate private sector economic growth.

Why does the president want less of it?