In a stunning reversal of voter opinions since the first weekend in August; the Rasmussen Reports national telephone survey reveals that “Likely U.S. Voters” has flipped from 75% feeling it is at least somewhat important for the government to launch a new stimulus program to create jobs (57% saying “it is Very Important”), to just 38% now supporting the President’s $447 billion jobs plan presented to the Joint Session of Congress. This nose-dive in support for a bold new government spending initiative to fight unemployment is directly tied to the violent plunge in the U.S. stock prices caused by the credit rating downgrade of the United States of America.
Likely voters have good reason to be concerned about the negative consequences of another round of big government spending. U.S. stock prices of the 500 large largest American companies in the S&P 500 Index made all-time highs just prior to the real estate and banking 2008 Credit Crisis. Over the next seven months, the stock prices of these conservative companies fell by 50% and heralded the start of the worst economic decline in America history since the Great Depression.
Here are a few statistics that demonstrate just how historic last month’s response has been to the downgrade of America’s credit rating by the S&P 500 Stock Index:
- The index was down whapping 5.7% for the month;
- The sum total of the violent up and down moves during the month was equal to 47%;
- Volatility was in the 98th percent highest level of any month since 1928;
- Investment return was in the bottom 10% of monthly returns since 1928;
- If September shows a loss, it will be only the 9th consecutive 5 month loss since 1928;
- The last 5 months of continuous stock losses before the Credit Crisis of 2008, was 1974.
The stock market is predicting that the United States reliance on big government initiatives funded by deficit spending is over. Next year, the recent deal to increase the debt ceiling requires $71 billion spending cuts. Furthermore, on December 31, 2011 the 100% depreciation of corporate capital purchases for 2011 will expire. The net effect of these cutbacks will result in approximately a 2% reduction in GDP. This will be the largest reduction in government activity since WWII.
The American Recovery and Reinvestment Act of 2009 was literally a $787 billion no-questions-asked blank-check written in support of the most extreme elements of the progressive movement since the Great Depression. When President Obama signed the bill, he charismatically said: "We have begun the essential work of keeping the American dream alive in our time." Unfortunately, his dream appears to have morphed from the real estate and banking Credit Crisis of 2008 into the real estate, banking, and United States Sovereign Debt Credit Crisis of 2011.
When President Obama said in July that Americans needed to: "Pull off the band aid. Eat our peas." The President was urging Congress to agree to raise taxes in order to continue the stimulus spending to create jobs favored by likely voters. But after the gut-wrenching financial turmoil of the last month and threats by S&P to further downgrade the U.S. credit rating; the historic consensus of American voter to support the Federal government as a jobs creator has evaporated.
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