Obamanomics: The Markets Are Losing Hope

In today’s New York Post:

There was once a time when trouble in foreign markets, whether in Asia or as now in Europe, would be good for US stocks.

Sure, our markets can get hammered when news like the 1997 Asian currency crisis hits. But we often make a comeback as investors digest the news and come to the conclusion that the best place to bet for future growth is on the companies at the heart of the US economy.

No longer.

And it’s not just the zero-percent job growth and 9.1 percent unemployment we’ve got now.

The mainstream business media will tell you that the problem lies in the “dysfunction of Washington.” In other words, the economic slump and all the market turbulence, including yesterday’s 100-point drop in the Dow, stem from a bipartisan cause — lawmakers and President Obama can’t manage to craft a sensible plan to grow the economy.

But talk to enough investors, and they’ll tell you this isn’t really a bipartisan problem. Rather, it largely remains at the top, meaning with Obama and his economic advisers — who, when they aren’t threatening to raise the taxes of “millionaires and billionaires” who make just $200,000 a year, are offering up the leftovers of previously failed economic policies, such as this “infrastructure bank” gimmick that the president plans to unveil in what’s being billed as a major economic speech later in the week.

The stock market bounced back after the 1997 Asian crisis because investors had much to look forward to as the Clinton administration, prodded by a Republican-led Congress, embraced a pro-growth agenda of tax cuts and welfare reform.

Contrast that to what we have now: an administration looking to purge high unemployment and slow growth with an “infrastructure bank” — which might put a few construction workers back to work, but can’t come close to reversing the Great Recession.

Put aside the fact that such government-mandated “infrastructure spending” often leads to fraud and waste; the history of such plans actually creating enough new jobs to spur significant economic growth is pretty dismal.

Whether it was FDR’s Works Projects Administration in the 1930s, the stimulus offered by President George W. Bush just before the financial crisis went into high gear, or Obama’s nearly $1 trillion spending spree in his first year, government mandated growth plans fail to deliver and often make a bad situation even worse. The spending has to be paid for — and whether that means higher taxes or new debt, it’s not worth the price.

The markets — that is, investors who are paid to bet on the future of US prosperity — know this history all too well. They also know we now have $14 trillion in debt that Obama’s “infrastructure” gimmick will only add to. And they know that this president is either too economically naá ve or too ideologically rigid to reverse course from his failed policies.

Then there’s the other “big idea” expected in his upcoming speech — extending the “payroll tax cut.” First off, the cut that’s already in place hasn’t worked any miracles so far. Plus, everyone knows it’s only temporary — and he’s looking to raise income taxes on a permanent basis.

And that’s why investors are increasingly tuning him out.

“Markets tend to be smart,” says David Ader, a strategist at CRT Capital Group, “or [at least] capable of learning. Thus if we constantly hear the same optimistic plans from politicians and they keep failing, eventually we’ll learn not to pay too much attention.”

We can only hope investors tune out the president’s speech on Thursday. The last time they listened to what he was saying about the economy, when he addressed the country after the S&P downgrade, the Dow dropped more than 600 points.

Original article here.