At
11:02am Eastern Standard Time, November 3, Senator John
Kerry called President George W Bush to concede defeat
in a hard-fought presidential race that saw the
Democratic challenger and the Republican incumbent tied
in most polls the day before the election. In the end,
though, the outcome wasn't nearly as close as the polls
had forecast. Bush's margin of victory in the popular
vote was a large 3.5 million and he became the first
candidate to win a majority of all votes cast since his
father in 1988. As impressive and unpredicted was the
length of his coattails: Republicans not only maintained
control of the Senate, but increased their seats from 51
to 55; they also added to their majority in the House of
Representatives. You have to go back to Franklin D
Roosevelt's 1936 re-election for such a feat. A US map
published by USAToday.com shows a huge majority (over
90%) of "red" counties (those won by Bush).
How
will the Bush II administration transform this mandate
into convincing and lasting results? First and foremost
by pushing ahead with the type of economic policies that
- after the miserable Jimmy Carter years - were ushered
in by Ronald Reagan and transformed a basket-case
economy, then judged soon to be overtaken by Japan, into
by far the world's most productive economy that allows
less than 5% of the world's population to produce nearly
30% of global output.
Reagan, in the midst of
deep recession and high inflation inherited from the
Carter administration, cut taxes, deregulated businesses
and labor markets, and rekindled entrepreneurial
initiative and record new business formation. He also
ran up massive fiscal deficits; but the fundamental
reforms he instituted laid the foundation for the
unprecedented prosperity of the 1990s and the building
down of deficits that ensued.
The recession Bush
inherited from Bill Clinton as the Internet bubble
collapsed wasn't nearly as pronounced as the Carter
recession. But the Reaganite method he chose to combat
it - tax cuts to stimulate business formation and
consumer spending - was effective even as the economy
was jolted by the events of September 11, 2001. Like
Reagan, Bush has run up sizable new fiscal deficits -
US$420 billion = 3.6% of gross domestic product (GDP) in
fiscal 2004. But also like Reagan, he has laid the
groundwork for their future reduction - to about $350
billion in fiscal 2005 and $300 billion in 2006. And
note that contrary to Democratic campaign rhetoric, only
about 20% of the current deficit was due to the tax cuts
enacted in 2001-02. Going forward, substantial elements
of the temporary tax cuts will be made permanent.
Republican control of the legislature makes that a done
deal.
On November 2, on highly misleading exit
polls that predicted a Kerry victory, Wall Street gave
up early stock-market gains (in the 100-point range for
the Dow Jones Industrial Average) and closed in negative
territory. On November 3, Asian and US markets staged
major rallies when it became clear that Bush had won.
This prompted some European analysts to make some
potentially quite misleading comments. For example,
prominent Swiss banker Robert Halver was quoted in
Germany's Der Spiegel magazine saying, "Wall Street
loves Bush." True, Wall Street stocks' performance
clearly signaled preference for Bush. But those stocks
are well distributed over a majority of US households
that had voted for Bush. By stark contrast, Wall Street
bigwigs solidly supported Kerry with their money. The
now crestfallen George Soros, who promised to become a
monk if Bush won, spent more than $26 million of his
money in trying to deny Bush a second term.
In
his victory speech, Bush promised not so much further
tax cuts as fundamental reform of the tax structure.
This will be the cornerstone of the "ownership society"
he outlined in his acceptance speech at the Republican
National Convention. Income taxes over time will be
substantially reduced and be replaced by consumption
(value-added) taxes, which will allow individuals to
decide on optimal allocation of their incomes and favor
savings and investment over consumption. The effect
should be added support for entrepreneurial activity and
business creation. Tort reform to impose caps on damages
and malpractice awards by courts is a further key aspect
of unburdening, in particular, small and start-up
enterprises.
Bush will also push for partial
"privatization" of social-security and health-care
financing, allowing individuals and families to manage
their own retirement and medical-care financing.
The term "revolutionary" may be too grandiose to
characterize these future legislative initiatives. And
yet, as they are implemented, the ongoing process of
enabling individuals and families to make their own
choices and being rewarded for the added risks they are
willing to incur charts an entirely different direction
for US society than that exemplified by the European
welfare states. Most Americans, on average, want the
government and the taxman to get off their backs, live
with the greater risks involved, and reap the greater
rewards they expect from controlling their own futures.
Nearly 70% of Americans now are homeowners. In ever
growing numbers they create and own businesses. The
average productivity gains ensuing will see the US
economy forge even further ahead of competitors. That,
ultimately, is the bedrock of US power on a global scale
Europeans and others deride as "hegemonism". They might
want to reflect on the fact that nothing but their own
preferences for over-regulated social and economic
structures stands in the way of replicating US power.
"America is different," commented several puzzled
European newspapers on the re-election of Bush. It is.
But not necessarily therefore the worse off or morally
inferior.
John Kerry kicked off and ended his
presidential campaign at Boston's historic Faneuil Hall,
a market and meeting place built in 1742. It has often
been called the birthplace of the American Revolution -
the place where Sam Adams and other Boston patriots
gathered and delivered the speeches that catalyzed the
drive for American independence. It wasn't Kerry's
message, however, but Bush's that carries on that
tradition.
(Copyright 2004 Asia Times Online
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