Dow 13,000
By Erick Posted in Breaking News — Comments (35) / Email this page » / Leave a comment »
Clearly, this is all Bush's fault.
Update (by Dan McLaughlin):
Let's look for comparison's sake at the closing prices for the Dow, S&P 500 and NASDAQ on May 27, 2003, the last trading day before the full Bush tax cuts were signed into law:
| Index | 5/27/03 | 4/25/07 | % Increase |
|---|---|---|---|
| Dow | 8781.35 | 13089.89 | 49.1% |
| S&P 500 | 951.48 | 1495.42 | 57.2% |
| NASDAQ | 1556.69 | 2547.89 | 63.7% |
Correlation alone isn't causation, but that sure is strong evidence against the people who thought the tax cuts were bad for the economy, isn't it? And don't you wish your Social Security payroll taxes had been invested at those returns?
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"We want tax increases on the "rich" [high-achievers, NOT the already-rich], period. They didn't hurt in the '90s, but that's all BESIDE THE POINT. We'd want them whether they hurt the economy or helped it; it doesn't matter. Just because our base wants us to. And that's good enough for us. Period."
been going up since they took over congress. Not that they've actually DONE anything to cause this (and if they have their way WRT taxes, the economy and DOW will reverse course real quick).
Socialism doesn't work. It looks nice on paper, but it's been tried and it's failed miserably every time (usually accompanied by widespread death and suffering).
Proud member of the V.R.W.C.
The DOW was up 224% under our glorious leader Bill Clinton.
[from 3,265 in Jan 1992 to 10,588 in Jan 2001]
The DOW has only increased 23% under GW Bush.
[from 10,588 to 13,036, today]
Thus, the Rate of Increase has plummeted 1000% under Bush!!!!
"No compromise with the main purpose, no peace till victory, no pact with unrepentant wrong." - Winston Churchill
It was actually lower on 1/19/1993 (3255.99) than it was in the 1992 price quoted above. Not that it matters anyway.
"Dow Ends Above 13,000 for First Time As Earnings Reports Push Stock Market to Historic Heights
NEW YORK (AP) -- It looks like a cause for celebration: The Dow Jones industrial average surged from 12,000 to 13,000 in just six months. But appearances can be deceiving, and there may be more reason to worry rather than rejoice about Wall Street's latest accomplishment."
When is it ever a good thing for these people? Oh yeah, only when it's a Democrat in the White House!
Women and minorities hit hardest!
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Those who live by the sword get shot by those who don't.
Looks like it's time for an excess profits tax!
strong economy = economic growth = increased energy usage =
obscene profits = global warming = Bush's fault
Yes the Nasdaq is up 63% from 2003, now at 2574. But let us remember, the Nasdaq is still down about 50% from its pre-Y2K bubble levels, and it may be long, long time before it ever gets back up there.
All of us who are investors were complicit of the Nasdaq getting that high back then, but it galls me that Clinton and Rubin are able to go around crowing about their wonderful economy, when it was just a manufactured bubble that imploded badly and cost a lot of small investors a lot of money, while Rubin's boys on Wall Street made a killing.
Even with all the accusations of a "real estate bubble" driving this current economy, we are on much firmer footing right now than when Cisco, Amazon, Pets.com, etc were trading in the stratosphere.
Tonight's news and the morning advertising shows will announce proudly that this mark is a purely psychological mark and it only comes on the heels of more bad news about the economy. You know, because of the BushCo administration people are defaulting on their mortages and the deficit is out of control, old people are eating more dogfood (even though it is tainted) and this stock market thing can only prove that the rich are getting richer and there is no need to make the BushCo tax cuts permanent because the economy is so bad. Whew.
the economy is booming just for "the rich" or "the top 1%," despite the fact that 2/3 of Americans own stocks.
Still, I don't like the idea of market performance dictating people's belief in the underlying economy -- market bubbles (e.g. 1929, 1999) can be indicative of underlying weaknesses in the overall economic structure.
But, when you throw in low unemployment (.5% below the "full employment" level, to be exact), inflation that is relatively in check, and a housing bubble that is largely being weathered, and yeah, you've got a strong economy.
On another note, did anyone see Samuelson's commentary in today's Washington Post saying that recessions can actually be a good thing? Very interesting read -- I might disagree with Samuelson on occasion, but he's always sane.
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The truth is, the more you tax profits, the more you undermine the American work ethic and the incentive structure that goes along with it. In fact, you demoralize the very system that has made this country great.
If the current President were a Democrat, the headline everyday would be how great our economy is doing.
The MSM still has a lot of power, and they decide how "good" the economy is. All of the economic indicators are extremely good, but the media is constantly telling the American people that trouble is brewing or "only a few" are doing well.
The economy under Bush's tenure has been phenomenal, especially considering how volatile the world is versus under Clinton, but as long as the MSM is in charge, they will do everything in their power to never admit conservative policies, such as lower taxation and regulation, actually work.
"Back in the thirties we were told we must collectivize the nation because the people were so poor. Now we are told we must collectivize the nation because the people are so rich. "
William F. Buckley, Jr.
Current positive economic data can't kill the idea that a tax cut will harm the economy.
One way in which a tax cut would harm the economy over the long term is that spending wouldn't be cut concurrently and the defecit would be greater than it would otherwise be had there been no tax cut. Eventually, the tax burden would be greater since tax revenue would have to be raised to cover the interest on the money that had to be borrowed because of the tax cut. This greater long term tax burden would harm the economy.
If this argument is correct, you'd see tax cuts cause short term economic growth, but lower long term economic growth.
That said, I think any cut in capital gains taxes is a good thing. Also, I think the presence of a deficit might make entitlement expansion much harder to achieve, thus lowering long term spending thus lowering long term tax revenue thus maximizing growth.
One way in which a tax cut would harm the economy over the long term is that spending wouldn't be cut concurrently and the defecit would be greater than it would otherwise be had there been no tax cut.
The obvious disconnect: spending causes deficits not tax cuts.
The second obvious disconnect: assuming increased revenue ≠ increased spending
"A man can never have too much red wine, too many books, or too much ammunition." -- Rudyard Kipling
A deficit occurs when spending is greater than revenue. If spending = revenue and you decrease revenue, the revenue decrease results in a deficit.
Yes, spending may have been too high in the first place and may be "responsible" for the deficit in a sense. But the following statement is still true: cutting revenues while holding spending constant will cause an increase in the deficit. Saying spending is more salient than tax revenue doesn't change this.
The second point may be true, but so far it has not been.
One summary of the research:
Niskanen has crunched the numbers between 1981 and 2005, testing for a relationship between tax cuts and government spending, and controlling for levels of unemployment, since these affect spending and taxes independently. Niskanen's result punctures his own party's dogma. Tax cuts are associated with increases in government spending.
http://www.washingtonpost.com/wp-dyn/content/article/2006/05/07/AR200605...
Personally, I still think over the long term, a large deficit will make it more likely that entitlements will be reduced, rather than taxes raised. The threat of financial ruin may make the government act differently than it has in the past.
If this argument is correct, you'd see tax cuts cause short term economic growth, but lower long term economic growth.
Of course, stock market valuations are driven by profit-maximizing decisions about the future earnings and appreciation potential of stocks, not just by short-term results.
"No compromise with the main purpose, no peace till victory, no pact with unrepentant wrong." - Winston Churchill
I'm not saying that tax cuts increase short term GDP growth which then increases stock prices.
I'm saying a stake in future earnings and the apperciatation of a stock become more valuable given that the chunk taken by the government is now less. Owning an appreciating stock becomes more valuable relative to other uses of money.
Clinton's tax increases were signed into law August 10, 1993, when the S&P 500 was at 449.45 . Four years later, the S&P 500 was at 933.53, for a gain of 107.7%! As you say, correlation does not imply causation, but if you think tax cuts help the stock market, you should think tax increases are even better.
I don't know anyone who said that Bush's tax cuts would harm the economy in the short term - critics of it argued that the resulting increase in debt would be a long-term drag on the economy. On the other hand, Republicans said that the tax increases in 1993 would hurt the economy, and look how that turned out. It seems like short-term economic growth is not at all correlated to changes in tax rates.
(1) The end of the savings and loan crisis and the end of the economy-suck they represented.
(2) The end of the Cold War -- you know, the thing your side lost.
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We are all heroes, you and Boo and I. Hamsters and rangers everywhere, rejoice!
Bush had
(1) much lower interest rates
(2) rapidly increasing government spending
The former especially is huge as far as the stock market is concerned.
...that's relevant to my (2). But I can understand that painful memories might cloud the mind.
The former is indeed helpful where the market, and indeed, the economy is concerned. Now, the relevant question: What was the prime rate for the first two years of Clinton's presidency?
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We are all heroes, you and Boo and I. Hamsters and rangers everywhere, rejoice!
The markets were driven by the essence of Clintonism, smoke and mirrors. The Dow, but especially the NASDAQ, increased because of companies whose singular trait was "burn rate". Anybody with an IQ over 9 and a greed index of less than 9 on a 10 scale figured out that these companies were going NOWHERE!
The '90's were short term market increases driven by greed and stupidity. Like I said, the essence of Clinton.
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Those who live by the sword get shot by those who don't.
The dot com boom didn't happen until the late 1990's, and note that the S&P is not the NASDAQ. The current recovery is driven by domestic and foreign debt (and now we're being outpaced by Europe), so I wouldn't go bragging about the Bush economy.
how debt drives the stock market. To those of us who've followed the market some decades that sounds counterintuitive since earnings is what drives the stock market, at least according to investors and business schools.
"A man can never have too much red wine, too many books, or too much ammunition." -- Rudyard Kipling
Consumer and government spending have been financed with debt, since both consumers and government have negative savings rates, and that has been supporting the economy. Companies make profits because people are buying stuff - they don't care where the money originally came from - but as we're starting to see with the housing industry, you can't keep building up debt forever.
".....Also, I think the presence of a deficit might make entitlement expansion much harder to achieve, thus lowering long term spending thus lowering long term tax revenue thus maximizing growth."
The statement, above, is a fallacy. Tax cuts, tax rates, and tax revenues are entirely different things. They do not directly correlate.
Supply Siders believe that lower tax rates increase government revenues, not lower them, because more money in the private sector results in increased economic growth. Therefore, lower tax rates can provide not less, but more money for entitlements. Tax rates don't do anything about growth in the Welfare State. You cannot starve the "beast" with lower tax rates, unless the economy is really bad.
So far, increased deficits have never reduced entitlements. If you overspend, you just borrow more money. Right now, global economic growth is indirectly paying for our increases in entitlements. We buy more things from other countries and they buy more U.S. government bonds to sustain U.S. government spending.
The argument that tax cuts lead to increased gov't spending may not seem intuitive from the perspective of rational markets. However, voters and politicians do not behave rationally in this way.
If I'm paying no taxes at all, then I do not see any downside in increasing government spending--it's free money! More drugs for grandma, bridges to nowhere, millions of dollars on asparagus research, who cares, it's all free! It's like the scene in Goodfellas where they take over the restaurant, borrow like crazy (Henry Hill says, who cares? No one's going to pay for it anyway.) and when you can't borrow anymore, burn the whole thing down.
If you want to reduce government spending, the quickest way to do that is tell people--ok, you want this, you're going to have to pay for it. Now, not later.
in favor of consumption taxes, rather than income taxes. I'll credit you on that one. That post made me go hmmm...
which I support, won't catch much of what people so freely consume with free, to them, money: government services. We could, and I think should, build user fees, tolls, and other revenue sources for some of the things that are done with income tax revenues, but I don't see us doing much to impose user fees on social welfare programs, medicare/medicaid, and the like; even modest medical co-pays get vehement opposition.
In Vino Veritas
A very moral idea that won't get to 1st base politically. People send their Representatives to the HOR to steal from others. What good is big government, if you can't make that rich, uppity neighbor pay for it?
"...and each wasted evening is
a gross violation against the
natural course of your only life;"
-Charles Buckowski
I'm sure Hillary (and Obama and Edwards, et al.) will say, "Yes, I heard the Dow crept over 13,000 today but that's no indication that the economy is in good shape. Just go ask the worker at the Ford Plant in Dearborn that just got laid off how the economy is doing!"