Obama’s part in Wall Street plunge

The Washington Times Weekly - - Editorials -

For rea­sons due to both words and deeds, Pres­i­dent Obama is far from blame­less that the stock mar­ket has plunged 32 per­cent since Elec­tion Day, with over 80 per­cent of that tak­ing place af­ter the beginning of the year. Nor is he free of re­spon­si­bil­ity that, since the elec­tion, un­em­ploy­ment has climbed. In the three months be­fore the elec­tion, the un­em­ploy­ment rate rose by 0.6 per­cent­age points. Dur­ing the three months mea­sured since the elec­tion, it has gone up by more than twice that — 1.3 per­cent­age points.

Mr. Obama ini­tially promised eco­nomic ben­e­fits as soon as the mar­kets saw that his pro­grams would be en­acted. Well, with over­whelm­ing Demo­cratic ma­jori­ties in both houses, his pro­gram was passed — but the mar­ket plunged.

Pres­i­dent Obama has also con­trib­uted to the surg­ing un­em­ploy­ment rate and drop­ping stock mar­ket by con­tin­u­ally ex­ag­ger­at­ing how bad things have been and bash­ing com­pa­nies. By scar­ing peo­ple, Mr. Obama has cre­ated a self-ful­fill­ing proph­esy. Scared peo­ple change their spending be­hav­ior, and that in­creases un­em­ploy­ment just as much as the “stim­u­lus” plan in­creases jobs.

The changes have shocked even some of Mr. Obama’s most de­voted elec­tion sup­port­ers. Two weeks ago CNBC in­vest­ment guru Jim Cramer called Pres­i­dent Obama’s bud­get a “rad­i­cal agenda,” adding, “This is the great­est wealth de­struc­tion I’ve seen by a pres­i­dent.”

There are sev­eral rea­sons that Mr. Obama’s ac­tions have con­trib­uted to the re­cent un­em­ploy­ment rate in­crease and why this will cause even more in­creases in the near fu­ture. By mov­ing money from places where it is cur­rently be­ing spent to places where the gov­ern­ment wants it spent, the jobs also move. But it takes time for peo­ple to move be­tween jobs. That is called un­em­ploy­ment.

If sub­si­dies for al­ter­na­tive en­ergy are in­creased, those com­pa­nies will ex­pand, pack up their cars and move to Cal­i­for­nia. They may not even have the right sets of skills for the new gov­ern­mentcre­ated jobs. Wher­ever th­ese dis­placed work­ers end up, it will take some time, and dur­ing that time those work­ers will be un­em­ployed. ploy­ment. Even if you know that you want to get a job in the al­ter­na­tive en­ergy in­dus­try, which job do you ac­cept? It takes time to find the job that fits your in­ter­ests. You may quit your cur­rent job to have the time to search full time for the new one. All those changes mean more un­em­ploy­ment.

But some of this im­pact has al­ready been felt for months. Just the threats of the stim­u­lus plan be­ing passed caused com­pa­nies to change in­vest­ment and spending plans, and that cre­ated more un­em­ploy­ment even be­fore the bill passed.

New pro­posed reg­u­la­tions have also caused all sorts of con­fu­sion for busi­nesses, again chang­ing busi­ness de­ci­sions even be­fore the reg­u­la­tions go into ef­fect. From the en­vi­ron­ment to price con­trols in credit mar­kets to threats to ab­ro­gate pri­vate mort­gage con­tracts, re­spon­si­ble busi­nesses can’t wait for a pro­gram to go into ef­fect be­fore they re­spond.

Even if firms think that there is a small chance that the Cap and Trade pro­posal will be passed, the ex­pected im­pact will be so huge that many in­vest­ment projects that al­ready are un­der­way will no longer be prof­itable. For­tunes of some com­pa­nies will be de­stroyed and oth­ers buoyed (though over­all we will be poorer), but jobs will surely be moved around.

Democrats feel a long pent-up de­sire to do some­thing, but some­times the best thing to do is noth­ing. So far, all that Mr. Obama’s ac­tions have done is erase bil­lions of dol­lars in Amer­ica’s re­tire­ment sav­ings. Why add the mis­ery of ad­di­tional un­em­ploy­ment?

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