Market performance hurts GOP

There is no doubt Republicans are running scared, facing a hostile electorate just months before the mid-term elections. Despite rumblings of war with Iraq, expect no invasion until next year at the earliest (though I still doubt an invasion will happen at all). So congressional Republicans are suddenly left exposed -- the rosy glow of the War on Terror long gone, replaced with the stench of corporate corruption and the shattered investment and retirement portfolios of millions of voters.

Congress rushed through a set of "reforms", and the president signed the bill in a high-profile ceremony. And then the GOP sat back and waited for voters and the markets to reward them, giving them props for doing the "right thing". Yet the markets are still downward-bound, inching ever closer to that sub-8,000 mark. And as the Dow drops, so does voter confidence in the GOP, party of business.

So what's going on? A variety of factors -- just one of which is corporate malfeasance -- are pummeling the markets. It didn't help that the Bush Administration announced a lax interpretation of the corporate reform bill just hours after Bush signed it. But ultimately, the economy is in bad shape, and the markets will reflect that. Unemployment is high. Corporate profits are down. And consumer spending, which led the way in past economic revivals, has remained surprisingly strong. That means any recovery would have to be led by higher business spending, and that’s clearly not in the cards for the near future.

In the past, elections did not hinge on market performance. No one but the richest class invested, and they were reliably Republican. However, that has obviously changed with the advent of the "investor class". In 2000, small investors voted Republican by a 10-point margin. Now, they back Republicans and Democrats evenly. Given that non-investors are heavily Democratic, it spells real dangers to the GOP.

Congressional Republicans who thought that passing the corporate reform bill would inoculate them against the falling markets were wrong. Not only was the bill essentially toothless, but it didn’t (couldn’t!) address all the root causes of the current investor malaise. Yet in their eagerness to appear busy, they oversold the bill. As a result, the richest class is angry at the GOP for its betrayal of their cause (they want more tax cuts and less regulation), while small investors see nothing but empty rhetoric and empty actions as their portfolios and 401(k)s continue to plummet.

Now the Bush Administration, in its infinite wisdom, is pushing for a belligerent, offensive, and unprovoked war with Iraq. While people’s savings and retirement funds melt away, the president remains obsessed with a distant and powerless dictator.

Congressional Republicans have every reason to be afraid.

Posted August 05, 2002 08:31 AM | Comments (2)