Cause and Effect? Dow Drops 280 Points 24 Hours after House GOP Votes Against Raising Debt Ceiling

Imagine the firestorm that would be raging on Republican propaganda outlets right now if the stock market had dropped 2.2 percent within 24 hours after Democrats had voted unanimously not to raise the nation’s debt ceiling.

The entire right-wing noise machine — from Fox & Friends to Limbaugh, from Hannity to O’Reilly — would be singing the same refrain: The stock market has sent a clear message of disapproval over the Democrats’ irresponsible vote. Whether that assertion was true would not matter. They would make it true simply by unanimously agreeing that it was.

But because it was Republicans who voted irresponsibly, right-wing media sees no relationship between the vote and market drop.

And, of course, neither does the “liberal” lamestream corporate inside-the-Beltway media.

No one sees any connection between this on May 31:

The House votes down a debt-ceiling increase

And this the next day:

Dow drops more than 200 points

Even though at least one right-leaning media outlet — the New York Daily News — predicted this on May 31, around the same time the vote was being taken:

Wall Street reacts to House vote on debt ceiling: Refusal to raise debt limit won’t affect market

by Alison Geindar

Tuesday, May 31st 2011, 9:03 PM

Wall Street recognizes Tuesday night’s vote on the debt ceiling as nothing but a kabuki dance that likely won’t send the stock market into a tizzy, analysts said.

A majority of House Republicans, and most Democrats, refused to raise the debt limit on a 318-97 vote.

“The markets may shrug it off, since it is still considered a political drama at this point,” said Asha Bangalore, senior vice president at Northern Trust Corp.

Since the Obama administration has moved money around to push off the debt deadline until Aug. 2, Wall Street won’t panic – yet.

Presumably, triggering a 280 point drop in the Dow is only a “panic” when Democrats do it.

But because Republican leaders secretly signaled to Wall Street that their vote against raising the debt ceiling was just a stunt, the vote had absolutely nothing to do with the market’s collapse.

All it took to avoid responsibility for a market drop was a nudge and a wink from Speaker Boehner to his corporate sponsors.

Instead, there is a solid consensus in the media that the drop was caused by various other factors, as outlined here by the AP:

A sharp dive in private job growth and a continued slowdown in the manufacturing sector combined to send the Dow Jones industrial average down more than 200 points Wednesday, its biggest drop since early March. Treasury bond prices rose to their highest level of the year as traders placed a larger value on safer investments.

Doubts about the economy’s strength that built throughout May were compounded by a pair of reports that were weaker than investors expected. The ISM’s manufacturing index fell to 53.5 in May from 60.4 in April. It had been as high as 61.4 in February. Still, a reading of more than 50 indicates the manufacturing industry is growing.

And private employers added just 38,000 jobs in May, down from 177,000 in April, according to payroll processor ADP. Analysts had expected 180,000 new jobs. The Labor Department’s more comprehensive report, which includes hiring by both private employers and the government, is released Friday.

“As far as we can tell, employers have hugely overreacted to the surge in oil prices, which has slowed but not killed consumption,” said Ian Shepherdson, chief U.S. economist for High Frequency Economics. The weak ADP results pushed him to cut his forecast for overall job growth in May to 75,000. He earlier had forecast Friday’s report to show growth of 175,000 jobs.

This is a prime example of how the GOP propaganda outlets control the political narrative. If the situation had been reversed, the blamestorming against Democrats on the right would have started bleeding from Fox into the mainstream on MSNBC’s early-morning, three-hour right-wing gabfest, “Morning Joe.” By mid-day, CNN hosts would be asking their in-house pundits to opine on the question: Was there a connection between the Democrats’ vote on the debt ceiling and the market drop?

After a few hours of debate, eventually even left-leaning middle-of-the-roaders would allow that there could be a connection. Their allowance is the penultimate step before a consensus is reached. By nightfall, there would be little doubt:

The stock market drop was the Democrats’ fault.

But because it was a Republican vote, the right-wing dogs did not bark. With no corollary media apparatus on the left, the result is a consensus among pundits that still favors Republicans: The GOP vote had no effect on the markets. It was merely a coincidence that the market dropped in the very next session. Broken government was not a factor.

See how this works?


  • Alex
    June 2, 2011 - 10:26 am | Permalink

    Dude. Decrying speculative examples of bias (the whole “straw man” thing) is ridiculous when Republicans do it, you shouldn’t be doing it either. Republicans are absurd enough as-is that you shouldn’t have to attack their hypothetical responses if things were different.

  • Seabear70
    June 2, 2011 - 10:52 am | Permalink

    Ok, so it’s like when Obama was elected and the economy immediately began to tank because businesses were afraid he was going to punish them for success like he said he would, then it continued to tank because he instead punished them for not contributing to his campaign.

  • June 2, 2011 - 6:15 pm | Permalink

    Seabear70, please stop lying. Obama did not punish anyone for not contributing to his campaign. He punished the entire middle class and the poor for voting for him.

    DINO Obama is further to the right than Dubya. Next year in the Democratic Primaries, vote out all DINOs, especially DINO Obama.

    Vote only for PROGRESSIVE DEMOCRATS, because a vote for the lesser of two evils (DINO vs. Republican), is still a vote for evil.

  • June 2, 2011 - 6:21 pm | Permalink

    Alex, what strawman? There was no speculation in the article as to why the stock market dropped so much. The stock market did indeed drop as much as it did because the House could not reach an agreement on the debt ceiling. Here is the proof:

    ‘Moody’s Investment Service will likely downgrade America’s credit rating if Congress can’t reach agreement on a debt ceiling increase by mid-July, the firm said in a statement Thursday.’

    Wall Street does not like to see anything downgraded. It causes stock and bond prices to drop and interest rates to rise.

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