While American investors were sleeping off the hangovers induced by a nearly 1,000-point gain in the Dow Jones industrial average, the party continued in Japan. The Nikkei stock index rose 14 percent -- its best day in history. European markets were up strongly in the morning, and at the opening bell in New York on Tuesday, the Dow jumped 400.
In a culture that reveres the short-term attention span as an essential survival tool, the stock market exuberance could swiftly banish the words "Great Depression" from the late night talk show lexicon, shift the terms of the presidential campaign, and calm the panic of millions of Americans who had been stunned at how quickly their retirement funds had withered away. We live in the now, and now is a lot better than last week. Monday night, overnight bank lending rates declined, a clear sign that credit markets are reacting favorably to the monumental efforts under way.
But at what cost? $250 billion to pay for a plan, as President Bush defined it Tuesday morning, "designed to directly benefit the American people by stabilizing the financial system and helping the economy recover," is not pocket change. A nation already submerged in debt at every level is taking on huge new liabilities. And that doesn't include the hundreds of billions that European governments are pouring into their own banks. What's more: These initial outlays may only be down payments.
With this backdrop in mind, it is instructive to return to some of the more triumphalist rhetoric of the Bush years. On Monday night DailyKos diarist saburo reminded us of Grover Norquist's 2004 prediction of the glories that would result from four more years of a Bush presidency and GOP domination of Congress, "The Democratic Party Is Toast."
Taken in toto, Norquist's manifesto is about as spectacularly wrong as it is possible for a forecast to be. Read the entire piece if you want to spend the rest of your day chuckling. But let's just take one chunk out, Norquist's thoughts on the individual Americans' relationship to the stock market and the political implications thereof.
Four more years of President Bush will also accelerate one of the most important demographic changes in America over the past 20 years: the number of Americans who own stock. In 1980, only 20 percent of adults owned stocks in mutual funds, 401ks, IRAs and direct contribution pensions. Today, that number is over 60 percent and growing. Bush wants to create Retirement Savings Accounts to allow every American to sock away up to $5,000 for retirement tax-free; similarly, the president has proposed Lifetime Savings Accounts allowing Americans to save $7,500 for education, housing, or health costs during their working lives.
Every American who owns his own mutual fund is decreasingly susceptible to the siren call of class warfare. (How did Dick Gephardt do this primary season?) According to pollster Scott Rasmussen, if you own $5000 in stock you are 18 percent less likely to be a Democrat and more likely to be a Republican. Every demographic group, including race, gender, age, and income, becomes more Republican with stock ownership. Four more years of more and bigger individual retirement accounts, health savings accounts, RSAs, and LSAs means four more years of more Republicans and fewer Democrats.
There's so much wrong here it's hard to know where to start. To begin with, I wonder if Norquist is relieved that Bush's plan to privatize Social Security failed so miserably. The siren song of class warfare is already playing at high volume during this campaign -- the screeching would have been unbearable if even more Americans had pinned their financial security to the stock market. As for the idea that stock market ownership would turn America a deeper shade of Republican? Somehow that seems not to have happened.
Even if the Dow jumps another 10 percent on Tuesday -- heck, even if it shoots all the way back up to its record heights of a year ago, I'd dare say that even in short attention span America, we'll all be looking at financial markets with a warier eye for a long time to come. And again, that doesn't even take into account the incredible price we're paying to bring "stability" to the market. We now know, viscerally, that markets crash as well as boom. The political calculus of the stock market has fundamentally changed, for at least a generation.