Boskin: Obama’s Radicalism is Killing the Dow
It’s hard not to see the continued sell-off on Wall Street and the growing fear on Main Street as a product, at least in part, of the realization that our new president’s policies are designed to radically re-engineer the market-based U.S. economy, not just mitigate the recession and financial crisis.
Martin KozlowskiThe illusion that Barack Obama will lead from the economic center has quickly come to an end. Instead of combining the best policies of past Democratic presidents — John Kennedy on taxes, Bill Clinton on welfare reform and a balanced budget, for instance — President Obama is returning to Jimmy Carter’s higher taxes and Mr. Clinton’s draconian defense drawdown.
Mr. Obama’s $3.6 trillion budget blueprint, by his own admission, redefines the role of government in our economy and society. The budget more than doubles the national debt held by the public, adding more to the debt than all previous presidents — from George Washington to George W. Bush — combined. It reduces defense spending to a level not sustained since the dangerous days before World War II, while increasing nondefense spending (relative to GDP) to the highest level in U.S. history. And it would raise taxes to historically high levels (again, relative to GDP). And all of this before addressing the impending explosion in Social Security and Medicare costs…
From the poorly designed stimulus bill and vague new financial rescue plan, to the enormous expansion of government spending, taxes and debt somehow permanently strengthening economic growth, the assumptions underlying the president’s economic program seem bereft of rigorous analysis and a careful reading of history…
On the growth effects of a large expansion of government, the European social welfare states present a window on our potential future: standards of living permanently 30% lower than ours. Rounding off perceived rough edges of our economic system may well be called for, but a major, perhaps irreversible, step toward a European-style social welfare state with its concomitant long-run economic stagnation is not.
President Barack Obama now has the distinction of presiding over his own bear market.
The Dow Jones Industrial Average fell 20 percent since Inauguration Day, the fastest drop under a new president in at least 90 years, according to data compiled by Bloomberg…
Yep.
ADDENDUM
(H/T)
Wall Street has soured on the new Administration.
A visual.
The Dow represents 30 arbitrarily chosen companies out of thousands. It suffered one of its worst losses when Truman announced that WWII was over and one if its biggest increases when the Titanic sunk.
So, by your causal logic, the percipitous decrease resulting from the election of President Obama is on par with ending WWII, spreading democracy, and putting the brakes on fascism.
– Perhaps it is.
Obama killing the DOW? First off, the DOW was nose diving long before Obama took office, so I’m not so sure at face value this makes any sense. But your post suggests that you think the economic news itself isn’t the primary factor here. Let’s see:
– GM’s auditor reports they may face bankruptcy
– Moody’s looks to downgrade BofA and Citi’s rating
– Oil drops to $40 (bad for Chevron and Exxon Mobil, not so bad for the rest of us)
– Existing home sales fall below 4.5 million for the first time in more than a decade
– The median home price fell another 3.1% in January (18.9% total since July)
– Vacant housing is at record levels
– 4th quarter 2008 investments fell 28%, the sharpest in 50 years
– New orders down 5% each month this year
– And unemployment claims keep going through the roof
But if only Obama would simply speak about cutting taxes all would be rosy? Remind me again which party views Obama as the messiah?
Ooh, forgot to add JP Morgan (also in the DOW) in the Moody ratings downgrade.
Sorry,
I guess that every leading economist and financial mind that opposes these efforts on behalf of BHO are just memebers of the vast right wing conspiracy. They have no merit whatsoever be cause “he who can walk on water” can do no wrong.
Russ, Robert,
The Bloomberg article is simply reporting what is quickly becoming a very serious problem that has been exacerbated by the new administration.
Robert, while you might find the Dow to be “arbitrary” selection of stocks, history and economists will disagree. Further, it’s not just the Dow. The Nasdaq, S&P, the Chicago Merc, and virtually every leading international index are down.
That the Dow is down 20 percent since BHO took office is not insignificant. In fact, prior to his election, market gurus like Jim Cramer, for example, predicted a rally. That has not happened, nor is it likely to happen.
Traders and the market are responding to what can only be described as a “radical agenda.” There is nothing fiscally conservative or even smart about the president’s budget, or his desire to damn the torpedoes.
The scary part is that historically, the markets have been about 6 months AHEAD of the overall economy.
Russ,
Your grasp of the economic news is obviously a bit light and well, scatterbrained. Downturns in the housing and the banking industries have been inextricably linked. The cause, as we know, was putting people in houses they couldn’t afford. New orders, unemployment, and 4Q investment are all tied up in the ensuing and persisting malaise.
The good news is that drops in oil prices, housing stock, and even stocks should begin to bring new investment in the markets. Unfortunately, with the president proposing massive spending initiatives, people are too scared about their inevitably increasing taxes to resow the seeds that naturally move economies out of recession. Therein lies the bad news: in his first month in office, BHO has effectively put up a giant roadblock to the regenerative capability inherent to our capitalist system.
I’m not sure it’s so much his radicalism (though, I don’t dispute the assertion that he has radical tendencies and ties), versus his apparent “let em eat cake” attitude which has led him to do nothing to stop the continuing slide. He puts his faith in government, not on the companies whose continued existence will help him pay the bills. He’s basically told everyone that he’s not concerned with the falling stock market, because he’s convinced himself that he’s the savior and that his long term view of higher taxes and more regulation is the correct one. They’ve responded in kind by selling off in record numbers. Although I admit this is slightly conspiratorial, I tend to think his targeting the stock market may be intended to scare people out of the private equities market, and into buying US government bonds and T-bills, so he can borrow the money to spend it on his agenda, when the ChiComs stop buying. The 30 Dow stocks are not arbitrary. They represent a generally representative slice of the overall productive economy. Take a look at the S&P 500 … its tracking nearly the same. Nasdaq is in the tank, too. While it is technically correct that the stock market drop-off started before he took office, it accelerated once it was apparent what he would do once in office, and since his inauguration, it has essentially been in a free-fall. PS It isn’t done dropping yet. Citibank will probably fall within the next week or so, and GM will almost certainly file for bankruptcy or be broken up and sold off. The only people still invested in either company are hedge fund traders, day traders hoping for a quick killing in case of another bailout, and people who like to gamble. No one who… Read more »
The national deficit has doubled SINCE Obama has taken office.
The stock market has dropped over 30% SINCE Obama has taken office–the worst start to any Presidency since Herbert Hoover.
And this can’t be blamed on the “Bush Administration”.
People like Bob Balliot can make ridiculous comparisons equating the drop to the end of WWII or like Russ, suggest that the Dow was “already” heading south.But that’s not the reality.
The reality is that the markets crave stability and consistency. Obama has provided neither. Obama campaigned as a moderate, but is governing as a leftist.
Investors don’t know if banks will be nationalized in 6 months. Indeed, some Obama supporters have suggested just that.
They don’t know what additional requirements and taxes the Obama administration will impose on companies.
They do know that Obama, between his stimulus plan and budget proposals, has spent more money in a month than all previous U.S. presidents have spent combined. And furthermore, he has indicated that he intends to tax job creators to help subsidize the effort.
This is what caused the drop and it’s why many Democrats in the financial industry that supported Obama are backing away. They expected an “Obama Bounce” and got an “Obama Plunge”. Well, welcome to Obamanomics 101, Jim Cramer. Even some liberal Democrats like Russ Feingold are beginning to question Obama’s policies.
That’s what you get for electing someone with great rhetoric, but no experience. Obama may have sped up the decline of the U.S. economy, but hey, at least he looks good doing it.