Chart of the Day

Via Wonkblog:

Dow Boskin Op Ed

If anything the chart is amusing because the op/ed it skewers so clearly deserves the skewering.

The chart is also amusing because it really underscores the ridiculous nature of the charges the Obama administration has a) socialist in any serious sense of the term or b) been an economic disaster.

I am not a fan of simplistic associations of economic performance and a given presidency, however, the trend line here (and the raw numbers) cannot be ignored and do need to be taken into consideration of the context of the dire predictions of the president’s opponents circa 2009.

Beyond the partisan sniping it needs to be recognized that Dow 18k and the 3rd quarter GDP growth figures are both good news.

FILED UNDER: US Politics, , ,
Steven L. Taylor
About Steven L. Taylor
Steven L. Taylor is a Professor of Political Science and a College of Arts and Sciences Dean. His main areas of expertise include parties, elections, and the institutional design of democracies. His most recent book is the co-authored A Different Democracy: American Government in a 31-Country Perspective. He earned his Ph.D. from the University of Texas and his BA from the University of California, Irvine. He has been blogging since 2003 (originally at the now defunct Poliblog). Follow Steven on Twitter


  1. michael reynolds says:

    You seem to think facts will affect people’s opinions. I wish it were true.

  2. gVOR08 says:

    Yup. If Obama’s a commie, he really sucks at it.

  3. Guarneri says:

    The Dow is a statistic not susceptible to manipulation. It simply is what it is. But without understanding of the drivers of valuation citing it is just bar room talk. Further, citing Boskin is a straw man argument.

    The outsized public (and private) equity valuations are creatures of easy credit and supernormal margins. Yield chase has driven people into riskier assets and driven equity valuations. So have cheap credit fueled stock buy backs and M&A valuations. Further, relatively low reinvestment in people (employment) and assets have created super normal profit and cash flow margins. These issues have been driven by the Fed and the response of corporate management to relatively dim growth prospects and rising employment costs. The SEC says I can’t give investment advice, but do yourself a favor and don’t make the age old mistake of thinking that this time for sure we won’t see mean reversion in multiples and margins.

    I might add that the hypocrisy of the cheerleaders is astounding. Easy credit destroyed the world when it was housing we are told. But the stock market today, well, that’s different. And a third of autos are now financed subprime. That’s different. And the government is encouraging a relaxation of mortgage credit standards. I guess that’s different too. We are told that income inequality is the scourge of our time…………but the stock market averages are to be lauded because, well, because we will avert our eyes to the fact that they are a huge source of income inequality. But hey, when you need something, anything to hang your guys economic hat on, screw intellectual honesty.

    As for the GDP report, go inspect the PCE transfer from Q1 to Q3. That would be PCE as in health care expenditures. Also inspect the drain in savings. Economists and auditors have a technical term for accounting for items out of period: “cooking the books.” And the best effect of Obamacare appears to be to drain savings accounts to pay for rising HCE which we can cast as rising GDP. On balance the report was better than what we have gotten used to for the past six years, but don’t make a mess in your pants. Doug M had the point correct in his piece when he noted that a quarter does not an economy make, and that we would be better to look at the calendar or TTM figures, especially given the “revisions” in the numbers.

    All that I just said is widely reported and verifiable if you don’t just parrot people hawking stocks, trade association economists, big bank economists beholden to govt or superficial press reports. And I didn’t mention Michael Boskin once.

  4. Ben Wolf says:

    @ Steven Taylor,

    In what sense is the DOW adding more points good news?

  5. C. Clavin says:

    If you keep saying the same thing over and over you are bound to be right.
    As it is, you’ve been wrong for the last 6 years.
    Just like Boskin.
    So good on the SEC for keeping you from giving advice.

  6. C. Clavin says:

    @Ben Wolf:
    Yes…I liked it far better when the Dow was at 8000 and GDP growth was -9%.

  7. ekaresky says:


    So if that’s your analysis of the Dow at 18,000 enlighten us with your analysis of the Dow at 8000 under Bush Jr. Please – we ignorant people are trying to understand why the increases in our IRA’s and 401K’s are actually not as desirous as where they were under Bush Jr.

  8. @Guarneri:

    citing Boskin is a straw man argument.

    I find this is to be a perplexing assertion given that the purpose of the Boskin citation is to note that there is direct, and pretty dramatic, evidence that contradicted Boskin’s thesis. This is rather the direct opposite of a straw man.

    If I said at the start of the NFL season that the Denver Broncos were going to go 1-15 and Peyton Manning was going to prove himself done and then, at the end of the season, you noted that Denver went 12-4 and Peyton passed for so many yards and touchdowns that would be an example of direct evidence against my thesis. It might be many things, but a straw man is not one of them.

    (And, I would note, I did not actually make an argument about Boskin, but rather an observation).

    In regards to you other points: I am open to the argument that the investor class got off too easy after the Great Recession or that we still have too much easy credit, among any number of other things.

    However, the notion that Dow 18k is not a significant number over 8k strikes me as a silly assertion.

    Are you going to tell me that if the Dow was current at 10k that you would be praising the President for that number?

    Would you have preferred substantial regulation of finance post-recession?

    Perhaps I am mis-remembering your past position on these issues, but I am pretty sure you aren’t an Elizabeth Warren kind of guy.

  9. Ben Wolf says:

    @C. Clavin:

    1) GDP is not at issue in my comment, therefore its inclusion in your response appears a diversion.

    2) The Dow: why are 18,000 points “better” than 8,000? Are you and Dr. Taylor suggesting that America is 10,000 somethings better than it was because the big board says so?


    Enriching your retirement account is not the purpose of the stock market, nor is there any empirical reason to find that this effect has proven true for most Americans. To the contrary, defined contribution plans have proven woefully inadequate to the majority of those depending upon them for retirement.

  10. al-Ameda says:

    I have a significant amount invested in the stock market, that is, my retirement holdings, and I for one, am extremely pleased that for the better part of 5 years I have tied a significant amount of my holdings to market index funds.

    The increase in the market since the catastrophic crash of 2008 has directly benefitted millions of Americans who, either directly or indirectly, have retirement funds invested in the stock market..

    I realize that it’s hard for conservatives to accept it, but this has happened on the watch of moderate (aka communist Kenyan usurper) Democratic president. It is very possible that If Republican-preferred austerity policies had been implemented we would not be talking about the market at 18,000, and the subsequent benefit to millions of middle class Americans.

  11. Ben Wolf says:

    @al-Ameda: Government policy under this administration had been to fuel a speculative asset boom and created the fastest growth of income inequality since the early Twentieth Century. Arguing that rising equities valuations is good for the country is akin to insisting that carpet-bombing with nuclear weapons will be beneficial in killing terrorists: blow up enough and you’re bound to hit somebody who deserves it, just as funneling a torrent of financial assets at the wealthiest is bound to help someone lower down the food-chain.

    But the purpose of the stock market is not to make money for people, nor to goose retirement funds. To the contrary there are vastly better methods available for providing a retirement than handing economic policy over to capital markets. Dow 18,000 is no more a desireable social outcome than drone strike 18,000 will be.