The price of the election


Two days before Senator John Kerry conceded the 2004 presidential race to President George W. Bush, the George J. Stigler Center for the Study of the Economy and the State hosted a debate on the two candidates' likely economic impacts.

The event, held at the Graduate School of Business' new Hyde Park Center, pitted GSB professor Austan Goolsbee—an economic adviser to the Kerry campaign—against Randall Kroszner—a 2001–03 member of the White House Council of Economic Advisers. They argued to a capacity crowd of polo shirt- and khakis-wearing grad students grabbing lunch in between classes and job interviews.

An animated Goolsbee criticized Bush's fiscal responsibility during the past four years: “It would be like the week before your kid goes to college, you max out all of your credit cards.” Bush's “stimulus” policies, he said, are supposed to take effect within the next six years, but the government has signed itself up for a decade of debt. “What does it take for a president to be voted out of office?

Kroszner rejected the deficit's importance, primarily arguing that there has been little evidence that the long-term interest rate will increase. Because the country's debt-to-GDP ratio is relatively low—particularly when compared to the Reagan years—lenders know that the country won't have a problem paying deficits back, he said.

The two speakers also debated the growing Social Security crisis. With the baby-boom generation pressing the system's resources, Bush's policy would create tax-relieved personal retirement accounts that create a long-term fix, said Kroszner: “It has to be now or later, and we're willing to pay more now to save later.”

But Goolsbee argued that the 2001 stock market recession reminded people why they don't invest privately and that Bush's projections of investment returns have not been risk-adjusted. He expected Kerry to restore the 1993 Clinton tax code and use surpluses to save Social Security—a plan that Bush “hacked to pieces with bad fiscal policy.”

Two days later, with Republicans expanding control of all three government branches, Bush's fiscal policy will almost certainly be able to test the waters again.

By S.I.A.

Photo: (from left to right) Randall Kroszner (Bush), Saul Levmore (moderator), and Austan Goolsbee (Kerry).

November 3, 2004