JACK GERMOND, the great political writer, tells a story about a horseplayer. It’s a tale with a political lesson. The horseplayer wakes up one morning at 5:55 A.M. with the number 5 in his mind. Having played hunches before, he’s intrigued. Suddenly he realizes it’s his 55th birthday, May 5. He’s ready to hit the racetrack, but he’s a salesman and has to go to a sales stop at the Johnson Building. He takes a taxi whose registration number is 5555. When he arrives, he sees he’s at 555 5th Avenue and his meeting is on the fifth floor. This is too much. He rushes to the track, waits until the fifth race and bets $5,000 on horse number 5. The horse comes in fifth. The lesson is you don’t always get what you expect at the track–or in politics. There’s another way of putting this: The future in politics is never a straight line projection of the present. Democrats believe it is a straight line. For months, they’ve sought an issue to use against President Bush and congressional Republicans, and they believe they’ve finally found one. The tax cut, Enron, the deficit, terrorist clues before September 11–those didn’t work out. But with the corporate fraud scandal upon us, Democrats believe Republican ties to big business and especially GOP efforts at deregulation make for a perfect campaign issue lasting through the midterm elections in November. Rather than a fleeting moment in politics, they believe the scandal has created a new era in which regulation and business-bashing are the touchstones and Republicans are sitting ducks. Maybe they’re right, but I doubt it. House Democratic leader Dick Gephardt has gone so far as to accuse House Republicans of actually causing the wave of corporate corruption. It’s “the result of [their] drive to deregulate” after capturing Congress in 1994, he told reporters. Their “actions or inactions . . . are the reason we now have come to the threshold of crippling a lot of business, crippling the stock market, crippling the businesses that were doing things the right way.” This is ludicrous. House Republicans had very limited power in the 1990s, given their narrow majority, a more liberal Senate, and a Democrat, Bill Clinton, in the White House. Neither these facts nor simple common sense has deterred Gephardt from promoting his charge. Last week, he produced a 32-page document that is both a mind-boggling attack on Republicans and a hymn to government regulation. Lest anyone miss the point, the document is entitled “Drive to Deregulate: GOP Congress Paved the Way for Enron and Other Corporate Misdeeds.” Its assumption is that the quarter-century run of deregulation–airlines, trucking, banks, and so on–has come to an abrupt end and the public’s appetite is now for more and more regulation. What exactly did Republicans do? The document chiefly dwells on things they didn’t do, but it cites two affirmative steps. Along with dozens of Democrats, they reformed securities litigation, a cash cow for trial lawyers, over Clinton’s veto. This was not the cause of any of the corporate corruption cases. The second thing Republicans did was play a role in deregulating the trading of energy derivatives, an Enron specialty. Of course Enron’s sin was hiding debts and exaggerating earnings, which is different from trading derivatives. So the document is not a serious piece of work. It’s propaganda. Still, Democratic candidates all over the country have adopted the Gephardt argument or the softer variant of it–Republicans are too lenient on business abuses. Democrats are leading the fight for corporate accountability, says Howard Wolfson, the executive director of the Democratic Congressional Campaign Committee. “Democrats are on the side of investors; they are on the side of corporate malfeasance.” Terry Neal in washingtonpost.com wrote that Wolfson believes Democrats have actually found a “magic bullet.” There’s one problem: Many Democrats have ties to the business community, too. The other part of the Democratic strategy involves President Bush. Months of criticism have failed to dent his popularity. Nevertheless, Democrats are trying to make him less attractive as a rallying figure for GOP candidates. They intend to pester Bush about his sale of stock in Harken Energy in 1990 and Harken’s sale of another company, Aloha. The Securities and Exchange Commission long ago cleared Bush of any wrongdoing, making it doubtful the Harken issue will have legs. But Democrats haven’t much else to work with. The corporate scandal may linger as the dominant issue, but there are several factors working against it, big ones. First, the economy is reasonably strong, growing at roughly a 4.5 percent rate in the first half of 2002. Consumers continue to buy at a furious pace. The housing market is booming. Productivity is rising at an astonishing rate. And personal income is up. Yes, the stock market has tanked, but there’s no evidence of a negative wealth effect, prompting consumers to spend less. For Bush and Republicans, the best case scenario is for a market rally in the fall. It could happen. Check out the special one-year earnings reports that America’s top 1,000 corporations have been ordered to file by August 14. SEC chairman Harvey Pitt has warned corporate heads they’re personally liable if the reports aren’t scrupulously accurate. As a result, earnings may be down, but investor confidence will be restored. Then hundreds of billions of dollars sitting on the sidelines may return to the market and spur a rally. There’s another factor involved here. By early fall, Congress is likely to have passed a corporate responsibility bill for Bush to sign. That should ease much of the anxiety over corporate fraud. In the face of a reasonably strong economy, a market rally, and stiffer corporate regulations on the books–and no new WorldComs–the business fraud scandal is bound to fade. Except there’s that Germond rule to remember. You never get what you expect. Fred Barnes is executive editor of The Weekly Standard.
