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Politics : PRESIDENT GEORGE W. BUSH -- Ignore unavailable to you. Want to Upgrade?

To: greenspirit who wrote (43938)	10/8/2000 5:31:42 PM
From: jimpit	Read Replies (1) \| Respond to of 769667

LOL... Good article, Michael. Would you believe I discovered the following one at the CBS MarketWatch site! CBS... not exactly a bastion of conservative thought... I wonder if Dan Blather knows... sshhhh! Jim _____________________________________________________ CBS MarketWatch.com cbs.marketwatch.com A Gore victory poses market risk By Michael J. Bazdarich CBS MarketWatch NewsWatch Latest headlines Last Update: 3:17 PM ET Oct 2, 2000 LOS ANGELES (CBS.MW) -- Aside from growth, inflation, and oil price risks for the securities markets, the 2000 presidential elections loom as another potential swing factor. I think the most likely political risk for the market is that of an Al Gore election, and here's why. The Clinton administration has done a masterful job of doing nothing, but taking credit for everything. A Gore administration would be much more likely to embark on interventionist economic policies which could stall growth and send bond and stock prices downward. Do I sound like a Republican hack? Well, answer me one question. What initiatives has Bill Clinton taken which have boosted economic growth? Here are the most prominent "economic" initiatives of his regime which I can recall: 1) The Family Leave Act; 2) Hillary's health care reform; 3) The tax hike of 1993; 4) various actions to raise the minimum wage; and 5) NAFTA and the expansion of GATT. Of these, his health care reform, thank goodness, was never enacted. You may like the Family Leave and minimum wage actions politically, but no one can claim that these stimulated the economy. In fact, the most ardent apologists of these actions claim only that they had no harmful effects. Similarly, once cannot seriously argue that the tax hike of 1993 stimulated economic growth. The (incorrect) defense of that package is that it lowered interest rates, but even on that score, where are the results? Short-term interest rates are three percentage points higher now what they were in 1992, and long rates are only very slightly lower. Yes, NAFTA and GATT boosted U.S. growth, but these initiatives were already in the works from the Bush Administration. In fact, THE major economic achievement of the Clinton presidency has been to give the Greenspan Fed a free hand in managing the economy. Ironically, the Greenspan Fed, too, was already in place prior to Bill Clinton's ascendance, but the prior administration, from Nicholas Brady on down, were much more critical of the Fed than Clinton's men have been. Which gets me back to my main point. I know that the paragraphs above sound like an anti-Bill diatribe, but the fact is that Clinton and Co. have shown enormous restraint and shrewdness in merely sitting back and letting good things happen (after taking some early licks from their minor, harmful actions). Jimmy Carter and Lyndon Johnson were not similarly disposed, nor would Walter Mondale nor Michael Dukakis likely have been, had they won election. No, it took an unusual mixture of self-assuredness and chutzpah to be willing to let nature take its course, secure in the belief that one could take full credit for it anyway, and I am mostly sincere when I laud Bill Clinton for these attributes. What worries me is that I can't believe Al Gore will act similarly. I think he believes his rhetoric, ranging from worries on global warning and advocacy of taxes on industrialized nations' energy consumption to wholesale condemnation of the 1980s' tax cuts. Furthermore, four to eight more years of do-nothing policies would likely just garner more credit for Clinton than for Gore. In other words, a Gore presidency will be much more likely to be an activist one as regards the economy, and the results will not be pretty. What's the near-term downside of this? Well, in the summer of 1992, when the prospects of a Clinton victory became imminent, market interest rates started rising in response. From early-September through early-November, long bond yields rose a full half percentage point. This occurred in the midst of a weak economy and with no expectations of Fed tightening nor rising inflation. In other words, there was little or no explanation of the yield rise other than impending political events. If George W. stumbles in the debates this week, or if some other event pushes Gore far ahead in the polls, or if the election results themselves come in accordingly, watch out. A market reaction similar to that of the fall of 1992 would likely be not far behind. © 1997-2000 MarketWatch.com, Inc. All rights reserved. Michael J. Bazdarich, principal of MBEconomics, is a columnist for CBS.MarketWatch.com. __________________________________________________________________________ cbs.marketwatch.com