Remember where you heard it first:
Market Erosion Vexes Democrats
Key Pillar of Support Appears Weakened
By Eric Pianin and Thomas B. Edsall
Washington Post Staff Writers
Tuesday, September 1, 1998; Page A07
Worried Democratic strategists said that the stock market's week-long
rout would likely damage the prospects of their party's candidates this fall
and further distract from their agenda of reforming health maintenance
organizations and shoring up the Social Security system.
Some also suggested that unless there is a turnabout sometime soon, the
mounting market woes could prove politically devastating to a president
already badly wounded by the Monica Lewinsky sex scandal. The strong
economy has been a key pillar of Clinton's continued popular support,
despite his poor personal ratings.
"Is this what does in his job ratings?" asked Democratic consultant Jim
Duffy. "That's the $64,000 question. And if his job rating falls, what does it
mean for the [Democratic] party?"
Another Democratic strategist who works for the national party and did
not want to be identified said, "I think we've got serious problems."
Reflecting the notion that by any calculation the market turmoil brings no
positives for the president, he said that the Lewinsky scandal might have
been enough to keep Clinton from finishing his second term, "and now a
few beams may fall on him."
Republican leaders were relatively muted in their initial response, although
clearly they see an opening to attack the president in the one area where he
has seemed strongest. "We're seeing a generalized lack of confidence in
global economic leadership, including -- but by no means exclusively -- the
White House," said Rep. Jim Leach (R-Iowa), chairman of the House
Banking and Financial Services Committee.
Senate Minority Leader Thomas A. Daschle (D-S.D.) cautioned against
premature speculation about how voters might assess blame if the stock
market continues its rapid decline. He noted that there are many factors at
play and that while Asian and Russian economies founder, the U.S.
economy remains vibrant.
"It's too early to tell whether activity in the market will make a difference,"
Daschle said. "What I think is important is that everyone appreciate the
stock market is one gauge by which we judge the economy. I would hope
our critics would give us credit for the soaring market that we've enjoyed
for the last five years and the strength of the economy."
But privately, Democrats say that the snowballing effect of Clinton's
political and legal problems and the free fall on Wall Street may undermine
their fast-fading hopes of regaining control of the House in November.
"We've had better times," a senior Senate Democrat said warily. "I could
probably deal with what's past. What I don't know is what's ahead."
Yesterday's 512-point drop in the Dow Jones industrial average, to
7539.07, put it below 8000 for the first time in seven months and more
than wiped out the remnants of all of this year's gains.
The sharp decline in the stock market could also influence two major
policy debates, dampening enthusiasm for privatizing a part of the Social
Security system and drying up support for a major Republican tax cut this
fall.
Proposals by House and Senate GOP leaders for tax cuts of $80 billion to
$100 billion or more over the coming five years depend in part on the
continuation of a booming economy and soaring budget surpluses. Fears of
a bear market and a gradual erosion of the nation's economic gains could
work against passage of anything other than token tax relief before the
election.
Yesterday, some GOP moderates who have argued against deep tax cuts
seized on the market news to urge their leadership to abandon tax cut
plans and focus instead on reducing the national debt and protecting Social
Security.
"I think it certainly should throw a damper on any discussion of massive tax
cuts," said Sen. John H. Chafee (R-R.I.), a member of the Senate Finance
Committee. "It seems to me this strengthens the hand of those of us who
say, 'Don't expect the surplus to be so large, and let's not get committed to
tax cuts.' "
Duffy, the Democratic political analyst, pointed out that the stock market
has become increasingly important in the political arena for two reasons:
One, faith in Social Security is declining, and two, the number of people
with money tied up in stocks, especially through pension plans, has grown
enormously.
"In focus groups with people under 45, all they want to talk about is their
401(k)s," Duffy said.
"We had two things on our agenda, HMOs and the surplus for Social
Security. It's hard enough to compete with three letters -- sex -- and now
to have this," he said. "The shoring up of [Clinton's] job approval has been
the stock market."
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