Tuesday, July 1, 2008

"I'm All Ears"

Henry Ross Perot, who had previously been an IBM salesman, started building his fortune when his firm, Electronic Data Systems (EDS) received a federal contract to computerize Medicare records. He later sold that company to General Motors, and founded another IT start-up, Perot Systems. During those years, he divided his time between his business ventures and various political activities.

In 1992, he launched a third-party candidacy for president.

The Republican incumbent, George H.W. Bush, had near-unanimous support in the polls, following the successful effort to expel the Iraqi military from Kuwait in Gulf War I, in 1991. At that time, there was semi-serious talk of his being unopposed for reelection in 1992.

However, the recession of 1990-1, and the relatively high unemployment that continued into the election year of 1992, resulted in a gradual erosion of Bush's popularity. Employment is a lagging indicator of economic growth, i.e., when recovery from a recession begins, it takes an extended period of time before the unemployment rate decreases significantly. Therefore, it felt to many people in 1992 as though the U.S. were still in recession, even though a strong recovery had begun in the first half of 1991. Bush's Democratic opponent, Governor Bill Clinton of Arkansas, was able to exploit that unease by promising a different turn in economic policy.

Perot's candidacy was largely based on two economic issues: 1) federal budget deficits and 2) international trade. The 1980s had seen budget deficits that were unprecedentedly high in nominal dollar terms, and high, but not unprecedented, as a percentage of Gross Domestic Product (GDP). As GDP grew strongly from 1982 forward, the deficits measured on that percentage basis fell rapidly.

Whether small or large, and however measured, continued deficits meant continued increases in the national debt. The issue of public debt has been controversial for all of American history; here is a discussion of how the founding fathers dealt with the issue.

Perot advocated a combination of tax increases and spending cuts to balance the budget.

Perot took a protectionist position on international trade. He opposed the North American Free Trade Agreement (NAFTA) that was then being negotiated by the U.S., with Canada and Mexico. During the following year, Perot engaged in a debate with Vice President Al Gore on CNN, in which Gore took the pro-NAFTA position.

Perot argued that, as a successful businessman, he had experience that was relevant to handling those economic issues. He contrasted himself with Clinton, who had been a professional politician almost his entire adult life, after a brief stint in academia, and Bush, who went into the oil business after college, but had been a professional politician for over a quarter of a century by 1992.

The counterargument is that an individual businessman tends to seek any advantage he can gain by lobbying government, e.g., for subsidies or for tariffs levied on his overseas competitors. But if a businessman-turned-president were to base the entire system on providing such favors, the system would break down, because resources would be allocated by government fiat, rather than by market forces, and the resulting inefficiencies would hamper economic growth. This is an example of what economists call the "fallacy of composition".

I don't want to be too coy about being the impartial historian here. As you might have guessed anyway, I'll acknowledge that this "counterargument" is the side that I take on that question.

For anyone who doesn't remember a moment of comic relief during a debate between Bush, Clinton and Perot on October 11, 1992, I want to explain the title of this post. Perot was asked about the fairness of his proposal to increase the federal gasoline tax. As part of his answer, he said that if anyone has a better plan, "I'm all ears". That was an unfortunate figure of speech on the part of a candidate with ears out of proportion with the remainder of his diminutive body. Laughter ensued and Perot, who I think has a tendency to take himself too seriously, good-naturedly acknowledged the unintended humor in his remark.

Clinton won with 370 electoral votes, to 168 for Bush. Perot won no electoral votes; however, his popular vote total, at 18.91%, was the highest of any third-party candidate since Theodore Roosevelt in 1912. Perot did better in the midwest and west, than in the east; he finished second to Bush in Utah.

Perot ran again in 1996, but was a lesser factor, with only 8.4% of the popular vote.

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