Gore or Bush? It Doesn't Matter

During presidential elections, people seek to find economic meaning from a victory by one candidate or the other. As politicians scramble to take credit for the country's prosperity, it was neither the Democratic administration nor the Republican Congress that created jobs or wealth during our current run of prosperity. You and I did, and the ability of the new president -- whoever he may be -- to change that is minimal.

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By Bill Mann (TMF Otter)
November 8, 2000

I'd love it if people recognized that the presidential election we just endured (or indeed are still enduring) was little more than a referendum on Harvard versus Yale.

Oh, sure, there are issues. The woman's right to choose. Drilling for oil in Alaska. Social Security. And so on.

But now the time for hyperbole has ended, and eventually a winner will be announced. Then it will be time for the government to do the best thing it can for the American economy: get the hell out of the way.

No, the Dow wouldn't drop down to 3500 in the event of a George W. Bush presidency. No, Microsoft (Nasdaq: MSFT) would not get a free pass, either. And no, the world isn't going to suddenly get a lot better for the pharmaceutical, oil, or tobacco companies with a Republican in the White House. We won't be phasing out things like the internal combustion engine and white males if Gore takes the president's office, nor would the rape of the environment automatically begin at 12:01 on Jan. 20 under a Bush administration.

Here's what I find amazing about elections: both George Bush and Al Gore, plus all of the multitudes of Senate and House candidates, governors, dog catchers, and so on, talked about the need to keep the U.S. economy on track. And as far as the presidential race went -- both candidates were ready and willing to paint the other's plan as a surefire way to destroy the economy.

What's interesting is that both wanted to spend more, but in different places. Both wanted to give tax cuts, but to different degrees. Health care and Social Security -- both very basic economic issues to large numbers of Americans -- were both of concern to Bush and Gore, and both had plans to address these issues.

Gore is generally more liberal than Bill Clinton, and George Bush is generally viewed as more conservative than Bob Dole. But neither is really that far from the center, and regardless of who won, both would have minimal effect on our economic standing.

This was not an election featuring Mao versus Mussolini, much as some would have us believe. The president-elect, regardless of who he may be, will have neither the inclination nor the mandate to roll out a government in his own idealistic image. For this very reason, this lack of real power, the stories of the economic betterment under one presidential candidate or the other were just so, well, stupid.

Think of this: When we have talked in the past about "the current bull market," the general length of time has been 17 years. Seventeen years ago was 1983, right in the middle of Ronald Reagan's first term. But add the political consideration, and all of a sudden the question is "Are you better off than you were eight years ago?" Well, sure most people are. But if we're in a seventeen-year long bull market, then most people were better off eight years ago than they were eight years before THAT. This period of time encompassed the presidencies of Reagan and Bush, Sr. It was also a time that saw the end of the Cold War, the collapse of the Soviet Union, and the Gulf War.

The economy was in the midst of readjusting to the reduction in defense spending when Bill Clinton was elected in 1992. But the Republican leadership was predicting dire consequences if we voted for Mr. Clinton and his "tax and spend" liberal cronies. Well, Clinton won, and then in '96 he won again, and in this period the economy has blossomed. The reason it has done so is twofold: First, the president has next to nothing to do with the economy, and second, a checks and balance system is in place to politically punish someone who goes too far down the wrong road.

Bill Clinton found this second point out immediately upon taking office when his health care plan was so maligned that he couldn't run away from it fast enough. Under the Clinton administration, pharmaceutical companies have flourished, adding hundreds of billions of dollars to their collective market capitalizations. But in 1993 it seemed as if these companies would be the administration's fat-cat whipping boys for years to come.

But what about the fact that we're now running at a budget surplus? Certainly Mr. Clinton and Mr. Gore had SOMETHING to do with that. Yes, in the same way that a sports fan has an effect on his team by yelling at a television set. In fact the best thing that Bill Clinton ever did with the economy was to stay out of its way. We have fiscal policy being driven by Congress and the Fed, some good and some bad, but for the most part the budget surplus was created by an unexpected increase in tax revenues.

Unexpected. The sense of financial power in the United States today was driven by the wealth-creating effect of the private sector. In a time where big government spending programs, the "New Deal" kind of infrastructure projects that served to pump money into the economy in the past, were being shunned by the public, the economy grew at a rate unprecedented in the modern era, adding thousands of high-paying jobs, showing growth rates that were previously thought to be dangerous, and taking unemployment down to historically low levels.

But the government, and more specifically, the president, had next to nothing to do with this. It galls me to no end to hear any politician say "WE added 200,000 additional jobs over the last year." No, YOU did not. Cisco (Nasdaq: CSCO), Yahoo! (Nasdaq: YHOO), General Electric (NYSE: GE), and tens of thousands of companies, public and private, did. Neither the spot I now inhabit nor any of the other 400 jobs created at The Motley Fool existed when Bill Clinton took office, and they weren't created by any action of any government at all. Our performance over the next four years won't be dependent upon George Bush or Al Gore, either.

In the end, economic policy is a responsive tool. It is also a tool that is not entrusted to the president alone. Rather, it is the purview of Congress and the Federal Reserve. But their ability is merely to respond to the forces that truly drive the economy. The president does not originate spending or tax bills, he merely ratifies them.

So for those of you who were considering moving to the Bahamas or Canada or wherever if your candidate did not win: grow up. But more importantly, understand that from an economic standpoint, for the stock market, regardless of who wins, the future growth rates will be determined by those at the companies who actually do the work.