It’s no accident markets are responding with a sense of unburdened freedom.
Those of us who have spent too much time following the so-called achievements of our elected “public servants,” especially at the federal level, are sadly aware of the adage popularized by M. Stanton Evans that “We have two parties here…. One is the evil party and the other is the stupid party.” Evans, who passed away in 2015, added “I’m very proud to be a member of the stupid party.”
Thanks to CNN, college professors, union leaders, New York Times columnists, and people named Streisand, Colbert, De Niro, and Dunham (Lena, not Jeff) you’d be forgiven for believing that the GOP is extremely stupid while the Democrats are barely evil at all.
The truth is the reverse: the evil perpetrated on the American electorate by Democrats is truly enormous. Indeed it is so omnipresent that many Americans have become inured to it, the evil as much a part of everyday life as the sun rising in the east.
In the economic sphere, the unexpected election of Donald Trump has already allowed us to understand just how evil Democratic policies truly are.
When the law is one man using “a pen and a phone,” there is no foundation on which to build or expand a business. Instead entrepreneurs sit on a thin crust atop a pool of quicksand, afraid to move for fear of upsetting their precarious positions.
Who would start a new bank, or make a loan to a small business, in the age of Dodd-Frank empowering hyperactive regulators to create and enforce any rule they like? Thanks to Democrats, the only people who can get loans in 2016 are those who don’t really need them.
Who would buy and develop land that has a semi-permanent puddle on it, knowing that Obama’s EPA might classify it as a wetland to be protected at a greater cost than the homes you were thinking of building?
Who, other than already-enormous companies, can navigate the FDA quagmire to gain the approval of a new life-saving drug — a drug which must then carry an exorbitant price tag to recover the regulatory costs of bringing it to market? (This is one example of why very large corporations don’t object to regulation as much as small companies do.)
As if the regulatory evil isn’t bad enough, the Democrats also crush economic growth through fiscal sins:
When health care and higher education and food and housing are “free” for so many, the cost borne by those who have the misfortune to be productive members of society (or, even more immorally, by our children), the economy struggles along with little growth or opportunity. Indeed, Barack Obama will likely be the first president since the Great Depression not to preside over a single year with at least 3 percent GDP growth.
Sadly, many Americans have become partially numb to the Democrats’ economic evil through repeated exposure to revisionist terminology such as “the new normal.” The left’s apologists tell us that we can never go back to economic freedom and the opportunities that come with it. They tell us that without regulating every aspect of our economic lives, humans will destroy the planet and each other because we are inherently bad (and stupid) people. They tell you that “inequality” and “social justice” require that you sacrifice your productive life, your entrepreneurial aspirations, your desire to improve your situation and that of your children, to their financially and spiritually impoverishing ideology.
Far too many have come to believe the left’s lies and manipulations, but the election of Donald Trump may be a once-in-a-generation wake-up call to throw off the shackles of economic evil.
It’s generally not easy to measure the impact of terrible economic policies. After all, there is no parallel universe of the same economy operating under better policies to compare with. Or at least there hasn’t been until now.
But the 2016 election has given us a glimpse into such a universe based on the reaction of financial markets to an election result that almost nobody expected. The latter point is crucial: The fact that markets saw a Trump victory as extremely unlikely means that one can reasonably attribute almost all of the change in the prices of stocks and yields of bonds since the election to market participants’ assessments of what Trump’s policies portend for economic growth (in excess of the dismal expectations under the likely-until-Election-Day continuation of Obamanomics by Hillary “Lurking in the Woods” Clinton.)
So what are the markets telling us?
Since the election, the yield on the US Government’s 10-year note has spiked upwards from about 1.86% to 2.48% as the market screams to investors “You’ll finally have better things to do with your capital than loan it to the government for a decade at less than 2 percent interest per year!”
Typically, a sharp jump in long-term rates is accompanied by serious pain in the stock market. So what has happened to equity prices since November 8th?
The widely followed S&P 500, an index of the 500 largest publicly traded companies in the United States, is up about 5.5%. The Russell 2000 index of small-capitalization stocks — companies whose smaller size means that they suffer a disproportionate share of the cost of the regulatory state — is up more than twice that much. (The massive gain among small-company stocks bodes particularly well for business formation under a Trump presidency.)
And the Wilshire 5000 index of all publicly traded American companies (actually only about 3,700 stocks) shows that investors in shares of American corporations have in just one month seen an increase in their aggregate asset values of approximately $1.75 trillion. No, that’s not a typo. That is nearly two trillion dollars more in the retirement accounts and investment accounts and college savings accounts of tens of millions of Americans, from the multi-millionaire demonized by Democrats to the pensions and 401(k)s of teachers and auto workers and political columnists.
And this is all before our next president has even taken office.
Donald Trump, due no doubt to his background in business rather than politics, has demonstrated a greater understanding than any other politician in memory of the devastation caused by over-regulation and internationally non-competitive corporate tax rates.
It was remarkable to hear a presidential candidate campaign against regulation with more passion than even the most free-market-oriented Tea Party candidate for Congress. Trump isn’t backing off that rhetoric since his election, noting often that for many companies (or those who would like to create companies) the burden of regulation is even more harmful than the burden of taxation.
Almost every time Mr. Trump opens his mouth about economic issues (other than trade), especially to announce the appointment of a person with actual experience in the actual economy to a position of influence over economic or labor policy, bond yields and stock prices simultaneously tick higher. It’s not so much that any one appointment makes an enormous difference to the economy; rather, each pro-business choice reinforces the signal that Trump is dead serious about these issues.
The message couldn’t be clearer, yet is likely still not understood: Donald Trump does not represent the imposition of new economic policies as much as he signals the end of evil Democratic policies and a return to a modicum of economic freedom and regulatory rationality.
As the always insightful economist Brian Wesbury put it, “instead of asking why the market is up, investors should be asking ‘Why wasn’t it rising more before?’” It is remarkable that (at least) $1.75 trillion of suffering is explained by a one-word answer: Obama.
Stan Evans was right that Republicans are too often stupid. But Democratic politicians, while they can occasionally be stunningly moronic (see here and here for two of my favorite examples), suffer from a much more fatal flaw than stupidity: they, due to the policies they impose on an unwilling nation, are evil.
It has taken the surprise election of a fierce and outspoken opponent of the regulatory state and its accompanying tax burden to let us measure just how evil.
Gage Skidmore/Creative Commons