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Tuesday, 7 November, 2000, 15:52 GMT
Boom fails to boost Gore
Wall Street has few worries about the election
Wall Street has few worries about the election
By BBC economics correspondent Andrew Walker

The US Presidential election takes place at a time when the US has enjoyed its longest ever period of continuous economic growth, and unemployment has reached a 30-year low.

But the Democratic candidate, Vice President Al Gore, does not appear to be reaping the usual political benefits of an economic boom corresponding with his time in office.

In fact, many voters seem to believe that even though the government played a part in achieving this prosperity, it made only a fairly modest contribution.

Most important has been the steady decline in the amount of money that the federal government has to borrow each year.

In 1992, just before Mr Clinton and Mr Gore took office, the deficit was equivalent to 4.4% of the size of the US economy. Now there is a sizeable surplus - much of which Mr Bush plans to give away in tax cuts.

The fact that the government has reduced its need to borrow has helped keep market interest rates down.

The surplus is in part due to economic growth, which producers higher tax revenue. But the administration has resisted the temptation to spend it all on programmes such as health or reducing tax rates.

The credit for that however belongs not so much to Mr Gore as to Robert Rubin, who was Treasury Secretary for much of the period.

Greenspan gets the credit

And if you asked the financial markets to give credit to any one person it would be the Chairman of the Federal Reserve, Alan Greenspan.

The Fed is in charge of monetary policy, and Mr Greenspan is thought to have raised interest rates at just the right time to prevent inflation getting out of hand, without overdoing it and sending the US into a recession.

And new technology has played an important role as well, with businesses investing heavily in computers and the internet to improve efficiency. Some economists think this development has increased the speed at which the US economy can grow without inflation, and has boosted the competitive advantage of the American economy over its foreign competitors.

Few worries on Wall Street

The relatively moderate economic record of the Democrats has meant that there is relatively little concern about the outcome of the election among investors.

Of course, people who own stock in individual companies are concerned about the differences in some policy areas - notably the environment and health care.

Shares in pharmaceutical, hospital, and energy companies have suffered falls whenever it appeared that Mr Gore might win the election, as he has promised tougher controls on prescription drug profits and tougher environmental restrictions on the production of oil and gas.

And bondholders, who own the debt issued by the US government (Treasury bonds), have already marked down the long term bond (and raised its interest rate to around 5.8%) on the fears that whichever candidate is elected, much of the budget surplus will be either spent or given away by future administrations.

Stock market investors appear more worried by the decline in the Nasdaq index of high-technology stocks - which has fallen 33% from its high in April - than who wins the election.

It's very much business as usual on Wall Street.

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See also:

27 Oct 00 | Business
How to spend the surplus
04 Jul 00 | Business
US social security battle heats up
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