Billionaire Carl Icahn Warns of Danger Ahead for US Economy

(Photo: Heidi Gutman, CNBC)
(Photo: Heidi Gutman, CNBC)

NEW YORK — Billionaire investor Carl Icahn may have said no to being Donald Trump’s Treasury secretary, but he’s not ready to give up the national stage.

In a rare move — even for an investor so accustomed to the public spotlight — the founder and chairman of $8.5 billion Icahn Enterprises has produced a video warning of “danger ahead’ for the U.S. economy that also advocates Trump as the best candidate to fix the nation’s problems.

In the 15-minute video, Icahn calls for taxes to be lowered for corporations and raised for hedge fund managers. He also reiterates his previous warning that interest rates hoovering close to zero are creating investment bubbles in real estate, art, corporate earnings and high-yield bonds.

“The middle-class investor has nowhere to go with their money but into the (stock) market, or even more concerning, high-yield bonds, which are very risky,” Icahn said in the video, which is posted on his website

In an interview with USA TODAY, Icahn said he made the video to highlight the “dysfunction” in corporate America and on Capitol Hill. “I want to see this dysfunction obliterated and we get stuff done in Congress,” said the billionaire, known for pushing his agenda at large publicly traded companies, including Apple, Yahoo and Motorola.

Icahn said he thinks Trump — who he sparred with in 2010 over a casino — is the best candidate to fix the dysfunction.

“I don’t think the other guys understand the major problems we face,” Icahn said of of presidential contenders. “I grew up on the streets in Queens (N.Y.). I never could have been this successful in any other country in the world. I hate to see it go down the tubes and that’s what’s sort of happening. We’re losing our hegemony. I really believe it.”

In July, Trump told MSNBC’s Morning Joe television show that he would “love to bring my friend Carl Icahn” on as head of the U.S. Treasury. Trump has also said he would recruit Icahn to negotiate with China.

Icahn has said he he cannot be Trump’s Treasury secretary because he has “a day job.” But he told USA TODAY he is open to helping Trump in other ways if Trump wins the White House in 2016.  “I’d be happy to help him in any way I could,” Icahn said. “I’m thought of as a good negotiator.”

Here’s a list of some of Icahn’s top economic concerns:

*Hedge fund managers don’t pay enough in taxes: Icahn said he agrees with Trump that Congress should close a tax loophole that allows hedge fund managers and other professional investors to benefit from lower tax rates on earnings. Under the current system, hedge fund managers get paid a portion of profits they earn for clients, which are taxed as capital gains, or around 23.8%. If they were taxed at ordinary income, they would have to pay up to 39.6%.

*Interest rates are too low: Icahn said he agrees with critics who have tied the mortgage meltdown of 2008 to the low interest rates that proceeded it. Lending standards have since been tightened, but Icahn said he still fears that historically low interest rates, which now hover close to zero, are creating asset bubbles in other areas, including high-yield bonds.

*M&A bubble: Icahn said the rise of junk bonds is contributing to an artificial merger boom. Companies are using the cash they have raised from junk bonds to buy companies they could not otherwise afford, he said. He said the merger boom is contributing to false growth by companies. “It’s like steroids,” he said of the rise in acquisitions.

*Corporate taxes are too high: Icahn says he wants Congress figure out a way to incentive companies to bring back the $2.2 trillion in cash they have overseas. It’s an issue some policymakers have argued could be dealt with through a tax holiday. Such a holiday would forgive either all or a portion of $770 billion in taxes that would otherwise be owed and benefit a slew of tech companies, including Apple — one of Icahn’s largest investments. Other economists have called for corporate taxes to be lowered more permanently.

Written by Kaja Whitehouse of USA Today

(Source: USA Today)

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