Today is the 25th anniversary of the stock market crash of 1987. The Dow fell 23% in one session and lost over $500 billion. It remains the largest one-day percentage-point drop ever.
Markets in nearly every country around the world plunged in a similar fashion. Many economists predicted we were heading for a second great depression. The losses continued through that week, and by the end of the month most markets had suffered huge falls.
It began in Hong Kong which dropped 41% by the end of the month. The Federal Reserve immediately intervened to prevent an even greater crisis. Short-term interest rates were instantly lowered and the markets recovered fairly quickly.
There was even a post-crash bull market driven by companies that bought back their stocks which they considered undervalued after the market meltdown.
There could be another crash, but it will not have the same driver as 1987. The derivatives which contributed to Black Monday no longer exist.
The prophets of doom were wrong in 1987 and the long-term turnaround was remarkable. A decade after Black Monday, Bill Clinton finally agreed to sign legislation passed by the GOP Congress to significantly cut capital gains rates. Along with the Reagan recovery, it ranks as the greatest economic expansion in American history.
“Tax The Rich” is a major theme for Democrats and it was certainly apparent last night in the vice presidential debate. The Obama/Biden team is wrong and there is no $5 trillion Romney tax cut for the rich. Even the Brookings Institution has pulled back from that charge.
We are coping with the worst economic and jobs recovery in modern times, and the Romney/Ryan plan is to reward success, and create opportunity, growth and jobs. This will be done by increasing take-home pay for the middle class, and incentives for investment and risk-taking.
When liberals shout tax the rich, conservatives must remind them that the Romney/Ryan plan includes a strict dollar cap on special tax deductions. It will most likely be $20,000 limit that will be even lower for top earners who get a marginal tax-rate cut. It’s a huge revenue-raiser, at lower tax rates.
Since last Friday’s unemployment report, the President has been bragging about job growth. This chart from the New York Times does not support his claims. While a majority of jobs lost during the downturn were in the middle range of wages, a majority of those added during the recovery have been low paying.
Even the liberal advocacy group National Employment Law Project says “The overarching message here is we don’t just have a jobs deficit; we have a ‘good jobs’ deficit. Many good jobs were wiped out by the recession and they are not coming back.”
They are definitely not coming back under an Obama Administration. According to the Times, “Job growth has been concentrated in positions that tend to fall into two categories: manual work that must be done in person, like styling hair or serving food, which usually pays relatively little; and more creative, design-oriented work like engineering or surgery, which often pays quite well.”
Romney is in Van Meter, Iowa (population 1,073) at noon today. He is speaking at the 127 year old farm of Margaret and James Koch, who said “I am overwhelmed by it. I didn’t really think I’d ever get a chance to see him in person. He knows agriculture is important to this country, and it speaks volumes that he will come to a farm.” As the candidate speaks, combines in the background will be harvesting corn and soybeans.
Romney will promise farmers that he will cut government red tape and regulations. America has had no trade agenda during the Obama administration, and Romney will tell the farm audience they will have greater access to world markets.
The Republican will conclude trade negotiations such as the Trans-Pacific Partnership, and ask Congress for the authority to pursue new agreements. He says “The president has stalled ongoing negotiations, and initiated no new ones.”
He is promising change so they will be able to pass down a farm to children without losing over half its value to taxes, and keep their energy costs as affordable as possible.
Craig Hill, the president of the Iowa Farm Bureau, said “We haven’t seen enough assurance that we’ll be able to operate our farms without a heavy burden of regulation and taxation under the Obama administration.”
The Republican candidate will also spell out his vision for making the agriculture economy grow and prosper.
In 2011, the House of Representatives passed the Ryan Plan to cut the deficit by $6.2 trillion. They voted to eliminate federal funding for the Corporation for Public Broadcasting (CPB), which was allocated $432 million from the government in the previous year. They also passed a bill to cut off all federal funding for National Public Radio. These votes were mostly along party lines. All three measures were later stopped in the Democratic Senate.
Republicans said it was time for the government to get out of the TV and radio business. The final vote came a week after conservative activists secretly recorded an NPR executive making derogatory comments about Tea Party supporters.
The ensuing controversy led to the resignation of NPR CEO Vivian Schiller. House Majority Leader Eric Cantor said taxpayers no longer wanted to spend money on the content CPB and NPR provides. “The problem is, we’ve seen programming for NPR and CPB often veer far from what most Americans would like to see as far as the expenditure of their taxpayer dollars. That’s the bottom line.”
Today we learned economic growth was 2% and 1.5% during the first and second quarters of this year. It made us think of 1992 when the de-facto slogan for Bill Clinton’s campaign was about the economy. Despite a historic record approval rating of 90% for President George H.W. Bush after the 1991 Gulf War victory, within 18 months, it would drop by 60 percentage points.
The economy was clearly improving in 1992 but Americans still remembered the 1990/1991 recession which was mild compared to Obama’s first year. 64% of Americans disapproved of Bush’s job performance in August 1992.
Compared to Obama’s 1.75% for the first six months of 2012, the real GDP for all of 1992 grew 3.4%. This exceeded the average annual growth rate durng Clinton’s first term.
Bush’s average annual increase in jobs did not come close to matching Reagan’s level, but it was far better than Obama.
Because of the economy, Bush was defeated for re-election and received only 38% of the vote.
It was just announced the Gross Domestic Product grew at an annual rate of 1.5% in the second quarter (April to June). This is down from 2.0% in the first quarter and 4.1% late last year.
The 1.5% growth was overwhelmed by monthly inflation of 2.3% (April) 1.7% (May) and 1.66% (June). The U.S. economy has never been so sluggish this long into a recovery. The Great Recession officially ended in June 2009, when the Obama administration was promising 5.3% unemployment by this time.
The good news is that no president has ever been re-elected with such dismal growth.
There is a lot of competition for that title, but a top contender would have to be this comment during the third 2008 debate with John McCain (see below link).
It was moderated by Bob Schieffer of CBS who said next year there would be and “astounding $455 billion deficit,” and Obama’s proposals would add another $200 billion to the deficit. The then Senator responded “What I have done throughout this campaign is to promise a net spendng cut.”
He described himself as a “strong proponent of pay as you go (PAY-GO). Every dollar that I have proposed spending, I have proposed an additional cut. So that it matches. . . We need to eliminate a whole host of programs that don’t work. I want to go through the federal budget line by line.”
Unfortunately, all of this was a complete lie. Obama never considered a net spending cut and of course it was not included in his proposed budgets. PAY-GO was passed by the Democratic Congress in early 2007, but they never once complied with it. The real farce was the news media which portrayed liberal Democrats as deficit hawks in 2006 and 2008.
Some of the other contending statements for biggest lie would be:
- I’ve done more for Israel’s security than any President ever.
- The GOP is responsible for Obama jobs bill not passing.
- Then you’ve got their (GOP) position which is dirtier air, dirtier water and less people with health insurance.
- The rich don’t pay their fair share.
- The health care bill will not increase the deficit by one dime.
- If you like the health care plan you have, you can keep it.
- We have run out of places in the US to drill for oil.
- We will cut deficit in half by end of the first term.
- Health care negotiations will be covered on C-Span.
- The unemployment rate will be 5.3% with the stimulus.
- “I am not somebody who promotes same-sex marriage”.
- Guantanamo Bay will be closed within a year.
- Didn’t know Jeremiah Wright was a radical.
- We will have the most transparent administration in history.
- I have visited all 57 states.
Why weren’t even more jobs created during the Bush years? Because we were at full employment for 5.5 years. John Merline of Investor’s Business Daily says “A key attack line in President Obama’s campaign stump speech these days is to claim that the country has tried Mitt Romney’s economic policies already, and they were a dismal failure. ‘The truth is,’ Obama says, ‘we tried (that) for almost a decade, and it didn’t work.’ . . .
“The month after Bush signed that 2003 law, jobs and the economy finally started growing again. From June 2003 to December 2007, the economy added 8.1 million jobs, according to the Bureau of Labor Statistics.
“The unemployment rate fell to 5% from 6.3%. Real GDP growth averaged close to 3% in the four-plus years after that, and the budget deficit fell steadily from 2004 to 2007.
“What’s more, the rich ended up paying a larger chunk of the federal income tax burden after Bush’s tax cuts went into effect. . . Obama is correct that the country has tried a combination of deregulation and tax cuts before. That took place under President Reagan.
“Reagan aggressively deregulated entire industries, while putting the brakes on new federal rules. As a result, regulatory compliance costs fell 8% during his time in office, and staffing dropped almost 7%. At the same time, Reagan’s tax cuts knocked taxes as a share of GDP down by 6%.
“The result was an almost eight-year economic boom in which real quarterly GDP growth averaged 4.3%. That’s nearly double the average growth rate Obama’s economic policies produced during the 3-year-old recovery.”
The President’s Jobs Council has not met in over six months. During that period, Obama has gone golfing 10 times and attended 106 fundraisers, but he never found time to meet with his Jobs Council. Obama’s pledge of a “laser beam focus on jobs” was another empty promise.
The Jobs Council was a 2011 campaign prop that has now been forgotten. Unfortunately the President has also forgotten American workers because projections this week are for unemployment to remain at 8.2% throughout the third quarter.
This could easily change if he would pick up the phone and call Senate Majority Leader Harry Reid (D-NV).
The GOP House has passed 30 jobs creation bills which are now stalled in the Senate. If the President wants to get our economy moving, he should also ask Reid to pass the Ryan Plan to cut the deficit by $6.2 trillion.
Another Obama promise was to have the most transparent administration in history, and he pledged to always be available to the press. As of June, the President has participated in 99 exchanges with reporters, while Bush was at 324, and Clinton was at 538.