The Dow Jones industrial average fell 1032.89 points (4.15%) today, the second-largest single-day drop in history--but only because Monday's drop was bigger. If current trends continue, this week's drop will be worse than that of Oct 4-10, 2008. Dow has lost 40.6% of the value it has added since Trump's inauguration, and will hit the 50% mark if it loses another 639 points. President Trump has attributed this market stumble to good economic news, claiming that "when good news is reported, the Stock Market goes down"--a complete reversal of usual market rules.
It definitely isn't justified for a president to claim attribute stock market increases with their administration and policies, yet claim that such a drastic drop is the effect of "good news." There's absolutely no reason why positive economic news would cause the market to decrease, and ultimately there's no clear connection between the president and the current economy.
Should economic growths/declines (including employment) ever be attributed to a presidency? Could the drastic tax cuts enacted possibly affect inflation rates after continuous economic growth?
Sources:
6 comments:
After the Great Depression, Roosevelt created the New Deal programs to help decrease unemployment and rebuild the economy. In addition, the Obama administration helped slow unemployment during the Great Recession, ultimately helping the economy recover. I think under these circumstances it is completely reasonable to attribute credit to both presidencies for their contributions to economic growth. Otherwise I do not really think presidents have as much of a direct impact on the economy, and Trump does not have as much impact on it as he likes to claim.
I would like to take a slightly different approach to this question than Alaina did and focus more on the economic side of the issue. Firstly, Trump is a business man so it is natural to assume that many of his policies would support businesses which leads to a growth in the stock market. It is because of this that I would think it reasonable to attribute recent economic growth to his presidency. More related to the current issue though, the stock market is mostly about peoples perceptions about how much something is worth or should be worth. Before the drop, the value of shares for many companies well exceeded their actual worth. Therefore, the recent drop could just be the stock market fixing itself. Although it is possible people could freak out and sell everything which would make the market plummet even lower. Going back to my point about the stock market being about peoples perceptions, I think it is a good thing that Trump is portraying this positively. It keeps people and investors confident in the market and makes them feel like they can keep investing safely. If Trump had made this event seem like a catastrophe, the American public would probably see it that way too and freak out accordingly. In my opinion, a lie is better than a terrible economy.
Matt makes a good point, stock prices were way overvalued in the beginning of 2018, and we are seeing a readjustment, kicked off by worries over inflation rate. However, I would point out that the President actually has very little to do with the economy. Tax policy and regulations may affect the market in the long run, but spikes and dips in the economy rarely have anything to do with what the President is doing. It really makes no sense that any President is bragging about the economy.
I have to agree with the sentiments described above in that all blame or credit should not be attributed to a president other than what their actual policies do. For example, during the Trump Presidency a tax reform plan proposed by Trump himself made its way through Congress and now American corporations are giving pay raises to their employees and hopefully employing more Americans in the near future with repatriation incentives for overseas cash reserves. After this past week's extremely volatile market, it is clear that we are at a turning point for interest rates as they should have started increasing about three years ago but we now have Jerome Powell to execute on the unfulfilled promises the Federal Reserve made month after month with Janet Yellen. It is honestly a combination of many factors that contributes to the seemingly endless bull market we have experienced but we have finally felt a market correction (loss of 10% in a weeks time) which I am very satisfied with personally.
I don't think credit or blame can be placed on the president's actions. His bragging about the economy is just another example of his ego being more important than reality. While policy may have some effect, the majority of Americans aren't very knowledgable about current political events and therefore they won't have a tremendous impact on the economy. The steady incline of the stock market was likely going to be balanced out by a drop. However extreme the change was, it was inevitable.
Because we live in a free market economy, I believe that in most situations, economic growth/decline should not be directly attributed to the president. As we have learned, the government has limited influence on the government and the amount of controls and regulations they can put on it. Although certain policies that the president's pass can make a difference, this specific drop, wasn't directly caused by the president's actions, but rather just occurred within the stock market. Whenever the national economy changes, however, people tend to give credit and blame to whoever is the leader, which in this case is the president.
Post a Comment