Twenty-two years ago this fall, a new book with the provocative title “Dow 36,000” was published to great fanfare — and not a little derision. U.S. stocks had been on fire. The technology and internet boom spurred a wave of day-traders and investment mania that now seems quaint. But at the time, the Dow Jones industrial average index was hovering around 10,000. And even in those heady days, forecasting a near-quadrupling of the index appeared naïve at best and ridiculous at worst.
Today, the Dow is on the verge of reaching that mark, even with recent gyrations triggered by a cocktail of concerns about the Chinese property market, inflation and the U.S. debt ceiling. That doesn’t make the earlier prediction prescient: had stocks simply averaged 7 percent a year — a benchmark commonly set by professional investors — the Dow should have hit 36,000 by 2018. While the trend has been up and up, the past two decades have been anything but smooth for stocks. Through the financial crisis and recessions of the past 20 years, along with periodic selling bouts, prices have oscillated wildly.
Even so, stocks have seen massive gains relative to wages. What then to make of the growth of the Dow? The more-than-fivefold gains for the tech heavy Nasdaq? Is it a sign of an economic system badly tilted toward the wealthy? Proof that financial markets exist in an alternate universe of capitalism, ever-expanding as the prospects for so many millions continue shrinking?
These days the politically fashionable solution is to ratchet up the corporate tax rate from the current rate of 21 percent to as high as 28 percent, the rate on long-term capital gains from 20 percent to as high as 39.6 percent, and potentially tax some unrealized gains as well. But while the urge to penalize thriving companies and investments may be a justifiable reaction to the wage-stock market disjuncture, taxes will do little to address the systemic problems separating the haves from the have-nots.
Though more than half of American households own stocks, the gains in financial markets are often treated as a prime example of how those with money — and how capital in general — have reaped unfair rewards. The current imbroglio in Congress over how to fund a several-trillion-dollar spending plan has turned to taxing stock market gains at a higher rate, in part because of a conviction that corporations and the very wealthy enjoy privileged tax treatment on those gains relative to wage-earners.
Without question, the past decades have been a golden age for capital. Anyone with money in financial markets — and yes the wealthy have proportionately more invested — has seen gains that are likely inconceivable to a wage earner who has no stake in the markets.
One of the ironies of the pandemic is that it has been relatively good for most Americans’ finances. According to the Federal Reserve, the bottom half of American households saw their net worth increase by 36 percent in the first…
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