Obamania having an impact on Americans perceptions

Rasmussen Reports that Americans are warming to the idea of more government intervention in the economy. Some highlights from recent Rasmussen polling:

• 45% of voters nationwide fear the government will do too much in response to the economic crisis while 44% are concerned that the government won’t do enough. In September, the numbers were 63% too much, 25% too little.
• The one constant throughout, however, is belief in the power of tax cuts to help the economy. In every survey conducted over the past few months, a majority of voters have favored tax cuts and tax cuts have consistently been more popular than stimulus plans involving new government spending. The latest findings show that 55% of voters believe any economic recovery plan approved by Congress should include tax cuts.

So, Obama is selling the idea that government is the solution, the media is contributing to Obama as the "New, New Deal" savior, and Americans are buying that government is the answer.

Although most Americans understand that tax cuts should be included in any recovery plan, my fear is they are only thinking of the pittance they will get, and are buying into the "tax the rich" scheme that Obama is peddling. As I have posted recently, we need big, bold tax cuts, for individuals, for corporations, and for investors. The overall economy won't benefit from government "investment," "stimulus," or other "infrastructure" spending. This is only taking money out of the economy from one place (taxpayers or investors) and transferring it to another (see this Heritage org piece).

Conservatives and Libertarians need to band together to return our nation to fiscal responsibility and sound tax policy. We are rapidly devolving to a Western European style welfare state and a future of low (or no) growth, and will be likewise ceding our leadership place in the world to the Chinese.

nothing more to

Investing and the GOP vs. Dems

A (liberal) co-worker forwarded this analysis from the NY Times to me - ostensibly to show how the Democrats are better for investors.I thought about it and wondered what the Times might be tying to prove.

So, I figured, if you were studying such trends, why would you choose the S&P Index, and not the Dow? The Dow would seem obvious. It's an old, established index and something all people relate to. Why the S&P? Could it be because, for some reason, the S&P doesn't tell the same story as the Dow?

I decided to pull the historical data for the Dow and do the same analysis, using the Dow. Also, for fun, I decided to add the Coolidge administration. I mean, if we're going to lambast Hoover, let's at least give Coolidge his due. In doing so, I wonder if you'll notice a strange correlation between the Coolidge/Hoover numbers and the Clinton/Bush2 years.

It's kind of interesting the crash after a long, big orgy.Anyway, I used yesterday's (Oct 30) close for Bush 2. And, to make the analysis easier, I chose to average the percentage increase or decrease across the president's time in office (imperfect, but good enough for comparison purposes):

Republicans:
Bush 2 = -1.91% per year (what a difference a couple of weeks make in this market, by January, he could be a net positive (though I don't expect that).
Bush 1 = +11.26% per year
Reagan = +16.9% per year
Nixon/Ford = +2.98% per year (figured Ford's admin was too short)
Ike = +15% per year
Hoover = -20.75% per year
Coolidge = +42.6% per year

Democrats
Clinton = +28.39% per year
Carter = -.3% per year
Johnson = +5.15% per year
JFK = +6.1% per year (broke up LBJ and JFK because I wanted to see if there was any early or later effect from the JFK tax cuts)
Truman = +10.2% per year
FDR = +16.2% per year

Without Hoover and Coolidge, the average per year increase for Republican administrations is 8.34% per year. For Democrat administrations, it is 10.94% per year. If we include both Hoover and Coolidge in the GOP numbers, it goes up to 9.08% per year. There's a difference, sure, but, not as much as the S&P analysis indicated, and right around 9-10% which is pretty much
what we're conditioned to expect from stocks, irrespective of who is president. For fun, remove Clinton, and the D average is 7.47%.

Some things jump out at me from this analysis:
1. The Coolidge and Clinton years were the absolute best for stocks. Both these periods were marked by tremendous innovation and speculation, and both were followed by down periods.
2. The New Deal years are interesting. In March 1937, stocks peaked at 194, from their starting point for FDR of 53.84. From July 1937, they tumbled downward, bottoming at 92 in April 1942 - a 50% decline in 5 years! Imagine if W had the same performance (he's down 13% in 8 years). But FDR was a wartime president (oops, same for W). They didn't start a steady climb upward until that summer, after the tide had turned in the Pacific War, and the American war machine kicked in. Without WW2, that FDR 16.2% does not happen. In fact, many consider it was only the threat of War that ensured FDR's 1940 victory and 3rd term. The New Deal programs weren't proving so capable of turning the economy around, but a World War was.
3. Clinton's numbers are amazingly good. However, having just lived through the '90's I think we can agree a lot of the wealth and stock market run up was not entirely real. Plus, Clinton, unlike the current Democrat nominee,was a proponent of free trade and cut the capital gains tax. Those two policies alone probably had more impact on investment than any other factors during his 8 years. I give at least half the credit for Clinton's success to Newt Gingrich. In fact, I wonder what this analysis would show us if we did it based on Congressional control????
4. I'm really surprised by the mediocrity of the other D's numbers. I wonder what JFK's would have been had he remained president. He passed the supply-side tax cut that was Reagan's model, and I wonder if his New Society would have been very much different from LBJ's.
5. The analysis you sent showed Carter as a success, economically. This analysis confirms his ineptitude, as well as that of Nixon and Ford (and of the '70's in general)
6. Most of all, I think these number show the economy to be much more cyclical. They also show that the controls put into place during/after the Depression, are working, and have worked, to ease the business cycle and provide a softer landing. I think better understanding and application of monetary policy has helped, too. Lots of Libertarians like to rail at the Federal Reserve, but I think they're largely wrong.

I did check one other thing I had been led to believe, and that was that you could take any 20 year period and stocks would outperform social security (when you use the historical growth rate of SS as 2%). That's true if you qualify the years as after the depression, or, you forswear investing from about 1927-1931. I don't always get to fact check these kinds of things, but just thought this was interesting. The bottom line, to me, is really that the stock market is immune to presidential meddling, which I had been taught in economics class, but, I think it's pretty much true, and a testimony to the solidity of our system. And, it's also a reason why investing part of our social security money in the market is not a bad thing - as long as we avoid another Depression.

End...

Note to McCain:

Hey, McCain campaign, you have ceded the momentum in this race back to Obama. We understand the economy in this campaign is going to be a very tough issue for Republicans, but you need to do these things, and continue on them:

1. Keep hitting Obama (even if it's below the belt - they are at their absolute worst when they are whining about tactics) on Fannie Mae/Freddie Mac - on the money he has taken from them and on his advisors. However, your ad must be better than the one you have out there. I'm also not enamored of the "Not ready to lead" theme so clearly stated. Because, once people decide he is ready, you've lost it. You need to hit him on his ideas, as "Bad for America" or "too liberal" or somesuch. Maybe it's the female narrator.
   
2. Do as Dick Morris says and point out that his policies will harm an economy that needs an injection of capital. His capital gains tax increases will stifle investment and while the Feds are taking money out of the economy to shore up failing banks, and banks are tightening their lending policies, that's disastrous. It won't be hard to find economists and reasonable quotes on that one.
3. Hit him as a tax and spender. Yes, this is always tried and true with Liberal Democrats, but it also happens to be true. He's going to raise taxes on the investor class, and small businesses, and that is also going to hurt the economy. Pound these themes home. Use the fact that you've been using on the campaign trail, that he has never opposed a tax increase, and pound it home. I think mixing ina clip of Bill Clinton saying he's tried but he just can't give the middle class a tax cut might be effective, to show that Dems will always tell us they're going to cut taxes, but when it comes to actually doing it, that's just business as usual
4. Hit him on not being a reformer on economic issues. When presented with opportunities to reform Fannie/Freddie, he didn't act. Tie him to Reid/Pelosi on this, two people less popular than Bush.
5. For yourself, you need to do as National Review and other conservative thinkers have suggested, and modify your own tax plan to increase significantly the child tax credit. This credit disproportionately favors the lower middle class, and you need those charts that show who gives more back to people in the 35-75k range, to be you. And, it's good policy.
   

Most importantly, STAY ON THE OFFENSIVE. Economic issues are winners for Republicans if we don't ceded the high ground. We're right on the issues, as even Bill Clinton will attest, since he largely followed Republican economic policies as President (thanks to Newt).