The American people have just endured a months-long bipartisan battering with words, as politicians and talking heads from both parties insist that they “take their medicine” by enduring severe austerity cuts. Against all evidence, they were told that this would be good for the economy. This illogical argument only has credence because Washington’s filled with followers of a free-market religion whose deity is the Market, whose Oracle is the stock exchange, and whose clergy includes bishops named Greenspan, Geithner, Rubin, and Rivlin.
But if Democrats are true believers, Republicans are this religion’s fundamentalists. All they need to do is repeat the sacred phrase “Tax cuts produce jobs!” and the whole congregation forms into ranks, prepared to do battle.
Believers in the One True Market believe that their Deity can only be propitiated when they sacrifice the sick, the elderly, and the poor. This lowers government expenditure and reduces political pressure to make the rich and powerful pay their fair share. We’re told that this sort of sacrifice reassures the wealthy. These minor deities will then invest and create new jobs, which is why they’re given the ritual title of “Job Creator” or “Wealth Creator.”
The believers tell us that once these sacrifices are made, money will flow downward like manna from heaven. There’s even an obscure mantra called Ricardian Equivalence that explains this esoteric mystery, although debunking it thoroughly (as apostate members of the clergy like De Long and Krugman have done) doesn’t discourage the True Believers.
Here’s what should discourage them. The all-seeing and all-knowing Stock Exchange, that Delphic Oracle of their cult, has looked upon their handiwork … and frowned. (Or maybe it upchucked. Whatever it did today, it certainly wasn’t happy.) No sooner did the President and Speaker Boehner announce their agreement than the stock market fell dramatically. The S&P 500 fell by 2.6% to its lowest point of the year. The Dow fell 2.2%, and Nasdaq dropped 2.8%.
Why does the Lord of the Economy punish its followers so? What has displeased It? For one thing, new economic data came out today and it was terrible. This should come as no surprise to anyone who isn’t caught up in the Free Market cult, but the True Believers seem to have been caught off guard.
Consumer spending is down, which is one big reason for today’s battering. And why wouldn’t it be down? Wages are stagnant, the long-term unemployed can’t find work, and people are fearful for the future. A new report showed that U.S. manufacturing growth is flatlining. And is there any cause for optimism on the unemployment front?
As economists like to say: Girlfriend, please!
Another reason for the stock market plunge was the continued threat of a downgrade of the U.S. government’s credit rating. That’s likely to come, if it comes, from organizations which are amusingly described as credit ratings “agencies.” They’re actually for-profit companies whose decision-making process was shown to be corrupt and intellectually degraded during the run-up to the last financial crisis. Their behavior in the past several months has been equally erratic and obscure. If free-marketism is a religion, they’re its corrupt medieval popes, selling their ratings like indulgences while looting the princes’ treasuries and lusting after their wives and children.
What will the “agencies” decide to do? If history’s a predictor, they’ll do whatever their cash-paying client base tells them. Worship of Profit is an individual as well as a collective exercise. But it’s the agencies’ unpredictability, not the possibility of further regulation, that’s making the private sector nervous.
Now, we’re not saying that the stock market really is an Oracle. Or if it is it’s like the one in the temple at Delphi. There, some researchers believe, the “prophecies” of its priests and priestesses were actually inspired by a hallucinogenic gas seeping up from the ground. Personally, I think of the stock market as a collective agreement about reality that’s constantly being changed and updated by real and imagined information, as well as by hopes, fears, misconceptions, and greed. (And, like the temple at Delphi, by the occasional mind-altering substance.) But whatever you think it is, it sure wasn’t impressed with yesterday’s deal.
Joe Wiesenthal helpfully (if not cheerfully) points out that today marks the eighth day in a row that the stock market has been down, a serial drubbing that we haven’t seen since the bleakest days of the crisis in October 2008. It’s time to ask our oracle: Why so glum, chum?
Because yesterday’s deal is an assault on the economy. The Economic Policy Institute estimates that it will cost the economy 1.8 million jobs and increase the unemployment rate by 0.6% in 2012 alone, while ending unemployment benefits that are currently being received by 3.8 million people. That’s going to hurt … a lot. Unemployed people spend most of the money they receive, which means it stimulates the economy. That’s also true of lower-income people, who will be hurt by this deal, and of the elderly, who are likely to be hurt in the next round.
This kind of misguided parsimony doesn’t just harm the overall economy. Ironically, it also makes it harder to reduce deficits over the long run. Even a consensual hallucination like the stock market can figure that out. Today’s results should put fear in the hearts of the free-market radicals. It’s telling them to expect a mighty smiting from a great Invisible Hand.
Like deities in all religions, the Lord of the Market is trying to tell its followers to be kinder to the elderly, the sick, and the poor. It’s trying to explain that one is never enriched by taking, only by giving. And in a very literal sense, it’s trying to tell the flock that “as you do to the least of these, you do to Me.”
But like the extremists of all religions, the True Believers refuse to listen.