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The market and the economy
The Washington Times
January 4, 2018

In the 14 or so months since the Trump election, the stock market has soared by more than 35 percent. The economist Arthur Laffer estimates this bull market has increased America’s net wealth by $6 trillion — that’s trillion with a “t” — and maybe more.

The stock market is a measure, and not the only one, of the health of the economy, but more importantly, it measures the confidence, optimism and expectations of the future of the economy. If anyone doubts that a strong stock market helps the working stiff, he should consider the alternative. When the stock market crashed in 2008, more than 7 million Americans lost their jobs.

It’s further nonsense to say that only the rich benefit from a rising stock market. Fifty-five million Americans have 401k plans. There are tens of millions more with IRAs and pensions. Where else is all that money invested? Junk bonds? A battered coffee can behind a brick in a basement wall? A rising stock market can be salvation for bankrupt state-government pension funds for retired teachers and municipal employees, even if few of them voted for Mr. Trump.

Markets are always forward looking. The much-maligned Trump tax cut has clearly played a major role in the run up in stock shares. When the corporate tax rate falls from 35 percent to 21 percent, the bite of earnings taken by the government falls from one-third to one-fifth, which means the value of the after-tax earnings to the shareholders is considerably higher. Shareholders, who take the risk in investing in companies, should be getting most of the profits, not that well-meaning interloper in the gaudy striped pants.

The economy is growing now by 3 percent annually, and some economists, not afflicted with excessive exuberance, predict 4 percent growth next year. Whatever tonic Mr. Trump is selling, we need more of it.

Read the full editorial here.