Why VCs Should Support George W. Bush –

President George W. Bush deserves re-election because he has done a very good job on the big issues: promoting economic growth and enhancing our national security.

Despite all the noise to the contrary, the results of the President’s focus on these two priorities have resulted in a low-inflation, low-interest-rate economy that is growing strongly; and a sharply reduced cadre of Al Qaeda terrorist leadership that is on the run.

On the economy, President Bush inherited an economy that was sliding into recession. In 2000, President Clinton’s last year in office, the Nasdaq crashed-losing 54% of its value from its peak to the end of the year. The crash destroyed several trillion dollars in household wealth for Americans.

In response, President Bush used every tool at his disposal to grow the economy. He cut taxes, not once but twice. And it is a canard to assert that tax cuts were “for the rich.” The bottom 50% of U.S. taxpayers paid 5.8% of all federal income taxes before the two Bush tax cuts, but pay just 2.9% after them. That’s right-the Bush tax cuts cut the burden of those with the bottom 50% in incomes in the United States in half. The Bush tax cuts put an extra $2,000 annually in the pocket of an average family of four in America. Real after-tax income for Americans is up 10% during President Bush’s term.

Today, the economy is growing smartly-at an average of 4.8% for the last year, one of the highest four-quarter growth rates in two decades. The unemployment rate, at 5.4%, is lower than it was when President Clinton stood for re-election in Nov. 1996 (to universal acclaim for a strong economy). In fact, you would have to go back almost a half a century-to

Dwight Eisenhower in 1956-to find a president standing for re-election with a lower unemployment rate than that which prevails in America today.

Inflation remains a non-existent threat. Interest rates remain near 40-year lows, and home ownership is

at an all-time high. Household wealth also is at an

all-time high, meaning the significant wealth lost during the stock market crash has been recovered.

On the economy, then, President Bush has done an excellent job. It is unclear what his opponent would do on economic policy-except to raise taxes. Sen. Kerry says that he would raise taxes only on those earning more than $200,000 per year, and that he actually would cut taxes for the middle class. But when he had the chance to cut taxes for the middle class-twice in the last four years-Sen. Kerry voted “no.” In fact, he has voted more than 350 times in his 19-year Senate career to either raise taxes or oppose those trying to cut them-a remarkably consistent record, and one adverse to the interest of venture capitalists.

Sen. Kerry talks about the size of the federal budget deficit, and promises to raise taxes to reduce it. But the primary cause of the deficit is the unrestrained growth of entitlements-principally Social Security and Medicare. Seventy years from today, these two programs will be $18 trillion in debt, or 10x the size of the federal budget and 2x the size of the entire U.S. economy. We could double federal income taxes for the next 20 years and it still would not be enough to make up that deficit.

On the issues of Social Security and Medicare, Sen. Kerry has shown all the courage of the Cowardly Lion. When he says, “I will never touch Social Security and Medicare,” he really is saying: I will never invest in university research, or highways, or mass transit infrastructure, or environmental protection, or K-12 education…

President Bush is the only candidate with the courage to propose Social Security reform-allowing younger workers to set aside some of their payroll taxes in a personal, 401(k)-style savings account. Such reform is the only path to the twin goals of a solvent Social Security system and a society that is capable of investing in the future.

Action To Combat Terrorism

Obviously, the most important national events of the last four years were the terrorist attacks of Sept. 11, 2001. Afterward, many critics said that going after the Al Qaeda sanctuaries in Afghanistan would be too hard-a “quagmire.” In fact, the Clinton Administration had failed to do anything about Al Qaeda sanctuaries despite repeated attacks in the 1990s. But President Bush took action to go after those sanctuaries-and today, of the 55 top Al Qaeda leaders identified by the government after Sept. 11, 45 are in captivity or are dead. Moreover, Libya is dismantling its nuclear program, and we have pulled the curtains back on the Pakistani nuclear program and disrupted its supply relationships with North Korea and others.

Issues of Special Concern To VCs

On issues of particular importance to VCs, President Bush’s record has been uniformly outstanding and Sen. Kerry’s has been unvaryingly bad.

* President Bush signed into law a cut in the long-term capital gains tax rate to 15 percent. Sen. Kerry opposed capital gains tax cuts and voted against them.

* President Bush supported the moratorium on Internet taxation and signed its extension into law. Sen. Kerry has said before certain audiences that he supports such a moratorium, but he voted to table an amendment that would have extended the moratorium.

* President Bush has stated clearly that he opposes the expensing of employee stock options. Sen. Kerry supports expensing.

* President Bush sponsored and signed into law landmark legislation to improve our schools by requiring testing of students to make sure they are ready for promotion, and by holding schools accountable for results. Sen. Kerry voted for No Child Left Behind, but now criticizes it.

* Despite a chorus of misleading press to the contrary, President Bush legalized for the first time federal funding of stem cell research. Such support was illegal under former President Bill Clinton. President Bush has increased R&D investment by 44% in the last four years, to a record $132 billion, and has created a new Math and Science Scholars fund for low-income students who study math and science in college.

* Finally, President Bush supports legislation to reduce the burden of frivolous litigation on the American economy. Sen. Kerry has selected a member of the plaintiff bar as his vice presidential candidate, and has accepted tens of millions of dollars in campaign contributions from trial lawyers nationwide.

Authenticity

At the end of the day, choosing a president, much like choosing a business associate, requires belief in the fundamental authenticity of that individual. While Sen. Kerry has changed his positions with every change in his polling numbers, President Bush has done what he promised to do. Today, the American economy is strong and the Al Qaeda leadership is depleted and on the defensive because of his steady leadership and decisive action. For these reasons, he deserves our support.

Bob Grady is the managing partner of Carlyle Venture Partners. Between 1989 and 1991, he served in the White House as deputy assistant to President George H.W. Bush. He currently is a vice chairman of the Bush-Cheney 2004 campaign in California.