It is fashionable in some quarters to say that it doesn’t make much difference who wins the elections; the country will go on its own way without much change.

However, in 2004 this is probably not the case.

In several areas it may be important whether Bush or Kerry becomes the next president:

1. If Kerry wins, the U.S. may begin to disengage from the War in Terror and wait for enemies to attack on the mainland. Unless terrorists have a change of heart, this course has a greater chance of resulting in a devastating blow against the continental U.S., perhaps with nuclear weapons. This may lead to the closing of U.S. borders, isolationism, a collapse in world trade, reindustrialization, and the evaporation of the trade deficit that has substituted U.S. domestic saving over the last generation.
   (See: Terror and Capital Markets).
2. If Kerry wins, government is likely to grow faster, resulting in higher individual income taxes and lower corporate taxes (corporations are government’s preferred revenue collectors). The gap between rich and poor will probably continue to widen, because the income tax is not a tax on wealth, only on becoming wealthy. Government regulation is likely to accelerate. This will not be positive for entrepreneurial activity, the supply of equities, and international competitiveness . (See The Hidden Shortage).
3. If Kerry wins, it will be a victory for ethical relativism and moral ambiguity. Speculators like George Soros will have triumphed. The implications for corporate governance and a capital market based on honest and fair dealings are not encouraging.
4. If Bush wins, there is a better chance of keeping the War on Terror offshore. By forcefully encouraging democracy in the more dangerous parts of the world, the odds of radical domestic reaction against globalization are somewhat reduced. Although the long-term decline of the U.S. is not likely to be reversed, the rate of loss of comparative advantage may slow somewhat.
5. If Bush wins, positive measures for long-term investors, like the reduction of taxes on dividends and lower personal income taxes, may be more likely. However, neither candidate has a program to deal with the shortage of equities, because the problem is not recognized. Neither candidate has a coherent or plausible policy regarding reindustrialization, retirement savings, or improving American comparative advantage in international trade.

In short, a Bush victory will be positive for long-term investors and honest entrepreneurs. A Kerry victory will likely make the trend toward bigger government irreversible, hasten the decline of the United States, and speed the day when Americans can no longer count on the rest of the world to finance their domestic spending. The question is not whether we will be going to “hell in a hand basket“, but rather how fast we will get there.

(See The Snare of Democracy)

If Kerry wins, I would recommend young people to either get a PhD and a job with the U.S. government, or move to Brazil, learn Portuguese, and become an entrepreneur. Come to think of it, I might recommend the same thing if Bush wins. In either case, you might be better positioned than having a job on Wall Street when, in a decade or so, the Baby Boomers finally figure out they’ve paid too much for their equity funds and start looking for someone to blame.

(See: The Baby Boomers).

In a few days it will all be over but the counting.

This entry was posted on Thursday, October 28th, 2004 at 4:37 pm and is filed under Leadership. You can follow any responses to this entry through the RSS 2.0 feed. You can skip to the end and leave a response. Pinging is currently not allowed.

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