What Went Up Now Goes Down

The trend is not looking helpful.

One interesting thing that has been transpiring is the fact that despite all of the “stimulus” the Obama administration has been injecting into the U.S. economy the stock market continues to fall.  In fact, the stock market hasn’t been this low since 1997.  Imagine all of the wealth that has been wiped out since January 20, 2009.  Could it be, possibly, that the “Obama Effect” isn’t turning out to be a positive one but instead negative?

Americans have welcomed the Obama era in the same spirit of hope the President campaigned on. But after five weeks in office, it’s become clear that Mr. Obama’s policies are slowing, if not stopping, what would otherwise be the normal process of economic recovery. From punishing business to squandering scarce national public resources, Team Obama is creating more uncertainty and less confidence — and thus a longer period of recession or subpar growth.

As has been written here earlier, every $1.00 that a government removes from one of its citizens is $1.00 less that he or she has to spend on something they might want or need.  In taking $1.00 from your pocket, the government is telling you that it knows how to spend that money better than you do.  If we are just speaking about $1.00 everybody will manage to survive but if we are talking about the $787 billion “stimulus” plan that is another issue.  This money is all borrowed and will be recouped through higher taxes, increased government debt, and by placing a mortgage on the future of all Americans.  Making “the rich” pay more is often popular but ask yourself, how many of the poor open businesses or hire people?  Small business employs the majority of Americans, by the way, not the U.S. government.

Our president has an excellent education and earned a Master’s Degree at Harvard University.  He was even president of the Harvard Law Review.  You’d think a person with this type of education and experience would understand the stock market:

“What I’m looking at is not the day-to-day gyrations of the stock market, but the long-term ability for the United States and the entire world economy to regain its footing,” he said.

“And, you know, the stock market is sort of like a tracking poll in politics. It bobs up and down day to day, and if you spend all your time worrying about that, then you’re probably going to get the long-term strategy wrong.”

"Hope" and "Progress"mean different things to different people.

We should all know, our president included, that the stock market reacts mostly to one thing – predicitions about the future.  Investors are very intelligent about probing where the economy is likely to go, what leaders are doing that might affect earnings or inflation, and what the longterm health of doing business is likely to be.  Clearly, investors are not liking what they are hearing from President Obama but the fact that they don’t like what they hear also means that people who have money in the market – everyone from retirement funds to savings – are losing their shirts on a daily basis.  Because the market has lost about 30% of its value since the presidential election ($3 trillion) he should start getting the message that increased taxes on energy production, wealth production, and increased government debt are not winners in a capitalistic society.  Remember those words: “in a capitalistic society.”

Clearly the American public is willing to give President Obama the benefit of the doubt when it comes to the plunging stock market and the troubled economy:

The vast majority of Americans, 84%, think the current economic conditions were inherited and not caused by President Barack Obama , according to the latest Wall Street Journal/NBC News poll to be released today.

Further, the majority of respondents don’t believe Obama will be viewed as responsible for the economy’s state until much later in his term. Asked at what point Obama will be “mostly responsible for the country’s economic conditions,” 25% said in one to two years, 18% said in two to three years, and 23% said in more than three years.

The problem with giving the president the benefit of the doubt is that by the time it has become clear what is going on it will be very difficult to undo the damage.  According to the Wall Street Journal:

[President Obama's] budget plan projects a federal deficit of $1.75 trillion for 2009, or 12.3% of the gross domestic product, a level not seen since 1942 as the U.S. plunged into World War II.

In one of the budget’s most ambitious proposals, the president plans to cap the emissions of greenhouse gases, forcing polluters to purchase permits for emissions that would be slowly brought down to 14%  below 2005 levels by 2020 and 83% below 2005 levels by 2050. The sale of those permits, beginning in 2012, would reap $646 billion through 2019.

A heavily taxed consumer is a poor one.

The $646 billion the U.S. government will “earn” from businesses means $646 billion in price increases for consumers.  Countries such as China, Germany, and Japan do not currently have these types of taxes on the businesses which operate within their borders which means that U.S. companies, already demonized by Democrats for exporting jobs will probably accelerate this trend as they seek to cut costs and stay competitive in an economy that is 70% composed of consumer spending.  If you were looking to buy two laptops and they were identical but one cost 15% more would you buy it?

President Obama is an intelligent man but by attempting to radically change the entire U.S. economy in less than two months he has clearly shaken the confidence of the very people whom he will need to lead it from recession: the U.S. consumer who has lost a great deal of wealth in the tanking market and businesses who not only pay taxes but also provide jobs for the U.S. consumer.

If the current market trends continue we will see how much longer the American public will continue to be so generous in their giving the benefit of the doubt.

Did you like this article? Get new articles daily for free via RSS or Email.