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The Gore Correction
The vice president is spooking the markets.


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Larry Kudlow

As Al Gore takes his campaign for Regulator-in-Chief through California, U.S. stock markets continue to slide. In fact, ever since post-Labor Day polls suggested that Gore could win, broad stock-market averages like the S&P 500 and the Dow Jones have dropped by roughly 6 percent. The technology-driven NASDAQ has fallen 10 percent. As Gore has come out from under Bill Clinton’s shadow, the summer stock-market rally has shut down.

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On the campaign trail, the Veep is out there trashing targeted big businesses, continuing his left-liberal populist crusade against health insurers, drug companies, oil, tobacco, and so-called manufacturing polluters. Gore’s latest gambit is to go after one industry per day in order to hammer home his message of “the people against the powerful.” Gore campaign aides now refer to this as “the people versus the plutocrats,” according to a story in the Washington Post. The morning after the publication of that story, the Dow Jones dipped 200 points on opening.

Financial commentators have come up with all the usual explanations about the sinking euro and rising oil prices, but there’s a much bigger problem here. The investor class is beginning to focus on Gore’s anti-business presidential theme. It seems increasingly clear that a President Gore will heavily regulate a number of business sectors in the U.S. economy, especially ones he does not consider socially useful. If this sounds like Soviet-style central planning, it is. Picture the appointment of a dozen Joel Kleins (he was the Justice Department Microsoft-basher until he resigned yesterday) to posts throughout the executive branch.

Investors are getting the message: American business is at risk. People are beginning to understand that Al Gore likes jobs, but doesn’t like businesses that create jobs. He likes prosperity; he just doesn’t want anyone to get rich. These contradictions are striking at the core of the 18-year-old stock-market bull.

These market fears may be overblown. A number of polls still show a neck-and-neck race, including the USA Today tracking poll, the Battleground 2000 tracking poll, and the Rasmussen daily poll. In fact, the last two give Bush a slight lead, as the Texan is beginning to mount his counterattack. But one of the best and most accurate polls of the impact of politics on future American wealth-creation and prosperity is the stock market. It’s currently saying, “Major worry.”

George W. is doing a decent job of making the distinction between Gore’s government-regulatory approach to the economy and his own free-enterprise instincts. But Bush has to be much tougher in his issues attack. He’s got to label Gore as a traditional, big-spending liberal who is proposing nearly $3 trillion in entitlement programs. He’s got to make it clear that targeting certain business sectors for regulation opens the door to targeting all business. Bush should also note that while Europe and Japan are cutting tax rates and deregulating, a Gore administration will take the U.S. in the opposite direction. Therefore, Gore will damage the long wave of prosperity by reducing the risk-taking animal spirit of capital investment. A less-competitive America will experience capital outflows, declining terms of trade, and a sinking dollar. Over-regulation produced these dismal conditions in the 1970s, and it could happen again.

Surprisingly, despite the Gore assault, a number of polls show that voters still favor Bush’s tax-cut plan, but they do not believe Bush will manage the economy as well as Gore will. This is because the Texas governor has not “connected the dots” between lower tax rates and expanded prosperity.

Under the Bush plan, the U.S. economy could double in 15 years, with a substantial increase in personal savings, investment, and productivity, along with heightened job creation. These economic gains will solve the Social Security deficit, and pave the way for defined-contribution private retirement accounts.

Gore’s overregulation, however, along with his spending plans, will drain resources from the productive private sector and slow investment, jobs, and growth.

As Steve Moore has written here, the Bush campaign should stop attacking Clinton, whose economic record (working with a Republican Congress) is a good one. Instead, the Bushies must separate Gore from Clinton by arguing that the former is far more liberal and anti-business than the latter. Over 130 million people who are working, and 100 million people who own shares in U.S. companies, will not want their future jobs and wealth compromised by Gore’s central planning and targeting. Bush should paint broad lines and clear differences between his philosophy and Gore’s. If he does, then an autumn stock-market rally is in the cards.



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