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The Investor Election
Bush spoke to the majority during his campaign.


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Grover Norquist

Despite the presidential campaign focus on re-fighting the Vietnam War and second guessing the war in Iraq, history suggests that most voters will be voting their pocketbooks today. But how does a voter judge this economy?

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In the wake of the Great Depression of the 1930s the single measure of economic well-being was the unemployment rate. It if was going up, the incumbent was in trouble; heading downward, the incumbent was safe.

Thanks to President Richard Nixon’s unleashing of the Great Inflation in the 1970s, unemployment ceased to be the sole measure of economic well-being. Candidate Jimmy Carter popularized this new reality when he created the misery index, the sum of the unemployment and inflation rates, as the true measure of the economy. Furthering the interests of social science, if not his career, President Jimmy Carter proved his thesis by running the misery index up form 13 in 1976 to 20 in 1980. He lost his job.

Looking at unemployment alone the rate is 5.4 percent today — below the average unemployment rates of the 1970s, 1980s, and 1990s. And it’s falling. The economy has gained nearly 2 million jobs since last August. When employment is growing and unemployment is falling it becomes a weak political argument.

Today, the misery index stands at 7.8, compared to President Bill Clinton’s 7.4 in September 1996. This is the lowest misery index for a candidate for reelection to the presidency since Lyndon Johnson ran in 1964.

But there is a third measure of the economy that may sway voters today: the value of the stock market.

The largest demographic shift in this country over the past 25 years is not the number of Americans whose parents speak Spanish. It is the number of Americans who own stocks directly. In 1978 only 17 percent of American adults owned stocks. Today, more than 60 percent of adults and 70 percent of those who voted in 2002 own stock.

The “investor voter” has already changed politics in the past 4 years. In 2000, then-candidate George W. Bush touched, heck he fondled, the third rail of American politics, Social Security, by suggesting that younger Americans be able to invest some of their FICA taxes in personal savings accounts. Years ago this would have been attacked by the Democrats as “ending” Social Security. But with half of adults fully aware of how mutual funds work, individual retirement accounts or defined contribution pensions are no longer a threatening idea. It’s a popular idea.

In 2001, when President Bush sent several tax cuts to the House, the Democrats voted in lockstep against ending the death tax and against cutting income tax rates. But the vote to expand individual retirement accounts was 400 to 25.

In 2003, Congress voted to trim the capital-gains tax to 15 percent and cut in half the double taxation of dividend income paid out to investors by corporations. Someone noticed the growing number of investor voters.

So which way will investor voters go today?

John Kerry could point out that the Dow Jones has fallen 863 points since Bush was inaugurated and now hovers around 10,000. Perhaps investors will reject Bush for the decline in the market, just as previous generations of voters would have fired presidents who saw unemployment and/or inflation rise.

Well, we don’t have to wonder how a declining market affects the modern investor voter. We have recent history: the 2002 election. From April 2000 to October 2002 the Dow Jones fell from 11,200 to 7,286; Americans lost $7 trillion of shareholder wealth. Yet, Republicans won back the Senate — confounding the traditional off-year loss by the party controlling the White House.

Why did this happen? Because Democrats did not have a narrative that blamed Republican policies for the decline, nor did they have any policies to increase stock prices. And that has not changed in the past 2 years.

The Democrats have told us for decades that Republicans will do anything to get market caps up. Their caricature of Republicans is that they will pollute the earth, club baby seals, and slash government to get stock prices higher. While exaggerating in order to attack Republicans, the Democrats only confirm that the GOP has become the tribune of investor voters. When FDR talked like that he confidently knew he was attacking only a few “economic royalists.” But Bush put his vision of the ownership society — personal retirement accounts, health savings accounts, lifetime savings accounts — front and center of his campaign, to visible results: Bush picked up a net 16 points among all investors in the month of August, according to Zogby’s post-convention poll. The new investor majority knows where he stands.

Democrats helpfully offer to sick the trial lawyers, labor unions, regulators, and tax collectors on your mutual fund. No matter how low the stock market falls, how could this help?

Low stock market values make investors demand solutions from politicians that will increases their wealth. Kerry has chosen sides. In the 1995 debate on capital-gains tax cuts he said, “This week defines the difference between them and us.” It’s not so wise to define 70 percent of voters as “them.” It shows your political age. In fact, some of the weakness in the stock market over recent weeks was caused by the possibility of a Kerry presidency.

An August poll by Scott Rasmussen showed 62 percent of undecided voters owned $5,000 in stocks, bonds, and mutual funds. They will decide who the next president will be.

Grover Norquist is president of Americans for Tax Reform. Cesar Conda, former domestic policy advisor to Vice President Dick Cheney, is a senior fellow with FreedomWorks.



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