Presidential Elections' Economic Importance - Brief Article

USA Today (Society for the Advancement of Education), Nov, 2000 by Tim D. Kane

WOULD IT HAVE MATTERED if George Washington had lost to John Adams in our nation's first presidential contest or, if eight years later, Adams had lost to Thomas Jefferson? Does it matter who the winner is this time? As is so often the case in economics, the answer is "it depends."

Our first three presidents helped found the nation and formalize its principles. Whichever of them held the highest office was of little consequence for three reasons. First, each believed limiting government's power was a prerequisite to securing mankind's rights to life, liberty, and the pursuit of happiness. Second, they were not far removed from the philosophers who provided inspiration on natural rights, personal liberty, private property, and the origins of tyranny. Third, the Federal government's income was small, limiting its ability to spend and therefore to intrude into private affairs.

With the ink still fresh on the Declaration of Independence and the Constitution, it would never have crossed the Framers' minds to suggest that the presidency conferred upon them powers other than to "faithfully execute the office of President of the United States, and ... [to] preserve, protect and defend the Constitution of the United States." Sections 2 and 3 of Article II identify the president's responsibilities: acting as commander-in-chief of the armed forces, conducting foreign affairs, appointing persons to high government offices and taking "care that the laws of the United States be faithfully executed." How is this job description connected to the economy?

In 1776, economist Adam Smith asserted that the sovereign had but three duties in a free market system--to provide national defense: maintain an exact system of justice to impartially mediate disputes, protect private property, and prevent the use of force or fraud; and provide certain public services. These three duties sound remarkably like the president's constitutional duties, and here we find the link between good government and the market. These three functions create an ideal environment for free enterprise where buyers and sellers have an incentive to create new wealth for themselves and for society. The resulting economic activities represent the machinery of liberty in operation.

Why did the Framers constrain government's power to "do good?" They did so because they recognized that if government "helped" one citizen by taking the property of another, it would weaken work incentives, undermine mutual trust (the market's lubricating oil), and the coercion required to affect the redistribution would engender class envy and reduce citizens to the status of subjects. When these truths were understood, it mattered little which man was chosen.

Four historical developments have created a Federal government and a presidency that Washington, Adams, and Jefferson would not recognize. First, public servants no longer credit the source of our "inalienable rights," nor do they acknowledge the Creator's role in establishing this most unique of all republics. Reverence and fear no longer constrain their behavior. Washington suffered no such ambivalence: "it is impossible to rightly govern a nation without God and the bible," he stated.

Second, the Great Depression convinced many intellectuals that the free market was inherently unstable, that government intervention was needed to prevent a reoccurrence. Of course, guiding and directing required an expansion of government's power--a power that could be wielded to do good. One by one, lofty objectives like eliminating poverty, cleaning the air, preserving endangered species, and banning discrimination joined full employment and price stability as public policy objectives. Along the way, the pursuit has threatened personal liberties, undermined the sanctity of private property, and restricted free speech--in spite of constitutional guarantees.

Third, passage of the 16th Amendment authorizing the income tax led to a process that now produces Federal revenues in excess of two trillion dollars annually. Currently, Federal expenditure accounts for 20% of the nation's gross domestic product. When state and local governments are counted, government takes one-third of GDP. As the government share expands, the private one contracts.

Finally, government's role as impartial mediator has given way to opportunism. The Federal government subsidized tobacco production for over 100 years and required cigarette manufacturers to warn smokers of heath dangers, but recently sued the industry for damaging smokers' health! In settling the suit, our government made the following offer: You may continue to produce and sell cigarettes to a new generation of consumers who may also contract cancer--but, if you'll pay us several billion dollars up front, we won't let them sue you if they do get sick. It's hard to distinguish between this type of extortion and that perpetrated by gangsters who offer "insurance" to businesses for a weekly fee.

Perhaps Jefferson had this similarity in mind when he observed: "The two enemies of the people are criminals and government, so let us tie the second down with the chains of the Constitution so the second will not become the legalized version of the first."