Wealth Is as American as Apple

It redefines counterintuitive to suggest that the American economy will be well served by arbitrarily destroying wealth. Yet this is the Biden Administration’s latest breakthrough idea, following up perhaps on its pharma industry stimulus of mandating price controls.The announcement of the antitrust suit against Apple, at a single stroke, wiped out something like $110 billion of Apple’s market cap. Perhaps President Biden wasn’t focusing on the fact that this means $110 billion less unrealized gains soon to be subject to his wealth tax. Oh well, one can’t have everything.Economists have a term for the economic halo cast by booming equity values. It’s called the wealth effect. It has a wonderful impact on economic growth by incentivizing a variety of stimulating activities. Wealth motivates people and corporations to spend and invest. Thus it has the double barreled effect of simultaneously stimulating demand and supply.Sounds like it covers most of the bases.An economist we all know said, the creation of wealth is always good; what you do with it is a political question. The Biden team, sadly for Apple shareholders and the country, only absorbed the latter half of this visionary observation. Other than the destruction of wealth, it’s hard to understand the rationale for launching an antitrust suit against Apple. If you asked the average iPhone owner how Apple’s monopoly was impacting him, you would get a blank stare. iPhone sales continue to boom in the U.S., not because there are no other choices — think Google, Samsung — but because consumers love them.When you factor in the value of all the features which have been added over the years, the price of the iPhone has actually plummeted. Hardly monopolistic behavior. iPhone sales have stalled in Communist China because of — wait for it — competition.So, is Mr. Biden concerned with the welfare of the American consumer? Well certainly not this generation of consumers as antitrust suits of this complexity — not to mention dubious legal foundations — take years to resolve. The famous IBM case took 13 years to complete, ultimately dropped after being ruled “without merit.” So we are left to conclude the only rational reason to sue Apple was to reduce its value, not for any valid antitrust objective. Mr. Biden is 81; he doesn’t have a 13-year time horizon.On the surface Mr. Biden seems to have a schizophrenic relationship with wealth. On the one hand he wants to tax it, but on the other he wants to destroy it. Witness this inexplicable antitrust action, farfetched prohibitions on mergers and acquisitions (look at the value of U.S. Steel after help from Washington); and, of course, price controls for the pharma industry. As if this wasn’t enough, there’s all his jawboning of industry in general about price gouging and other manifestations of greed.The effect on wealth means there will be less to tax. Yet maybe, like parallel lines, the two objectives do meet in the distant future. After all annual wealth taxation is, through confiscation, wealth destruction on the installment plan.Perhaps Mr. Biden is convinced that China is our greatest global rival and that we should compete with them by copying them. After all President Xi has been one of the world’s leading destroyers of wealth. Any unfortunate investor in Alibaba or Baidu knows what I mean.Those two bellwethers of the Chinese stock market currently trade at around 25 percent of their all-time high. In each case, and so many more, Mr. Xi had wiped out enormous wealth that might have funded growth, diversification, innovation, even the dreaded stock buybacks. Why Mr. Biden should want to emulate such policies is a mystery. Maybe he thinks Mr. Xi knows something he doesn’t. He’s probably right about that.As I argued in the “Edict of Warren,” an attack on wealth is fundamentally un-American. Wealth may not be synonymous with happiness — as in life, liberty, and the pursuit of thereof — but there are certainly some overlaps. This kind of mindless attack on wealth will leave us all, not just the shareholders of Apple, poorer.

Wealth Is as American as Apple

Wealth Is as American as Apple

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