Jewish World Review Nov. 12, 2002 / 7 Kislev, 5763
http://www.NewsAndOpinion.com | The Republican triumph last week challenges both political parties. The Democrats must look backward and deal with problems of failure; the Republicans can look forward and deal with problems of success. The Democrats need a message and a messenger. They tried to run on the weakness in the economy without a clear-cut plan to improve it. The economic facts restricted Democratic opportunities. On the income side, it is a jobless recovery, but the unemployment rate remains at a relatively low 5.7 percent and even less, 5.2 percent, for heads of household. Meanwhile, real wages have increased by a solid 2 percent.
On the wealth side, the stock market has made millions poorer-but the effect of wealth contraction was mitigated, since the top 10 percent own about 80 percent of stocks. More important, since 68 percent of families own their own homes, in a market of rising values and declining mortgage rates, this produced stunning opportunities for refinancing gains, with home equity of the average American family at least three times its financial assets. The economy, in other words, was hardly a burning political issue.
On what clearly was a key issue, the war on terrorism, the Democrats came off as "national security lite." They conveyed the perception that they were too interested in protecting special-interest constituencies-the civil service unions in their fight over the new homeland security department; the tort lawyers on the issue of terrorism insurance; and the environmental lobby on the issue of energy independence. Everybody has the right to be wrong. The Democrats have been abusing the privilege.
Fairness. Republicans now face a different set of problems. In George W. Bush, they have a gifted political messenger, but they cannot rely on the political momentum gained in last week's balloting to carry them through the presidential year of 2004. They will hazard the odds of a second term for Bush if they appear to support programs that excessively favor the wealthy and the business community, especially with investors bemoaning shrunken portfolios and so many corporate bosses exposed as hucksters. This is not, in short, a moment when Americans will equate good economic policy with what is good for business.
All this might be different, of course, if Americans thought they had a fair shot at success and that the winners in the American economy played by the rules instead of doing whatever they could get away with. Pay for performance is acceptable. But all the stories of executives who failed and were still paid millions of dollars on their way out the door are outrageous. Right now, 23 major companies are being investigated. Their CEOs collected about $1.4 billion in compensation between 1999 and 2001, only to see the market value of their companies plunge by about $500 billion, while over 160,000 people were laid off. As President Bush said, "Responsible leaders do not collect huge bonus packages when the value of their companies dramatically declines . . . ." nor "take home tens of millions of dollars in compensation as their companies prepare to file for bankruptcy." Who would have thought that business leaders who had already made so much money would ever have to do anything immoral in their entire business life? No wonder the American sense of fairness was aroused.
Traditionally, Americans don't resent wealth because they believe ours is an opportunity society and that anyone who works hard can make it here. Indeed, America has extended to millions of ordinary people the upwardly mobile avenues of economic advancement and personal fulfillment previously available only to the elite. But lurking in the background is the fact that average annual salaries in America, adjusted for inflation, have grown only about 10 percent from 1970 to 1999, while after-tax income for the top 1 percent rose by 157 percent. The bulk of all income gains were concentrated in the top 20 percent. Public cynicism over growing income inequality is an issue that is smoldering; if not watched carefully, it could burn Republicans-badly.
Democrats will make much of the fact that the two major tax cuts of the past 25 years, both under President Reagan and the current President Bush, were heavily tilted toward the well off, while the only major tax hike during that time-the increase in payroll taxes-was tilted the other way.
So ideas emanating from the Republican leadership like eliminating double taxation of dividends or reducing the capital-gains tax must, if proposed, be balanced by programs to extend unemployment insurance, provide medical care for the unemployed, and support states in fiscal crisis-all to create a perception of fairness.
Properly handled, though, the Republicans have the opportunity to take
control of the great middle of American political life. Who would have
thought George W. Bush would have been able to pull that off?
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