Sometimes people - experts even - make pronouncements that seem so out of line with reality that I've got to double take.
I was reading this article in the New York Times today, which summed up the opinions coming out of Reuter's Investment Outlook Summit this week. Here's the lead sentence:
NEW YORK (Reuters) - Republican presidential candidate John McCain's tax policies have given him an edge as the better man for the economy, various Wall Street experts said at this week's Reuters Investment Outlook Summit.
I guess that's not so surprising. Wall Street likes tax cuts, for sure. But aren't we now in a current economic crisis AFTER massive tax cuts were given by the Bush administration? I know the reasons for our current economic struggles are complex and that tax cuts by themselves were not necessarily the cause. But it sure doesn't seem like our economy has done better because of them, does it?
So I've got to wonder, how do supposedly smart people expect to do the same old thing (tax cuts) and get different results (better economy)?
More puzzlement of mine below.
Here's more Wall Street pronouncements on McCain's tax cuts:
McCain plans to extend the Bush administration's tax cuts, eliminate the Alternative Minimum Tax, and slash corporate taxes. Obama, who has derided the Arizona senator's plans, has pledged to raise taxes on the wealthy and introduce a broad range of refundable tax credits.
"My personal opinion is I would argue that McCain is probably the better candidate for the economy and that is more or less because of his tax policies," James Caron, head of global rates research at investment bank Morgan Stanley in New York, said at the Reuters Summit this week.
"In this environment that we're in right now, the last thing you want to have is higher taxes and taking money out of the consumers' pockets," he added.
David Bianco, chief U.S. strategist at UBS Investment Research, told the summit that Wall Street would welcome McCain with open arms. "My view is that McCain is better for the market," Bianco said.
"The market will respond to McCain corporate tax cuts," said participant Alan Ruskin, chief international strategist at RBS Greenwich Capital in Greenwich, Connecticut.
As far as taking money out of consumer's pockets, Obama's economic policies would actually put more money into the pockets of 95% of consumers. I know that's not the percentage that the Wall Street execs belong to. But still, if you're going to refer to Obama's policies as "taking money out of consumer's pockets" at least be clear that you're talking about taking it from 5% of consumers who will still have plenty left over to consume with, and giving more money to 95% who may be able to use that tax break to put gas in their cars and get to the mall.
But besides that, Deomcrats are better for the economy. From a 2002 article in Slate we learn the following:
But Democrats, it turns out, are much better for the stock market than Republicans. Slate ran the numbers and found that since 1900, Democratic presidents have produced a 12.3 percent annual total return on the S&P 500, but Republicans only an 8 percent return. In 2000, the Stock Trader's Almanac, which slices and dices Wall Street performance figures like baseball stats, came up with nearly the same numbers (13.4 percent versus 8.1 percent) by measuring Dow price appreciation. (Most of the 20th century's bear markets, incidentally, have been Republican bear markets: the Crash of '29, the early '70s oil shock, the '87 correction, and the current stall occurred under GOP presidents.)
According to almanac editor Jeffrey Hirsch, the presidential party figures are among the most significant he's found. If the stock market were random, we'd expect such a result only one-quarter of the time. "I don't know why people are convinced Republicans are good for the stock market," Hirsch says.
Nor does having a Republican Congress help the market. A Democratic Senate showed returns of 10.5 percent (versus 9.4 percent for a GOP upper chamber), and a Democratic House returned 10.9 percent versus 8.1 percent for the Republicans.
When both houses of Congress opposed the president, the return was a stellar 12.9 percent. Libertarians may celebrate this as proof that the market likes gridlock and government inaction. But the market likes steamrollers nearly as much: The S&P performs almost as well—returning 11.8 percent—when the presidency and both houses are held by the same party. The only situation Mr. Market dislikes is what we have now: one house for each party. Those years have a -0.9 percent return.
Republicans are no doubt muttering that that's just the stock market, not the whole economy. But real GDP growth follows the same pattern. Since 1930 (the first year decent data is available), GDP growth was 5.4 percent for Democratic presidents and 1.6 percent for Republicans.
So where does Wall Street get the idea that this time, the economy will do better under a Republican? And especially under John McCain, Mr "don't know much about economics?" Must not be from actual data, nor from the life experience of those of us in the 95%.
Also, if McCain's plan is going to be so much better for the economy, why does it appear most of corporate America is now backing Democrats? From the same NY Times article:
Wall Street may like McCain but it is betting on the Democratic senator from Illinois.
The securities and investment industry has given more campaign contributions to Obama than any other candidate, totaling nearly $7.91 million and exceeding McCain's $4.15 million.
And Corporate America as a whole likes the Democrats.
For the first time in a generation, most major U.S. business sectors are donating more campaign money to Democrats than to Republicans, according to a political fund-raising watchdog group.
Six of 10 business sectors tracked by the Center for Responsive Politics had given more money to Democrats as of late April in all federal races, marking a shift over the past year with profound implications for Republicans.
I suppose Wall Street experts can say one thing, but it sure looks as though reality reflects something different. But let's not have something like facts get in the way of expert pronouncements on one of the most dire circumstances of our times.