Bear Market for Bush?
MOORE, STEPHEN
Bear Market for Bush? Why the president—and the economy—really need a tax cut. BY STEPHEN MOORE LIFE DOESN'T GET any better than this if you're a Republican. The decisive triumph in Iraq has sent...
...Signs of an economic slowdown first emerged in the third quarter of 2000...
...If he fights for the tax cut, there's a good chance he will win...
...was basking in the afterglow of his Gulf War triumph, his administration had a brief opportunity to pass almost any legislation it wished for...
...Still, the stock market collapse has led to a liquidation of $5 trillion in wealth—some of which has been absorbed by foreigners, but most of it by American shareholders...
...Home values have continued to rise since 2000 as a result of the 30-year lows in interest rates...
...Bush has two advantages in defending himself on the economy...
...Since Bush was inaugurated in January 2001, the Dow Jones has fallen 20 percent and the Nasdaq has tumbled 45 percent— though the mini-rally since the end of the Iraq war is helping to reverse these declines...
...First, he must salvage his stimulus package and get the wayward Senate Republicans, namely Olympia Snowe of Maine and George Voinovich of Ohio, back on board...
...He also lost because he seemed completely inattentive to the anxieties of American workers and investors...
...put it...
...If, between now and the elections in 2004, Bush would start to simply say no to all new spending, no to all new regulations, no to all industry bailout requests, the stock market would take note and reward him...
...The Democrats are preparing to Herbert Hooverize George W., and they've got a lot of ammunition to do it with...
...That's hardly going to generate a flurry of economic activity...
...They were Herbert Hoover and Jimmy Carter— not the kind of company Bush wants to keep...
...Now that would make investors happy...
...Not once has this happened...
...If things go right for Republicans in '04 they could really go right...
...In fact, it's a bit of a mystery why investor-class voters didn't abandon the GOP in 2002...
...To summarize a 20-minute talk in two sentences: Under Clinton, the budget deficit and unemployment went way down, while the GDP, jobs, and the stock market soared upward...
...The answer seems to be that Republicans caught a lucky break...
...and Republicans got nearly 55 percent of them in 2002...
...Bush says he wants to create a more pro-business regulatory environment, but economist Brian Wesbury reports that the Federal Register, a good proxy for federal rule-making, has been rapidly fattening with new pages in the past couple of years...
...These losses are bigger than the GDP of virtually every country in the world...
...Not long ago, I sat through a Ted Stephen Moore is president of the Club for Growth...
...That was the beginning of the end of papa Bush's presidency...
...There are a surprisingly small number of people in Congress in either party who have a philosophical commitment these days to smaller government," complained Arizona Republican congressman Jeff Flake, after some 350 House members approved a $400 billion pork-spending bill earlier this year...
...Under Bush, the deficit and unemployment went up, while the GDP, jobs, and the stock market went down...
...The political penalty for a lousy stock market should be even stiffer now, because of the sudden emergence of the new investor-class voter...
...Bush's tax policies have been well-intentioned, but he was forced to make compromises that neutered the impact of his 2001 bill...
...economy simply can't improve until the stock market recovers...
...He should reject the half-loaf non-stimulus alternative that the Senate has offered...
...This was an economic tailspin that Bush inherited rather than created...
...The Democratic stimulus package is pitifully unimaginative: more spending on infrastructure, on aid to states and cities, on expanded welfare benefits...
...The stock market hit its peak in the spring of 2000— about nine months before Bush was inaugurated...
...But there is no denying the economy has performed rottenly...
...So Bush may well coast to victory, even in a bear market, but why tempt fate...
...Bush is a free marketer but has approved multi-billion dollar bailouts of the insurance and airline industries...
...After all, the GOP has been here before—in 1991...
...So far, Bush's record has been spotty at best in this regard...
...This President Bush has now arrived at his own defining moment of domestic policy...
...Kennedy slideshow presentation on the economy...
...Could Republicans possibly lose in 2004...
...This helps explain why consumer spending has remained robust even as Wall Street keeps liquidating wealth...
...Which is to say the Bush administration would be wise to pursue a course that firms up its weakest point: the stock market...
...didn't "feel our pain...
...But the supply-side, wealth-inducing aspect of the first Bush tax cut doesn't take effect, for the most part, until 2005...
...So what economic policy options does Bush have now to reverse the stock market slide...
...Pollster Scott Ras-mussen reports that Bush won a slight majority of these shareholders in 2000...
...After Bush Sr...
...So far the top income tax rate has come down by only one percentage point...
...muscled the Iraqis out of Kuwait, he was surfing on a crest of popularity higher than his son now enjoys or anything Reagan ever saw...
...Oh, they could find a way...
...In just two and a half years, the 10-year budget outlook has gone from a benign $3 trillion surplus projection to a gloomy $2 trillion deficit...
...That's how this president can defy history and survive a bear market...
...In particular, if the stock market doesn't recover soon, Bush will be running headlong against history in his reelection bid...
...It was depressingly persuasive...
...He should strong-arm Congress into passing his stimulus bill—intact...
...The decisive triumph in Iraq has sent President Bush's approval ratings soaring back above 70 percent, according to an April 15 NBC poll...
...was evicted from office— because he lacked a coherent program for reviving the economy after a relatively mild and short-lived recession...
...And if he loses, he can still solidify the loyalties of investor-class voters by fighting their battle...
...Wayne Angell, the former Federal Reserve Board member and now a guru on Wall Street, tells me, "Few policymakers seem to understand that the overall U.S...
...That is about as bearish a turn of events as one can imagine...
...Bush was right to call for acceleration of income tax cuts...
...Bush is a free trader, but we have had steel quotas...
...Still, less than two years later, Bush Sr...
...In sum, the government is growing like weeds under Bush...
...The battle to save the tax cut isn't over by a long shot...
...This president is also vulnerable— though the well of support among conservatives enjoyed by George W. Bush runs far deeper than it ever did for his father...
...Polls show the public is skeptical that the Bush tax cut will work, but even more distrustful that big government solutions are the key to growth...
...But it also carries with it a flashing danger signal: If the housing market bubble pops, and stocks and housing prices take a parallel tumble—and that is a big t/—then the economy could be in real trouble...
...Moreover, voters seem to understand that the 9/11 attacks created a jolt to the economy from which we are still recovering...
...Twice a president came up for reelection after a term in which the stock market fell, and both incumbents got the boot...
...The 2000 election was the first in which a majority of voters owned stock, up from about 20 percent as recently as 1976...
...Economists have a range of estimates of how much stock valuations will increase as a result, but most fall in the 5 to 15 percent range...
...The obvious prescription is a battalion of investor-friendly policies...
...Bush's critics sneer that his tax cuts haven't stimulated the economy...
...So I got to wondering how many times in the last 100 years a president has been reelected when the stock market fell during his first term, as it has under George W. Bush...
...Bush is against big government, but he signed and even praised the most expensive and protectionist agriculture bill in American history...
...Twelve years ago, when Bush Sr...
...Also, Bush must slam the breaks on this horrendously costly spending spree on Capitol Hill...
...Under many plausible scenarios, 2004 could deliver for the GoP the kind of landslide that 1964 was for the LBJ Democrats...
...To jittery voters, it seemed as though, to borrow a phrase from Clinton, Bush Sr...
...The White House called for a $150 billion highway bill ("jobs, jobs, jobs," as Bush Sr...
...It turns out that, for the average family, the loss in household wealth from the stock market freefall has been almost completely offset by the increase in value of the other major asset held by Americans: their homes...
...The dividend tax cut will instantaneously increase stock values when it's passed...
...In 2004 these wealth-depleted voters might not be so forgiving to GOP incumbents...
...And, if we suffer another year of a bear market and stagnant growth in the private economy (the public sector has been growing like gangbusters), voters may again rebel against a successful wartime president...
...First, most Americans acknowledge that the recession and stock market collapse began under Clinton...
...Bush's other advantage is that the Democrats are countering his tax cuts with moldy 1970s-style governmental expansionism that few Americans buy into...
...The economy needs steroids now, and the president should ask Democrats who voted for his plan in 2001 why it makes sense to cut taxes in 2005 and 2006, but not now...
Vol. 8 • May 2003 • No. 33
