Before we get all exited over the new “record” high of the stock market, a few facts put more light on this achievement. It has taken nearly seven years since the previous Jan. 14, 2000, high under Clinton to get here. Also, inflation of some 20 percent since then would require more than a 2,200 point increase (to approximately 14,000, not the 11,800 now) to have a truly record-breaking new high.
Scratching and clawing to achieve the new current milestone for almost seven years after the earlier record is not a triumph, but a failure.
With an average annual inflation of 2.575 percent over the past six years, and a compounded inflation of some 20 percent, the records are a reflection of a failed economic policy of draining productivity and earnings power from lower and middle classes by the disproportionate tax cuts for the wealthy. Trickle-down has not worked since Herbert Hoover tried it.
Some claim that the market has changed since 2000 with different stocks, but that’s simply not a true assessment. When the Dow Jones evaluators change a stock as one of the 30 market indices, they purposely assure it will not alter the overall market value. No one can properly argue that comparing 2000 to now is apples and oranges.
Both “CBS Market Watch” and “CNN Money” did pieces on the recent 2004 and 1999 changes and found that the value before and right after had only a miniscule difference (.035 percent in 2004 with the addition and subtraction of three stocks) immediately following the component stock substitutions. ATT is even back in after being taken off.
The 20 percent reduced value in the overall Dow-Jones due to inflation since 2000 is real and has enormous impact on lower and middle income workers and families. To say the new record is great and the inflation and economic policies causing the lag are tangential is like asking Mrs. Lincoln, “Aside from that, how was the play?”
Today’s long, drawn-out achievement of the record compared to almost seven years ago, even without factoring in inflation, also demonstrates the likely ineffectiveness of the administration’s proposed Social Security privatization policy of basing pensions on stock 401(k)s.
Seniors cannot wait seven years to start making money with their investment, let alone lose 20 percent to inflation cuts over seven years. We will literally return to seniors scouring trash for food. Social Security has reduced poverty among the elderly by over 40 percent and is the most successful social program we have — we do not need a federal giveaway to Wall Street to mess it up.
Another area of concern is the creation of new jobs. During the Clinton administration, the job growth rate was 23 million new jobs in eight years. In nearly six years, the Bush administration has created two million jobs, just barely more than one-twelfth of what the Clinton administration achieved, when the numbers factor in the two million jobs lost between 2001 and 2002, when Bush first launched his tax policies. (Bush always neglects the lost two million jobs in claiming four million gained).
The October stock milestones are at best a modest achievement and in reality a sad statement of a slow return to prosperity, delayed and hampered by the current administration’s economic policies.
Robert Weiner is a former Clinton White House senior public affairs director. Richard Bangs is a senior economic policy analyst at Robert Weiner Associates.
