Not really. Thanks to Chart of the Day, here’s the history of the DOW adjusted for inflation:

Notice a couple of things:

* The incredible 1929 stock crash is evident.

* There was a weak recovery in the mid-1930s during the New Deal, sort of like today under the Obama Deal.

* Strong, lasting recovery didn’t begin until 1946, just after World War II. As economists Vedder and Gallaway explain, President Truman wanted to keep most of the New Deal measures and wartime controls. But Congress bucked him, cut the controls and also cut taxes, sparking the boom that lasted until the late 1960s.

* In the late 1960s, the massive expense of LBJ’s Great Society and Vietnam War began buckling the economy; he imposed a 10 percent surtax in 1968.

* In 1971, with his “Nixon Shock,” President Nixon jolted the economy with wage and price controls, tax increases, tariffs and going off the gold standard. That artificially boosted the economy past his 1972 re-election. Then the bottom fell out of the economy. We suffered “stagflation” (stagnation + inflation) and the “malaise economy.” The stock market kept declining.

* In 1983, President Reagan’s tax increases finally kicked in with full force, beginning nearly a 20-year run of prosperity, with only one minor recession. He also cut regulations. Budgets were not cut enough, hence the deficits of those days. And a quasi-gold standard was restored by Fed Chairman Paul Volcker, with gold pegged at about $350 an ounce, stabilizing prices and quieting inflation.

* Bill Clinton’s second term included tax cuts that canceled the tax increases of his first term; welfare reform; and the first budgets in three decades.

* The dot-com bust of 1999-2000 was a minor problem.

* In 2001, terrorists flew planes into the World Trade Center and the Pentagon. President Bush and Fed Chairman Alan Greenspan panicked. Bush went on a wild spending binge, reversing the Clinton spending restraint and bringing back the mega-deficits. Not just defense was increased; two-thirds of new spending was domestic. His tax cuts were defective because they had an expiration date. Greenspan inflated the currency, with gold rising sharply above the $350 average of the previous 20 years. And Greenspan kept interest rates artificially low, blowing up the housing bubble of the mid-decade.

* In 2007-08, the economy collapsed, which is shown in the cart.

* From 2008 to now, supposedly the policies of Fed Chairman Bernanke and President Obama have “saved” us. But as the chart shows, the DOW, adjusted for inflation, only is back to where it was 15 years ago. American now is suffering a second “lost decade.” Even the Fed today reported, according to AP, “that the U.S. economy is growing only modestly, a downgrade from its June assessment. The Fed expects growth will pick up in the second half of the year, but the more cautious message may be a signal that it’s not ready to slow its bond purchases soon.”

I short, it’s cuts in taxes and regulations, plus stable money, that produce growth; and increases in taxes and regulations, plus unstable money, that impose stagnation or recession.

By Chris Reed

Perhaps the single smartest guy in the Schwarzenegger administration, David Crane, continues to be a wrecking ball when it comes to the arguments offered by apologists for California’s ruinous state finances. In his latest Bloomberg News column, Crane takes on the defenders of the status quo who try to reframe the narrative by saying pension funds aren’t underfunded because benefits are ridiculously generous, it’s because of Larger Economic Factors That Came Out Of Nowhere.

“The reason for rising pension costs has nothing to do with the recession or short-term declines on Wall Street. Public pension costs are increasing simply because liabilities are growing faster than assets.

“Calpers is a good example. As an intermediary that administers pension promises made by the state of California and other public-sector employers to their employees, it collects contributions from employers and employees, invests those funds to generate earnings, and uses the proceeds to pay benefits to retired employees.

“In 2007, Calpers reported that the pension liabilities of its largest pool of employers totaled $248 billion. By 2011, just four years later, those liabilities had grown 32 percent, to $328 billion. That rapid growth happens because pension liabilities grow (‘accrete’) at the rate used to discount those obligations to present value, which at Calpers is a very high 7.5 percent per year. Pension assets must grow at that “hurdle” rate or pension costs rise. For example, to meet the rate at which pension liabilities were increasing in 2007, Calpers needed the Dow to reach 20,000 by now. Because it is at 75 percent of that level, pension costs must rise to make up the difference.

“This isn’t a new phenomenon. To meet the rate at which pension liabilities were growing in 1999, Calpers needed the Dow to reach 30,000 by now. Because it is half that level, California has spent $20 billion more on public pensions than would have been the case had pension assets grown at the hurdle rate.”

Projecting Dow at 30,000 epitomizes insanity of 1999

In key ways, 1999 was the year that brought the pension tsunami more toward shore than in any other year. That’s when CalPERS lobbied for a retroactive 50 percent increase in pensions for state employees, triggering a wave of giveaways by local governments who were encouraged by CalPERS’ insane claim that it would be easy to fund the much more expensive benefits.

What was driving that assumption? As Crane notes, the idea that the Dow Jones Industrial Average would be at 30,000 this year. Nothing epitomizes the civic arson committed by CalPERS in 1999 better than that ridiculous factoid.