Market Drops Below 7,000

I was a doomsayer in the eyes of many when I said the market would go below 8,000. Today, I'm seeing it skid well below 7,000 and it shows no sign of going back up. This is the lowest level in over a decade. Sure, there is plenty of time in the day, but it doesn't look good.

So what is driving the massive market decline? As usual, the news headlines are driving stock prices. The big headline today is Barack Obama's breath taking new budget proposal. Kevin Hasset points out in Bloomberg.com that "The gap between rhetoric and hype in President Barack Obama’s budget is as wide as the Pacific Ocean. Obama has not offered change; he has offered a continuation of George W. Bush’s policies. Obama is not the anti-Bush. He is Bush on steroids." I couldn't agree more and will go a step further...Obama's policies are the next logical step in the actions taken by Bush towards institutional socialism. People need to get past party and ideological lines and squarely place criticism where it belongs -- both among Republicans and Democrats.

How "big" is Obama's spending? Hasset notes the comparison between Bush's numbers and Obama's: "In January 2008, the Congressional Budget Office put out a 10-year forecast that included a projection for government spending. The forecast, at the end of the Bush spending spree, saw government spending in 2009 at about $3 trillion, increasing to $4.3 trillion by 2018."
These numbers seem outrageously high, but didn't even hit the reality. "federal spending for 2009 turned out $900 billion higher than was expected, because of the near-term policies associated with the financial crisis and the recession. Lost amid the hype about Obama cutting the deficit in half, however, is the fact that most of this higher spending sticks. Obama plans to spend $4.9 trillion in 2018, about $550 billion higher than the CBO’s projection. That’s right, $550 billion more."

Finally, Hasset notes that "looking at the entire 10 years, and extrapolating out the CBO number to include an estimate for 2019, Obama has proposed that government spending over the next 10 years be $5.3 trillion higher than the CBO projected just last year." Let's put this in perspective, in 2008 (before the massive spending increases in September) the entire budget of the federal government was only (I know, don't laugh) $2.7 trillion. This is a level that took over two centuries to reach. Obama intends to double that number in the next ten years. This budget shouldn't just make Wall Street nervous, but every single American should worry about their financial lives.

Kevin Price is a syndicated columnist whose articles frequently appear at ChicagoSunTimes.com, Reuters.com, USAToday.com, and other national media. Kevin Price is Host of the Price of Business (M-F at 11 AM on CNN 650) and Publisher of the Houston Business Review. Hear the show live and online at PriceofBusiness.com. Visit the archive of past shows here.