The rich must be done reacting. Right after the November election, conservative blog P&R Miscellany reveled in the stock market's slide as a sign that the 1% knew four more years of President Obama meant economic doom. I suggested that post-election stock market performance isn't the most reliable predictor of future economic results.
So, to paraphrase dearly departed Mayor Ed Koch, How're we doin'?
The Dow broke 14,000 today, boosted by an optimistic reading of jobs numbers and double-digit gains in auto sales. Since November 1, it's up 913 points, 6.97%. That's exactly the vote of confidence Mitt Romney said the markets would give after the election, right?
Unlike Mitt and P&R, President Obama and I will heed Han Solo's warning through the TIE Fighter bits. Remember what happened the only other time the Dow hit 14,000?
Oh yeah, that. 15 months, and our mutual funds lose 50% of their value. Yum.
This week's report that GDP went negative in the fourth quarter of 2012, the first shrinkage since 2009, may make you worry we're heading for a 2007-style cliff again. But read those numbers closely: federal defense cuts of an annualized rate of 22.2% by themselves wiped out the 1.1% GDP gain analysts predicted and then some, offsetting increases in personal consumption, business spending, and housing growth.
The only thing wrong with the debt and deficit is that they are too small. We need to be increasing government spending, not reducing it. What in God’s name are our policy makers thinking? Why do they believe that, when we already have over 20 million Americans unemployed or underemployed, a laid off federal employee would suddenly find herself swamped with job offers? And how will those in the private sector replace the revenues that resulted from soldiers, Marines, park rangers, NASA scientists, postal employees, etc., shopping in their store? The short answer is, they won’t. As you cut federal spending, the economy–including the private sector–contracts, just as it would if you cut any other kind of spending [Dr. John T. Harvey, professor of economics, Texas Christian University, "The Coming Recession: How Fiscal Responsibility Is Economic Suicide," Forbes, 2013.01.30].
We do have a spending problem: we're hamstringing the economy with short-sighted political grandstanding. Prime that pump again, Mr. President!
Update 2013.02.02 07:30 MST: P&R responds, excusing his November post as somewhat "inarticulate" but still mostly right.