Don't dump Dow's drops on president

The Baltimore Sun

The Obama administration is taking drastic measures to reverse the slumping economy, but one indicator seems to be on the rise: media hyperventilating about the stock market.

Predictably, on Fox News we've heard Chris Wallace, Brit Hume, Neil Cavuto and others ruminate about an "Obama bear market." One analyst on Mr. Cavuto's show pointed the stock-blame finger at President Barack Obama on Oct. 20 - two weeks before the presidential election.

First of all, the stock market is not the entire economy, nor do the Dow Jones Industrial Average and NASDAQ represent the entire marketplace. But for the sake of argument, let's assume they were perfect proxies.

The Dow closed at 7,949 and 7,553, respectively, on the day Mr. Obama was inaugurated and on Feb. 17, the day he signed the big, initial stimulus package. As of Monday's close, the Dow was at 7,776, down 2.2 percent from the inauguration but up 3 percent from the stimulus signing.

Point: It's far too early to begin judging the long-term effects of the Obama economic policy.

The teleprompter Chicken Littles at Fox and the CNBC screamers like Jim Cramer and Rick Santelli ought to at least give Mr. Obama 1,179 trading days before passing judgment. That's how long it took the Dow, on Feb. 16, 2006, to close again above its 11,091 level of June 7, 2001 - the day George W. Bush signed the first of three income tax cuts that, applying that same logic, stagnated the markets for almost half a decade. (For the record, on the first trading day of Mr. Bush's presidency, the Dow closed at 10,588; on the last, it closed at 8,281, down 22 percent after eight long years.)

The Dow grew by about half during the eight Democratic years of John Kennedy and Lyndon Johnson, then stagnated for the eight years of Republicans Richard Nixon and Gerald Ford, and again during Democrat Jimmy Carter's lone term. It more than tripled during Ronald Reagan and George H.W. Bush's 12 combined years in the Oval Office, and more than tripled yet again during Bill Clinton's two terms. In the interest of fairness to Mr. Bush, by the start of this decade, the stock market was due for a correction after its strong, two-decade run.

But, of course, partisan control of the White House is but one very indirect factor affecting the markets. It matters who controls Congress, and more specifically what policies are advanced by Washington politicians, regardless of their party affiliation. There are the decisions of unelected bureaucrats and appointed officials like those at the Federal Reserve. And in this global economy, American officials from the president on down have less control over the country's economic situation than they did a half-century ago.

Factors within government's control that can contribute to the state of the economy include tax rates and preferences, spending programs and investments, federal lending rates, trade and labor policies, and business and environmental regulations. And many other factors are indicative of the economy's health: consumer prices, median incomes, the gross domestic product, workplace productivity, budget deficits, trade balances, unemployment rates and, yes, home values.

It is irresponsible, if not lazy, to simply point one finger at the White House and note the level of partisanship of its current occupant, then a second finger at the Dow Jones stock closing value that day, and draw a straight line connecting the two. But that's the kind of unfair hysteria we're hearing from some quarters.

Mr. Obama and his Treasury secretary, Timothy F. Geithner, are taking some big gambles. Their latest one appeared to have paid off with Monday's 6.8 percent market surge. But it's way too early to start drawing conclusions about where the economy is headed based on where the market closed today, tomorrow, next week or even next year.

Thomas F. Schaller teaches political science at UMBC. His column appears regularly in The Baltimore Sun. His e-mail is schaller67@

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