- The Washington Times - Tuesday, November 7, 2000

The most recent tracking poll of Investor's Business Daily showed a huge 19 percentage point lead by George W. Bush over Al Gore among investors who own $10,000 or more in stock. Shareholders are the backbone of Bush support. They are carrying him to victory.
Investor Class voters have been the invisible hand of American politics during most of the 1990s, though most media commentators have missed the political significance of this key group. Investors may well be the single biggest swing factor in today's election. There are roughly 100 million of them. Sixty-percent of likely voters are investors.
The IBD poll confirms an earlier John Zogby poll that showed investors favoring Mr. Bush over Mr. Gore by 50 percent to 39 percent. Two weeks ago the IBD poll showed Mr. Bush with a 7 percentage point lead among investors. Since then the Texan has jumped 10 points, while the vice president has lost 4 points.
In today's high-tech information-age ownership and wealth creation culture, stock prices are more important than gross domestic product. Between Labor Day and mid-October the Nasdaq lost nearly 30 percent, with the S&P; 500 and Dow Jones dropping 12 percent-15 percent. Effectively, the stock market decline ended Al Gore's post-L.A. Convention bounce in the polls.
Mideast tensions and an unexpected spike-up in oil prices also hurt Mr. Gore. Whether justified or not, incumbents suffer when market developments turn sour. If you live by the campaign sword of prosperity, then you must die on the campaign sword of a major market sell-off. Though markets have stabilized recently, there was a significant sense in October that financial events were unraveling. Disorder seemed to be taking over. I believe investors started flocking to Mr. Bush in response.
Stock markets are leading indicators of wealth and growth. The third-quarter economy slipped to 2.7 percent annualized growth, the lowest reading in quite a while. For three straight months, the industrial manufacturing sector appears to have dipped into recession. The nation's purchasing managers report slower new orders, slower exports and slower production. Employment growth has been turning down.
Personal tax payments are rising at twice the pace of personal income, and real disposable income a key measure of living standards has slowed to 3 percent growth from 5 percent. The effective average personal tax-rate has increased to 15.5 percent from 14.5 percent in the past year, reducing consumer purchasing power.
All-star currency strategist Robert Sinche reminds us that yield curves are flat around the world, signaling more sluggish future growth. Other signs of significant monetary restraint appear with the strong dollar and the weak gold price. Election eve investor and voter sentiment may have sniffed out a growth pause. The stock market was a warning; actual data are now providing confirmation. George Bush's across-the-board tax cuts may be coming just in the nick of time.
Before all this, undoubtedly a good chunk of the 100 million or so members of the Investor Class had been willing to give President Clinton at least some credit for the bull market prosperity. I count myself in this group.
Mr. Clinton turned Republican between 1994 after the GOP swept Congress and 1998 when the Monica Lewinsky scandal surfaced. The neo-Republican from Arkansas signed a capital gains tax-cut, welfare reform, expanded super-saver IRAs and a balanced budget resolution. All were pro-growth measures.
Meanwhile Alan Greenspan's policies brought inflation down to nearly 1 percent. This last disinflationary leg amounted to an economywide tax-cut that neutralized the anti-growth effects of the Clinton tax increase of 1993. The effective unindexed capital gains tax burden dropped to a 25 percent record low rate, providing a big booster rocket to risk-taking and capital formation and productivity and profits and the stock market.
In the signature economic achievement of the Clinton administration, Robert Rubin and Mr. Greenspan worked well, under Mr. Clinton's aegis, to strengthen the dollar exchange rate and argue that a strong currency was in the nation's economic interest. Mr. Clinton reappointed Mr. Greenspan twice.
But Al Gore chose not to run as a third-term prosperity manager who would further bolster capital formation, price stability, risk-taking and business expansion. Instead, he took the left road, repeatedly bashing big business and high-income taxpayers. What initially looked like a great left-wing populist idea at the L.A. Convention when Mr. Gore temporarily bolstered the Democratic base, now looks like a terrible political mistake as independent voters are breaking toward Mr. Bush by a nearly 15-percentage point margin.
Think of it in terms of the stock market, as will the 50 percent of households who own shares. If Mr. Gore becomes president and then actually implements punitive measures to control drug prices, nationalize health care, penalize insurance companies and overregulate industrial manufacturing firms, how do you think market sectors would react?
If Mr. Gore becomes president and his Kyoto global warming policies prevent new drilling and development of natural gas, how will technology stocks fare if U.S. policies block the electricity supplies necessary to fuel the wired technology economy? What will auto, rubber and tire, steel and other manufacturing shares do when Kyoto knocks one percentage point off yearly economic growth?
Should Mr. Gore appoint overly-aggressive Joel Klein-type regulators for the Justice Department anti-trust division, the Federal Communicatitons Commission, the Federal Trade Commission, the Occupational Safety and Health Administration, the Environmental Protection Agency and so forth, how will the stock market react? Anti-growth regulatory burdens will diminish prosperity and curtail wealth creation. Stock markets will slump, providing a metaphor for economic decline.
Had Mr. Gore taken a different political route, he might well be in much better shape today. But he didn't. You can't be in favor of jobs but against the businesses that create jobs. You can't be in favor of prosperity, but opposed to people getting rich.
Candidates who threaten the geese that lay the golden eggs can't possibly attract the necessary broad-based political support in today's wealth-creating information economy. People actually remember what you say.
You can't be an attack dog on Monday and then deny it on Wednesday. You can't spend $3 trillion on Tuesday and then talk about limited government on Friday. Maybe there was a time in American politics when cynical candidates could get away with this. But now is not that time. Nowadays the computer mouse tracks the political mouth. The only poll that matters is the final election result today. No one's crystal ball, including mine, can know with certainty what the presidential outcome will be.
But certainly George Bush's pro-growth and pro-capital formation policies of private retirement accounts and lower marginal tax-rates have captured the overwhelming support of the Investor Class. By proposing to turn a sizable fraction of the on- and off-budget surpluses back to the taxpayers in the private free-enterprise economy, it is Mr. Bush who will limit the size and scope of the federal government.
Mr. Bush has established himself as the pro-wealth and pro-growth Investor Class favorite. I believe this credential will carry him to victory and the stock market to new highs.

Lawrence Kudlow is chief U.S. investment strategist and chief U.S. economist at ING Barings LLC.

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