Congress Makes the Economy Hibernate

Jeff Jacoby offers an interesting tidbit in today’s Globe:

… it’s a quantifiable phenomenon. Scholars call it the “congressional effect” – markets tend to get nervous when Congress is in session, and generally perform better when it isn’t. As economists Michael Ferguson and H. Douglas Witte have shown, the impact this tendency can have is dramatic. Analyzing stock returns since the Dow Jones Industrial Average was created in 1897, they found that an astonishing 90 percent of its gains occurred when lawmakers were on vacation. A dollar invested in the index’s stocks in 1897 and converted back to cash whenever Congress recessed would have grown to just $2 by 2000. On the opposite strategy – investing in stocks only when the House and Senate were away and cashing out when they came back into session – that dollar would have grown to $216.10.

Maybe our homegrown reachers-for-the-stars — those non-Democrats who challenge Rhode Island’s national representatives — should make this a talking point. You know, something about transforming the national legislature into an organization to which the nation can look to solve problems, not perpetually recreate them.

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joe bernstein
joe bernstein
12 years ago

it’s “hibernate” 🙂

Justin Katz
12 years ago

Ugh. Blogging on the run. My brain was screaming “spellcheck, spellcheck!” I should have listened.
Thanks for the correction.

Monique
Editor
12 years ago

Does the Constitution specify how frequently Congress must meet? Suppose for a period, we restructured to have them meet for one month every other year, a la New Hampshire. What harm would a little experiment do …?

Monique
Editor
12 years ago

… We would, of course, have to address the issue of compensation, which would presumably need to be adjusted in view of the considerably lessened work load.

Ragin' Rhode Islander
Ragin' Rhode Islander
12 years ago

>… We would, of course, have to address the issue of compensation, which would presumably need to be adjusted in view of the considerably lessened work load.
Yes, give them a raise and increase their pensions.
Signed,
Robert Walsh
NEARI

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