What’s the likely political effect of today’s plunge in the stock market? There’s an excellent chance it will have absolutely no effect whatsoever, and that it will be basically forgotten within weeks, and long before the 2012 elections.
The nature of such high-visibility events is that partisans are quick to claim them as proof they were right all along. Here, for example, is Jennifer Rubin:
Obama’s entirely false assessment of the economy had real policy implications. Recall that Treasury Secretary Tim Geithner a year ago told us that the economy could “withstand” tax hikes. And so he doggedly urged tax increases, rather than cuts.
Well, yes — except that what actually happened was that taxes since then were cut, not raised. I suppose it’s certainly possible that the markets were reacting today to a year old policy preference by the Secretary rather than actual policy undertaken in the subsequent months. What the hell, I figure the markets probably tanked today in reaction to the Clinton tax increases of 1993, or perhaps the George H.W. Bush betrayal of 1990.
I don’t mean to just pick on one side. I’m sure liberals are convinced that today’s plunge was the result of Washington’s bipartisan embrace of austerity, while centrist deficit hawks will swear it was because the debt limit deal wasn’t big enough. My suggestion? Ignore all of it.
Ignore, too, claims about what it all means for 2012. Of course, the economy is very important to those elections, but a bad day for the Dow, or even a terrible month for the Dow, doesn’t mean much this far in advance of the election. What you want to look at instead are broad measures of the economy, especially hints of how it’s going to be doing next spring and summer. There’s probably no way to avoid the fact that the political world will obsess about highly visible episodes well in advance of the election, but they just don’t tell us anything significant or long term about politics or policy.