by Jurgen Brauer, November 2004
Copyright: J. Brauer. No reproduction without permission.

I was wrong!

Four years ago, I wrote a column declaring that it was a good thing that the Bush/Gore U.S. presidential election was essentially tied. A few thousand out of a 100 million votes produces a "winner" only in a legal sense, I wrote, adding that neither candidate could reasonably claim to possess an electoral mandate and would therefore have to tread lightly.

I also predicted that a tied U.S. House and U.S. Senate would produce continued spending restraint and reign in tax-cut designs, so that the then-surplus would continue to grow, a "forced savings" that would fuel domestic business investment through low interest rates, reduce national debt, and afford politicians the opportunity to deal with the looming Social Security and Medicare crises and other long-term issues. I predicted that economic policy would continue to be run - as it then had been - primarily by the Federal Reserve Bank, rather than by Congress and the Administration.

You knew that economists could be wrong - at least when writing about politics.

But you knew that economists could be wrong - at least when writing about politics.

What happened? When no one knew who was going to be president, when the country was in limbo, and when the world laughed at us - the presumed champions of democracy who couldn't run an election - U.S. business investment dropped precipitously from much over $1.7 trillion to much less than $1.6 trillion (on an annualized basis). Consumption rose, as did government spending. The dollar outflow to finance imports stayed at about the same level. Thus, the recession of 2001 - which is officially dated to have begun in March 2001 - can be laid in its entirety at the feet of falling business investment, read: lacking U.S. business confidence in the U.S. economy. The bosses got cold feet!

And who in his right mind would plunk down a $100 million or $1 billion investment, when you don't even know something as fundamentally important as who the country's chief executive was to be?

Despite 9/11, the recession ended in November 2001, at least according to the way the numbers are ordinarily run. True, the wars the U.S. fought in Afghan mountains and Iraqi deserts in 2001 and 2003 drove federal government spending to new heights and "stimulated" the economy at the expense of wrecking fiscal discipline. So did the tax cuts that were supposed to prod the economy along as well. More spending, less government income, and what was a gorgeous federal government budget surplus metamorphosed into a hideous budget deficit. And while I certainly enjoy my modest share of the Bush tax-cuts, I can assure you that not a penny made it to consumption; it's all being stored up to compensate for a monthly social security retirement check I may never see on account of it being so small.

Fighting wars in Afghan mountains and Iraqi deserts does not stimulate the economy.

Although the weapons factories did well, fighting wars - and squirreled-away tax cuts - do not stimulate the economy much, hence the lack-luster picture on the employment front. The challenger overstates things by using the "golden 1990s" as the standard to which the economy should return - remember below 4 percent unemployment? - and the incumbent overstates things as well in claiming that all is as well as it could be. Real wages - wages adjusted for consumer price inflation - have fallen for the average American, and poverty levels are up, both in numbers and as a percentage of the population.

The war in Iraq is not going well - if it were, it would be over! - and the prospect of another "tied" election in the U.S. now frightens me. How are we going to assist voting in Iraq if we can't do it ourselves?

So, here's my plea: vote decisively. I'd rather take another four bad years with a clear Bush-win, and be sure to get a new fellow come January 2009, than another four years of a mandate-less "winner" and all the uncertainty this brings.