by Ed Morrissey
After almost seven weeks of the Obama administration, the markets have already given the new president a failing grade. After the rollout of Obama’s stimulus plan, mortgage bailout, and the blueprint of his FY2010 budget, Wall Street has blown a big raspberry at the White House, losing almost 18% of its value since the inauguration. Hoover Institution fellow Michael Boskin says that investors have recognized that Barack Obama intends to impose a hard-Left economic agenda on the US in an effort to transform us into Europe:
The 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.
Markets look forward, not to the present or past. Investors in any sort of market attempt to predict the future, determining where to put their money. They choose industries, companies, and aggregations based on where (and whether) they expect growth.
That's what makes this Obama's bear market. Investors have seen what Boskin sees, and they’re pulling out. They don’t see anywhere in the near or long term that looks promising for growth. It doesn’t help when Obama himself offers investment advice by referring to "profits and earning ratios", since profits and earnings are the exact same thing and stock investors look at price-to-earnings ratios (P/E ratios). It also doesn’t help when Obama promises a clear recovery plan to investors and his Treasury Secretary — the "uniquely qualified" indispensable Cabinet appointee — shows up empty-handed.
Wall Street sees rampant incompetence at the top and has given Obama a vote of no confidence.
The question that Boskin poses is whether they see something worse than incompetence, and clearly, they do. The policies Obama espouses — tax increases, greater regulation, limitations on energy production — are explicitly anti-growth. All three kill growth in different but linked ways. All of them increase the costs on businesses at a time when prices can’t go up, squeezing people out of the market and into unemployment lines, along with all of the people they may have hired otherwise. That gives Obama a mandate for a nanny-state approach that he claims will be temporary but already has taken on the permanence of the European system that drives down growth and keeps unemployment at the levels we just reached this month as a rule.
It's incompetence married to ideology. It's a fatal prescription for investors, and they're voting with their feet.
Click to view image: 'incompetence married to ideology'
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