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Economic lessons from Campaign 1992.

Some messages are very clear from the recent U.S. presidential election. The previously very popular incumbent lost the election because of the economy. Infact, the "3.7 percent rule" led us in early spring to predict the outcome. The 3.7 percent rule simply says that if disposable personal income in the three months preceding the election grows by at least 3.7 percent, the incumbent or his party gets reelected. If the growth is lower, the incumbent loses. It was obvious early on that President Bush was not about to achieve that magical growth rate. The actual rate was 2.3 percent. So, despite successes in foreign policy and relatively solid support of the population, the incumbent lost. The attempts of the administration to stimulate the economy through monetary means were not enough.

In addition to the economy determining the outcome of the election, the debates among the candidates provided a lot of entertainment for economists. The debates were mainly centered on economic issues. Arkansas Governor Bill Clinton focused on economics, stressing change as his major message. Business magnate Ross Perot provided the most entertainment with his Grandpa-like lectures of discovering the truth (economics), and then sharing his surprising findings with the grandkids. His lectures showed how little he understood democracy by claiming debt to be the nation's number one problem.

The Bush Backfire

So where did President Bush go wrong? As a pure economist, I have to say that he did not use a fiscal stimulus to get us out of the recession we were in. Because we had the longest peacetime economic expansion in U.S. history, the administration got cocky and wouldn't listen to people like me who talked about the coming recession. Mr. Bush did not even want to admit that the recession was here long after most of the population realized it. But to me Mr. Bush showed a fundamental lack of understanding about economics in the debates. His whole being negates the most basic principle of economics, namely the existence of trade-offs. To him, every issue is black and white with no shades of gray. He attacked Mr. Clinton relentlessly for waffling, a strategy that ultimately backfired. The American people apparently understood trade-offs, that a candidate can be against a war or hesitant about sending U.S. troops into Kuwait because of the potential casualties, and with those beliefs can still become a good commander-in-chief. Mr. Bush also refused to accept the fact that "there is no free lunch" and that there is cost to certain actions. Ronald Reagan was elected in 1980 after asking a clever question constantly during the campaign, "Are you better off now than you were four years ago?," a line he resurrected successfully again in 1984.

Mr. Bush was elected president in 1988 after basing his campaign on the theme, "Read my lips. No new taxes." In 1992, President bush paid a price for these slogans. It turned out that we weren't better off than we were four years ago, and he didn't deliver on what we read on his lips.

Perot For Emperor

Ross Perot got away with murder in the televised debates. I want to focus here only on his less bizarre statements. It seemed as if everybody was afraid to call him on his assertions. His running mate looked totally out of place, but that didn't bother anybody. This is because Mr. Perot seemed to be running for emperor, and the position of vice-emperor is not that relevant. His claim that Mr. Clinton was not qualified because a governor of a small state cannot ran the federal government (any more than a grocery store owner cannot run a large business) was not particularly well thought out.

Mr. Clinton at least had some relevant experience and ideas about the principles of governing. He represented millions of people, had dealt with a legislature not elected by him which he could not avoid,

Adam M. PilarskI, PH.D., is the chief economist at McDonnell Douglas Corporation and has written extensively in the field of economics.
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Title Annotation:electioneering of presidential candidates
Author:Pilarski, Adam M.
Publication:Business Forum
Article Type:Column
Date:Jan 1, 1993
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