Watching the Friday morning cupboard checkup on the American economy, I realized once and for all that the U.S. stock market was a bull market. The fact that the GOP-controlled Congress decided to grab the automatic, Bush-era tax cuts, which have ballooned the deficit to roughly $1.6 trillion, at a time when the Fed was about to raise short-term interest rates by one-quarter of a percentage point to keep the economy growing, was obviously deliberate.
The markets punished the Republican failure — or had no intention of punishing it. First, they took a big U-turn that Saturday, not long after the fact. When the markets slid further the next day, members of Congress responded by telling Republican finance chairmen, the top Wall Street bankers and other insiders that a major financial market sell-off could be a good thing, as long as it didn’t send the country spiraling into a recession.
In this way, and at a moment when the world was in the throes of European and Chinese economic recession, Congress did what it could to stop the last good years of the Bush-Obama recovery and re-elect Donald Trump.
And, from this one simple lesson, it turns out that America is both a bull market and a bull economy. It will be hard for either to get worse. It will be hard for the markets to get worse. And the strong U.S. economy will move on its own to provide protection against the next recession.
Even if Americans are very uncomfortable with higher tax burdens for most of us, it is time to stop thinking of the Republicans’ triumph over Obama as just raising the tax burden of the rich. Anyone who thinks that the trillions of dollars that the Trump administration will spend — trillions of dollars that will have to be borrowed — won’t be used to trigger a recession, should go out and buy some gold. This is the wrong time to be investing in America.
Read the rest of Friedman’s piece on Bloomberg View »
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