The man who got it right, in his way, was Al Gore. Quoting Al Jolson, he promised the voters: ‘You ain’t seen nothin’ yet.’ This was his message four years ago, when I was in New York, leaning over the rails to watch the two runners in the Great Presidential Stakes as they neared the line — then, as now, neck and neck. In those distant days, money was rolling in to the Treasury, and the candidates were competing to spend it. George Bush I had raised taxes and lost an election, so George Bush II was in favour of cutting them. Al Gore said that the age of prosperity was only just starting. I thought that was asking too much. The economy, I said, had taken us all for a long and enjoyable ride on the cycle, but now it was wobbling, and as cycles went it looked more like a cart-propelled horse, pushed forward by the stock market, which peaked a month later. As for the embarrassment of the Treasury’s riches — the national debt, we were seriously told, was on course for extinction — that never looked like a problem beyond the wit of modern governments. Awarded the race by a controversial decision in the stewards’ room, Mr Bush has never since met a spending plan he disliked enough to veto it, and he has proved himself a tax-cutter for all seasons. In good times, so he thinks, cuts are affordable, and in bad times, cuts are the remedy. This has enabled him to preside with indifference over the decline of his country’s finances, and although, as Adam Smith said, there is a deal of ruin in a nation, reversing the process requires an effort of will. That will be the task for this year’s winner of the Great Presidential Stakes. We ain’t seen nothin’ yet.
Nunn of the above
The economic handicappers at Goldman Sachs have been working the form out. Four summers ago, they say, the US federal government was completing its fourth consecutive year in the black, with a surplus of $236 billion, and the Congressional Budget Office was projecting a surplus of $5.6 trillion over the ten years ahead. It is now projecting a ten-year deficit of $2.3 trillion, even assuming that the Bush tax cuts expire when their time runs out. Doubting this, Goldman’s economists think that $5 or $6 trillion now looks more likely, getting worse as the decade goes on. Both candidates have plans for halving the deficit, but the economists cannot make either set of numbers add up. They believe that John Kerry takes the point more seriously, with George Bush II more concerned about getting his tax cuts entrenched. I can see why William Janeway, investment banker and occasional Spectator columnist, always backed Senator Sam Nunn of Georgia. He yearned to vote for Nunn Of The Above.
Gold votes early
You can see how gold is voting. Pushing up this week to its highest price — in dollars, that is — for 16 years, it is firmly in the Nunn (or Neither) camp. This administration has had to print trillions of dollars, the next one will have to print more, printing dollars is easier than mining for gold, and the price is reflecting the difference. This process used to be known as inflation, and when Alan Greenspan retires from the Federal Reserve next year, his successor will need to do something about it, even if that hurts. Until now the markets have found the sage’s presence reassuring, but he may be nearing his wise-by date. Observe that oil is now voting the same way as gold.
Poor old Citicorp can’t put a foot right. Correction: rich old Citicorp. This week’s fine — $250,000 for misleading investors in hedge funds — will not break the world’s biggest provider of financial services, but it represents a bad habit. When the markets were blazing, Citi wandered too close to the flames, burning its fingers on WorldCom and Enron, losing billions and getting some expensive reputations dented. Undeterred, Citi raided Europe’s bond markets and suffered more reputational damage. In Japan, Citi’s private bankers provoked the hosts into withdrawing their licence. This in turn provoked Charles Prince, Citi’s new chief executive, to order a purge whose victims included the head of Citigroup International, Sir Deryck Maughan. This rising star of Her Majesty’s Treasury was lured away to Salomon Brothers, and Warren Buffett called on him to run it, greeting him as the lift doors opened and saying, ‘You’re tapped.’ That was an earlier exercise in repairing reputations after serious damage. Then Citi paid a fortune for Salomon, and a new generation got up to new tricks, and now the name has been junked and the work must be done again. Markets, as Sir Patrick Sergeant says, are ruled by greed and fear — and greed’s turn, for the moment, is over.
The big winner from fear’s turn is Eliot Spitzer. He rides into Wall Street with his silver star pinned to his chest, and the men in black hats flee, or fall from their horses. As New York’s Attorney General, he has taken on its financial grandees, and Jeffrey Greenberg is only the latest. He was chairman and chief executive of Marsh & McLennan, insurance brokers to the world, until Mr Spitzer swooped, accusing Marsh Mac of a culture of covert commissions, knocking two fifths off its share price and inviting Mr Greenberg’s resignation. In the same way as Mr Spitzer and in the same job, Rudolf Giuliani made his name as a financial crime-buster, went on to be mayor of New York and may still have higher aspirations. So, surely, has Mr Spitzer. Watch his speed when next the elections come round.
Amtrak has me worried. This is the hard-pressed operator of America’s long-distance passenger trains, and now it has moved into the British market and diversified into delivering wines. Either that, or someone on this side has borrowed its name and dressed it up with a suitable logo. I find that what this Amtrak does best is delivering cards which explain why it has taken the wine somewhere else — back to its depot, or back to the wine merchant, or away to the surgery of a neighbouring doctor, who is surprised to learn that this is what he ordered. If this is the railways’ Amtrak, too, I wonder where it leaves its passengers.