Monday, July 13, 2009

Larry Kudlow: Stock Markets are Not Voting for the United States Anymore #tcot #tlot #gop #sarah

A Larry Kudlow article in National Review warns that the Obama administration's big government policies are lead American to The Road to Economic Demoralization

Washington’s enormous expansion of the state-, local-, and federal-government spending share of GDP to over 40 percent — including Bailout Nation, TARP, and takeovers in numerous industries — is eerily reminiscent of Old Europe’s old policies. And in an ironic twist, Europe seems to be moving toward a lower-tax-and-spend-and-regulate, Ronald Reagan–type approach, while the U.S. is regressing to the failed socialist model of Old Europe. This makes no sense.

Higher tax rates undermine the incentive model of growth. At the margin, investment risk and work effort become less rewarding. On top of this, Obama’s regulatory moves toward greater government control of the economy will further drown animal spirits in a sea of red tape born of bureaucratic officialdom.

Think about this in terms of the threat to nationalize heath care, which is over 15 percent of the economy. Additionally, Washington’s cap-and-trade proposals will essentially nationalize the entire energy sector — another 15 percent of the economy — sending long tentacles into every nook of the economy that’s impacted by energy, which is virtually everything.

And all this comes on top of the U.S. government’s takeover of auto companies, banks, AIG, Fannie, and Freddie. Instead of Schumpeterian gales of creative destruction, we’re on the road to economic demoralization.

Here’s the clincher: Year-to-date, Dow Jones stocks are off 8 percent, while China stocks are up 71 percent. The world index is up 4 percent. Emerging markets are up 25 percent. They’re all beating us. None of this is good.

We’re going the wrong way. That’s why stock markets are not voting for the United States anymore.

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