So Nutter's budget axe will be sharp and wide. There will be layoffs, unfilled job vacancies, shuttered libraries and swimming pools, and fire equipment taken out of service. And don't expect to keep seeing those small reductions in the wage and business tax, at least not again until 2015. Nutter says the collapsing stock market, the frozen capital market and dramatically reduced tax revenue collection is taking a terrible toll. Nutter said that high-level city officials will take a pay cut, including him. As for the police department, there will be no layoffs, but 200 police vacancies will not be filled, and police overtime will be cut back.
Up the New Jersey Turnpike, New York Mayor Michael Bloomberg announced the cancellation of two popular pieces of tax relief, and the cancellation of the next Police Academy class of 1000. When they talk about the financial crisis coming to Main Street, this is what they mean. It's happening.
The almost constant flow of bad economic news is serving to point out just what an extraordinarily difficult job awaits Barack Obama when he takes office on January 20th.
Here's a sample of today's bad news. Retail sales turned in a shockingly low performance in October even when you consider the depths of the economic crisis. Sales plunged last month to their weakest October level since 1969. 1969! Are you kidding me? That was the year man first walked on the moon, half a million people hung out in the mud at Max Yasgur's farm in upstate New York to listen to Country Joe and the Fish (an event better known as Woodstock), newly inaugurated President Richard Nixon presided over the peaking of U-S troops in Vietnam at 543 thousand, and it cost six cents to mail a letter. And October, 1969 was a real bad month for retail sales. Here are some of the grim numbers from last month: Penny had a 13% drop in same store sales, Nordstrom's, down 15.7%, Gap, down 16%, even Target was down 4.8%. Only Wal-Mart exceeded Wall Street's expectations, posting a 2.4 gain last month. It's frightening to think what the sector's overall performance would have been had Wal-Mart tanked as well. What's evening more frightening is what the holiday season is going to look like for retailers. Many retailers take in 35% to 40% of their yearly revenue during the shopping season. This could get ugly.
Speaking of tanking, for the second straight day since Barack Obama's election, the stock market had a terrible day, down almost 450 points in the Dow. Yesterday, I suggested that stocks were reacting to the brutal ADP jobless report. The fact that Americans were finally going to choose our next President was probably part of the reason the market turned in a historically positive performance last week. The word out there seems to be that now that the election is over, Wall Street is quickly refocusing on the financial and economic woes that Obama will have to tackle. The question could even be asked, does Wall Street really care who's President. Well according to Paul Kedrosky in today's New York Post, not really.
Honestly? Wall Street doesn't care. Yes, I know that's not the answer anyone wants. People want to believe that Wall Street is obsessing over the presidential race the way most of the country has been. It seems only right somehow, sort of mirrored pathologies. There is a pathology going on, however, but it's much, much stranger.
There is no denying that there is a relationship between presidential elections and the markets. You would have to be delusional to believe that choosing, say, Mao or Mussolini wouldn't cause the markets to implode the morning after. But that's an extreme case. To be somewhat more practically-minded, there is data showing that Democratic presidents are best for the markets. But then again, data also shows Republican presidents turn in the best Dow Jones numbers between the election and the end of the year. And then there are those positive numbers on how Dow Jones returns look for Democratic presidents who control Congress, but only have a small majority in the house. Let's not forget, of course, the cheerfully nuts claim that the main reason the stock market sold off to the point of nothingness in September was that Barack Obama went from being tied with John McCain to having a clear lead in the presidential race.
Wall Street has neatly managed to half-way marginalize President Obama, even if it had to gut itself and the economy to do it.
Should you care about all this psycho-babble data? No. It is small-sample silliness intended to give nonsense the patina of truth, which it isn't. Here is the reality: Markets generally don't know what to make of presidents. Such people rarely do what they say they are going to do, which makes discounting the future difficult; and such things as they do that turn out to matter to markets often have their economic significance missed for years. Who would have thought Reagan would be as progressive as he was, that Clinton would be such an unrepentant free-trader, and that Bush II would be so tone-deaf on economic matters? None of them seemed that way going in, and yet that's what happened.
If this is an extreme view, and I'm not at all sure it isn't, you can at least saying something that relates to it with a measure of confidence. The economic crisis may prevent Barack Obama from turning his campaign platform into reality. A middle-class tax cut was the economic cornerstone of his campaign. Will a deep recession force the new administration to change or postpone its goal? Will Obama be able to tackle health care before the economy is working again? Many economists believe these are reasonable questions. Events may be overtaking plans that were designed before the current crisis. Democrats are calling for major stimulus programs and other emergency spending programs, and if they're to be paid for with something other than IOU's, then some of Obama's economic program will have to wait. Neither he nor any of his advisors will admit to that, but you do the math. In fact, there are reports of quite a flap going on among his economic brain trust: emergency spending vs. budget busting. It's the economic stimulators on one side and the deficit hawks on the other. The problem for the President-elect, he probably has only one chance to get it right. Did anybody say this was going to be easy?