The stock market today took a tumble, with the Dow dropping more than 500 points. The jobs outlook is bleak. (“The number of people claiming new jobless benefits remained broadly flat at an elevated level last week, pointing to persistent weakness in the U.S. labor market. New claims for unemployment insurance fell by just 1,000 to a seasonally adjusted 400,000 in the week ended July 30, the Labor Department said Thursday.”) As the New York Times observed, the culprit was “intensifying investor fears about a slowdown in global economic growth and worries about Europe’s ongoing debt crisis, which is centered now on Italy and Spain.”
When I asked economist Douglas Holtz-Eakin of the American Action Forum about his assessment of our economic woes, he pointed to investors moving back to Treasurys (and out of the stock market) with the U.S. debt ceiling crisis resolved, the European debt crisis growing and the realization that “Obama has no strategy for growth and jobs.” He says, “Bottom line — the absence of good news leads to a cumulative lack of confidence.”
Not surprisingly, Republican presidential campaigns came out firing at the Obama administration. The Bachmann campaign put out a statement that reads:
“Unfortunately, Americans continue to feel the effects of President Obama’s failed economic policies as they see their life savings dwindle in the falling stock market, and watch the economy and unemployment continue in a no-growth spiral. Clearly, the markets are reacting negatively to giving President Obama a $2.4 trillion blank check, as well as the President’s promise to increase taxes on the American people and job creators. He has no intention of cutting spending. What the markets wanted, and what the country needs, is a fundamental restructuring in the way Washington spends taxpayers dollars that reins in unprecedented spending, gets our debt under control, and encourages pro-growth economic policies. Politicians can say what they want to say, but you can’t fool the markets.”
Tim Miller from the Jon Huntsman camp e-mailed me, “On the most important issue facing our country — the economy and jobs — the President has failed. He’s had 2.5 years to inject more confidence into the economy, create an environment for growth, pass free trade agreements, and he’s done none of that. To get the economy going again, the country needs new leadership, someone with a track record of creating an environment that allows entrepreneurs to create needed jobs.” Likewise, Andrea Saul,the spokeswoman for Mitt Romney, who has made jobs the centerpiece of his campaign, had this take: “In the past, President Obama has cited gains in the stock market as an indicator of a recovering economy and a healthy financial system. Now that the Dow is falling, he needs to explain what that says about his failed leadership and the state of the economy.”
Saul has a point. In May, President Obama told a Massachusetts DNC gathering: “But an economy that was shrinking at about 6 percent is now growing again. Over the last 14 months we’ve created 2 million private-sector jobs, starting to recover some of those jobs that were lost during the crisis. The financial system is stable. The stock market has doubled.” It’s sort of like last year’s “recovery summer” — it simply wasn’t true.
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. And as we saw in Obama’s Rose Garden speech this week, his anemic program of items like an infrastructure bank and patent reform shows no sign that he connects his uber-regulatory schemes, Obamcare and the threat of ever-higher taxes to the faltering economy. His Keynesian spending spree didn’t work; he has nothing else.
This is an unpleasant reminder of just how perilous is our economy and how serious is the shortage of economic leadership and pro-growth policies in this administration.
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