From INVESTER BUSINESS DAILY
Economy: The head-scratching continues as stocks take another leg down. Why, they ask, must the market be so negative? With an economy buckling under leftist incompetence, what, we ask, is there to be positive about?
Funny, because it's been going on for almost three years now, but hardly a day goes by without some bit of bad news the media calls "unexpected." But investors have noticed.
After selling off 2.9% on Wednesday, the S&P 500 dived another 3.2% Thursday. The Dow industrial average is testing a 52-week low.
Wednesday's drop came after the Fed unveiled its new plan for reviving the economy and as President Obama hit the road to sell his new but unimproved $447 billion stimulus.
Thursday's "unexpected" news was that the four-week moving average for jobless claims — a labor-market bellwether — rose to 421,000. Any number north of 400,000 is considered recession territory.
But should anyone really be surprised?
After all, we were promised in 2009 that $840 billion in stimulus would guarantee unemployment would not top 8%. Today, it's 9.1%, and has stayed above 9% for 26 of the last 31 months.
Since this president took office, U.S. businesses have shed 3.3 million jobs. We are still 6.9 million below our peak employment reached in January 2008. Ordinarily, more than two years after a recession has ended, well over a million jobs have been added to payrolls.
Whether it's jobs, economic growth, energy prices, incomes, regulation, weak foreign policy, or the quality of our lives and the nation's social fabric, America's current course looks questionable at best.
No wonder the markets are so volatile. They discount not the present, but the future. And the future for investors is murky at best and downright dark at worst.
So what's wrong? Here's a quick review of some of the federal policies launched in the name of "stimulus."
• Failed Fed policy. For three years, we've kept interest rates at record lows, undergone two rounds of quantitative easing and created $2 trillion in new money. On Wednesday the Fed announced its next move: the $400 billion "Operation Twist" — modeled on a failed Fed bond-buying program from the '60s to push down long-term interest rates. With so much Fed meddling, the markets can't help but be confused.
• Growing federal debt. In the European Union, debt-to-GDP ratios have hit an economy-crippling 140%. Greece, Italy, Ireland, Portugal and Spain all verge on default. But we have nothing to be smug about.
U.S. debt of $14.5 trillion already tops 100% of GDP, a level economists believe saps a nation's economic vitality. At the rate we're racking up deficits — $4 trillion in just three years — we'll soon join the EU in perpetual economic stagnation.
• Unstimulating stimulus. Faced with the clear failure of his previous stimulus, which wasted $840 billion, the president's new plan spends another $457 billion and imposes massive new taxes on the middle class, small businesses and entrepreneurs. Some 1.9 million new jobs will be created, the president reckons. In fact, jobs will be destroyed.
• Class warfare. The president relentlessly attacks "millionaires and billionaires," aided by the mainstream media's penchant for repeating his factually challenged assertions about who pays our taxes. In pushing the new "Buffett Rule" to raise taxes on the rich, the president absurdly claims that millionaires pay less in taxes than their secretaries.
But as blogger Noel Sheppard notes, IRS data disprove this canard: 99.6% of those earning above $1 million pay taxes at a higher tax rate than secretaries. And just over 200,000 wealthy taxpayers pay 20% of all federal income taxes. These are the very people who create new businesses and jobs.
• Anti-business bias. The president's war on small business and entrepreneurs has devastated American job creation, once the envy of the world. A House committee estimates more than half the taxes under the new "stimulus" will be paid by small businesses.
Refusing to sign an already negotiated free-trade bill, proposing onerous new taxes and regulations, and pursuing a money-wasting and corrupt "green jobs" strategy are leaving a wake of economic destruction.
• Regulatory siege. Federal regulation costs America $1.8 trillion a year — or roughly 13% of all our output. Whether it's the Environmental Protection Agency requiring power plants to shut down and others to be retrofitted with costly new equipment, or the National Labor Relations Board telling companies like Boeing where they can and cannot locate new facilities, or a moratorium on oil drilling in the Gulf of Mexico, or foot-dragging on the construction of a new pipeline from Canada that could boost U.S. energy security and lower prices, the government is a barrier to growth.
• ObamaCare. An estimated 4% of the U.S. chronically lacks health insurance — a serious, but manageable problem. Rather than address the real problem, the president and his allies in the Democrat-controlled Congress took over 17% of our economy. Now we're stuck with a health care program that studies show will provide lower-quality care at a cost of as much as $1 trillion over the next decade.
Health care reformers promised to "bend the cost curve down" and let Americans keep their current doctor if they wish. But a new study asserts that Obama-Care will raise premiums by 55% to 85%, while small-business surveys show that 30% or more will drop health coverage entirely — forcing employees into government-run health insurance "exchanges."
Such warmed-over leftist thinking, taken straight from the progressive playbook, is why markets are melting down. Not in 70 years have we had to deal with policies so ill-considered and poorly designed.
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