By Columnist Charles Payne
“Unprecedented default could result in recession comparable to or worse than 2008 financial crisis” – Jack Lew
Scaring the market is one way to get the attention of the public, but I must confess that I have never seen public officials and lawmakers deliberately attempt to jawbone stocks lower. But yesterday the administration came out in what I think was a reckless manner of trying to force a market crash to push their agenda.
The biggest blow came from Treasury Secretary Jack Lew, as he warned of a fate worse than that of 2008 if the debt ceiling isn’t raised and CR continues. Ironically, the report talks about “brinksmanship.”
Well, allow me to retort!
So much of the report is disingenuous and designed to frighten people, but then again, that’s a hallmark of the administration. Case in point:
Jack Lew – Sharp declines in household wealth. Wealth is an important determinant of household consumption spending, and consumption spending accounts for about 70 percent of GDP. From the second to the third quarter of 2011, household consumption fell $2.4 trillion.
My retort – Household wealth increased in 2011. Moreover, after decreasing to $49,067 or 2.8 percent in 2009 from 2008 and falling to $48,109 or 2.0 percent in 2010 from 2009, consumer spending was up 3.0 percent in 2011 back to $49,705. Short term events that cause consumers to pause spending almost always result in pent-up demand that sooner rather than later creates an outsized spree back to the norm, which makes this post recession recovery so odd ... overall Americans haven’t reverted back to the spending means from before the Great Recession. with the exception of buying new rides with zero down and zero percent financing.
Jack Lew – A fall in private-sector confidence. Consumer and business confidence were falling in 2011, and as the debate about the debt limit progressed, business and household confidence fell to levels that are typically only seen during recessions. It took months before confidence recovered even though, ultimately, there was no default.
My retort – Consumer confidence has established a new paradigm. There is no doubt Washington DC shenanigans haven't helped, but there is something deeper at work with respect to consumer confidence. I say the nation has been ripped apart and success demonized. Those that don't have it are boiling over with anger and those that do have it are boiling over in anger. The former would like to believe they were robbed (even those that sleep all day and play video games all night), while the latter feel slighted and wonder how hard it will be to keep hard-earned rewards in this life.
I get that Jack Lew is accomplished and was supposed to bring some free market ideas to the administration, but like so many others that should’ve known better, he has resorted to the kind of tactics that actually add to misery and lack of confidence. The fear mongering as a weapon is a game that should have played out a long time ago in Washington. Ironically, I chalk up most of the loss in stock prices this week to poor economic data rather than attempts to jawbone the market lower.
In lieu of official report, here’s Sept. jobs data – 150,000 jobs, which 55 percent earned $10 hour or lower, 270,000 quit looking and L-T 4 million without work.
Still, Jack should be ashamed!