John Boehner said Tuesday the Republicans got "90 percent of what we wanted" from the budget deal. So presumably he and his colleagues are willing to take responsibility for some 450 points of Thursday's mammoth 513-point drop in the Dow Jones Industrial Average.
I'm being a bit facetious -- but only a bit. It's always dangerous to read too much into one day's move in the stock market.
Yet the stock sell-off -- not just today's, but that of the last days -- cannot be easily dismissed. It marks Wall Street's largest losing streak since 2008.
Republicans repeatedly assured the nation that once the debt-limit deal was done -- capping spending, cutting the budget deficit, and getting "90 percent" of what they wanted -- the economy would bounce back.
Just the opposite seems to be happening.
Call it the Republican's double-dip recession.
Wall Street investors aren't ideologues. They don't obsess about budget deficits ten years from now, or the size of the government. One day doesn't make a trend, but a giant sell-off like this is motivated by hard, cold realities.
Here are the two hard, cold realities investors are most worried about:
First, the economy looks like it's dead in the water. The Commerce Department reports almost no growth in the first half of the year. And job growth is just about at a standstill. Far fewer jobs were generated in May and June than necessary just to keep up with the growth in the potential labor force -- meaning the employment picture is actually worsening. Investors fear Friday's jobs report for July will show more of the same.
Secondly, investors now know the federal government's hands are tied. The original stimulus is over; the Fed's "quantitative easing" is over.
This week's deal over the debt ceiling cinches it. The market is now on its own -- without enough rocket power get out of the continuing gravitational pull of the Great Recession.
Now that the deal is done, Obama and the Democrats will have a much harder time passing anything close to the stimulus necessary to breach the gap between what consumers (who are 70 percent of the economy) are willing to spend and what the economy can produce at or near full-employment.
Not incidentally, the Commerce Department's revised data for what happened to the economy in 2008 and 2009 shows the drop to have been far greater than had been supposed. The economy plunged 8.9 percent in the fourth quarter of 2008 -- the steepest quarterly decline in more than half a century. And in 2009 household buying declined almost 2 percent (compared with a previous estimate of 1.2 percent). That's the biggest contraction in almost sixty years.
This means the original stimulus should have been much larger in order to offset the drop. With cash-starved state and local governments simultaneously scaling back their own spending, the federal stimulus needed to be even bigger.
So much for Republican claims that the original stimulus "didn't work." Of course it didn't, given the size of the slide.
It was never a debt crisis. The debt crisis was manufactured. It's been a jobs, wages, and growth crisis all along. And that reality has finally caught up with us.
Now that we're slouching toward a double-dip recession, the only hope is voters will tell their members of Congress -- who are now on recess back home -- to stop obsessing about future budget deficits and get to work on the real crisis of unemployment, falling wages, and no growth.
We need a bold jobs bill to restart the economy. Eliminate payroll taxes on the first $20,000 of income for two years. Recreate the WPA and the Civilian Conservation Corps. The federal government should lend money to cash-strapped states and local governments. Give employers tax credits for net new jobs. Amend the bankruptcy laws to allow distressed homeowners to declare bankruptcy on their primary residence. Extend unemployment insurance. Provide partial unemployment benefits to people who have lost part-time jobs. Start an infrastructure bank.
And more.
The jobs bill should be number one on the nation's agenda. It should have been all along.
Robert Reich is the author of Aftershock: The Next Economy and America's Future, now in bookstores. This post originally appeared at RobertReich.org.
Follow Robert Reich on Twitter: www.twitter.com/RBReich
William Bradley: Less Than Meets the Eye: The Big Budget Deal and Obama's Real Problem
Also, it has been my experience that too much entrepreneurial energy is locked up and locked down in behemoths like IBM, Oracle, Microsoft, HP, Wal-Mart, Boeing, etc. Breaking up these entrepreneurial prisons would create jobs, unlock innovation and enable more competition and product creation.
When people use those terms when speaking about the economy,. it just tells other people that they don't know that much about economics.
Listening carefully to people using the term The Economy repeatedly one finds them referring to different things by the term.
But you are wrong when you say that talk about a stimulus refers to a car or getting plants to grow. Stimulus is actually quite carefully defined when applied to national finances. Stimulus is defined operationally when implemented.
This tells me you don't know much about economics. Keynes gave an operational definition for its use in his work (think of liquidity traps). Bernanke defined it quite carefully when speaking to Congress.
Now that even this meager 20% expired, economy slowed down despite the tax cuts being continued, or even further tax cuts instituted.
Tax cuts never produced any job. This money is sitting on the sidelines or is spent on Chinese goods. They may produce some jobs in China though.
Nationwide statistics last couple of decades shown clearly red states leading in relying on federal support. That's not anecdotical!
And when we collapse the US currency and the life savings of generations becomes worthless.....will you pay them all back in gold?
Obama OWNS his Deficits, Obama OWNS his economy, and now Obama owns this downgrade, and he got it following whose advice?.......!!!!!
Deficit spending is not, in and of itself, a bad thing. I deficit spent to purchase my home, ans someday, if I make all of the payments, I will own it outright. In the meantime, I am provided shelter for myself and family. Recently, my son, who also has a mortgage, had to go deeper in debt to finance some much needed repairs to his home.
This is where our country finds itself. We do not need to be the world's policemen. We do not need to be at war with countries that pose no threat to us. However, we do need to invest in our country and rebuild the infrastructure crumbling around us.
This is what Obama was supposed to have done. Invest here. Create jobs here. strengthen the economy here. Not use our tax dollars to blow up and then build roads, bridges, hospitals and schools in Iraq and Afghanistan and now, Libya.
http://www.amazon.com/Death-China-Confronting-Dragon-Global/dp/0132180235/ref=sr_1_1?s=books&ie=UTF8&qid=1312627184&sr=1-1
Also: http://www.amazon.com/Free-Trade-Doesnt-Work-Replace/dp/0578082667/ref=sr_1_1?s=books&ie=UTF8&qid=1312627271&sr=1-1
It's like the corporation that contractually obligates itself to provide retirement for it's employees, then allows it's CEO and corporate officers to increase their salaries from 40 times what the average employee makes to over 400 times it, then claims it has no money for the retirement program and must "reorganize" to divest itself of its contractual obligations. You'll note, the CEO's and officers never pay back any of their salaries or their benefits.
For indvidual taxes Democrats should propose that we increase the tax on the wealthy back to 50%, use all of that increased revenue to raise the standard deuction from $5800 to at least $14500 (full time yearly minimum wage). Should at the same time get rid of Earned Income Credit. The people on the right see this as a welfare program and they do have a point.
Funny thing about all this is that these proposals would not be a violation of the Republicans no new taxes pledge. If they blocked it the Democrats could legitamately scream Upper Class Warfare.
"Martha have you finished stocking the bunker yet?"
Obama may not have done the right things to fix the mess - but, it remains the mess of bush (the lessor). And GOP Congressmen and Tea Party members are not "messengers" - unless, of course, you believe the message of going back to bush (the lessor) policies that gave us the "Great Recession" is something we should strive for.
Take the entire issue OUT of politics.
1) Make it a simple Presidential order to pass debt ceiling increases.
2) Put programs like Medicare and Social Security under a commission that has ability to increase pay in, age requirements, etc to assure total security of the programs forever.
3) Make congress pay for ALL budget items up front except for wars, recession, and national disaster issues and then require tax increases on ALL Americans to pay for any of these events.
4) When the jobless rate goes above a set point (5%) programs would automatically kick in to repair and upgrade the infrastructure of the US and put people back to work within 45 days of their unemployment. Universal employment with the same pay rate they got before they were laid off as long as them demonstrate that they are working to get other jobs or going back to school for new degrees, skill sets, certificates in demand occupations.
I don't really know if they are capable of feeling these feelings, because they might suffer from a highly functional form of "anti-social" disorder, but I do wish they are slowly having their suppressed feelings of guilt eat them from the inside out like catching the flesh eating disease...
So whatever we are in - a recession, a double dip recession, a depression - it makes no difference what you call it for most of us.