Volatility of Market Brings Danger of Mistaken Assumptions : Stock Dive as Political Target Is Risky Business

The economic and psychological shock waves from this week’s stock market plunge are rocking the national political landscape and thrusting the presidential candidates of both parties out onto one of the slipperiest slopes of the 1988 campaign.

Seeming to offer opportunities for gaining precious political advantages by casting blame and proposing solutions, Wall Street’s debacle presented temptations for White House aspirants that were hard to resist.

But the perils inherent in reaching for such prizes also were clear. The continuing volatility of financial markets here and abroad--coupled with nagging uncertainty about what the upheaval means for the U.S. economy as a whole--created a situation in which attempts to gain a step on the opposition today could produce more harm than good tomorrow.

Peril of Assumptions

Laying down a rule of thumb for candidates in both parties, GOP consultant and presidential campaign veteran Eddie Mahe Jr. said: “The thing they should all be is cautious, and not make statements on some assumption that turns out to be false.”

Nothing illustrated the pointedness of that advice better than the experience of GOP contender and Senate Minority Leader Bob Dole, who some thought stood to benefit more from the financial turbulence than any of his Republican rivals.

In the immediate wake of the stock exchange nose dive Monday, Dole issued a call for action and presidential leadership. “Someone has to take charge here,” the Kansas Republican said on the Senate floor.

But Wednesday, informed during a midday press conference that the Dow Jones average was then up 195 points, Dole appeared to have second thoughts. “Maybe you don’t do anything,” he said. “Maybe you find out what the problem is first” and then “find out how to address it.”

Mounting Evidence

Indeed, as the week wore on, with the nation’s attention swinging back and forth from the arrhythmic thumping of its financial heart in Lower Manhattan to its beleaguered policy-makers in Washington, evidence mounted that attempting to seize political advantage during the crisis entailed risks as well as potential opportunities for individual candidates and for their parties.

Particularly at first, many politicians held the view that Monday’s price collapse--statistically overshadowing even the somber memories of the black days in October, 1929--represented an irreversible setback to the Republican Party.

“For a long time people have been saying there was a hitch to Reaganomics,” contended Democratic consultant and National Committee member Mark A. Siegel. “Now public confidence has been so badly shaken it won’t recover.”

And some Republicans agreed that it was hard to see a bright side for the GOP. “What’s happened clearly can’t be viewed as beneficial to the Republican Party,” conceded Richard B. Wirthlin, longtime pollster and adviser to President Reagan who has just signed on for a similar role in the Dole campaign.

Skepticism Voiced

But others were skeptical that there would be any lasting impact from this week’s shocks, assuming that no further economic disasters follow.

“Americans are so conditioned to shocks” that they will soon be able to shrug off this one, predicted Larry Sabato, University of Virginia political analyst.

Besides, Democrats--and even Republicans--had to avoid seeming overeager in exploiting the situation, lest they appear callously opportunistic in a time of national distress.

“The politics of opposition is unfortunately that you have to hope for the worst, and that puts you in a bad light with the rest of the country,” Democratic pollster Mark Mellman said.

That point seemed to occur to Democratic contender Richard A. Gephardt, although somewhat belatedly. Thought by some to be in a good position to benefit from the week’s distress because his candidacy has focused on economic issues, Gephardt at first charged that Reagan’s economic policies were the root of the stock market’s problems. But soon afterward, the Missouri congressman issued a statement saying it was time “to think about the country, not politics.”

‘Strongest Position’

Similarly, Dole’s experience as Senate Finance Committee chairman and his independence from the Administration could help him in a time of economic difficulties. Wirthlin asserted that “given the record that Sen. Dole has established in reducing the deficit and his position on economic issues,” the senator was “in the strongest position” of all GOP candidates to deal with the stock market crisis.

Yet Dole ran the risk of appearing disloyal in the eyes of Reagan supporters if he showed too much aggressiveness in pressing such advantages.

Bush Closely Linked

Not surprisingly, this point was made with particular emphasis by supporters of Vice President George Bush, who figured to suffer most from the Reagan Administration’s misfortunes because he is the candidate most closely linked to it.

“Anytime something happens,” the charge that Bush will be hurt because of his closeness to the President “is going to be leveled,” said Bush campaign manager Lee Atwater, who recalled that similar dire predictions were made during the Iran- contra affair and yet Bush’s candidacy had survived.

Bush’s strategists contended that anyone positioning himself on economic issues needed to reckon with the President’s personal popularity among the Republican activists who will pick their party’s next nominee.

Still, the maneuvering for advantage went on among Republicans. New York Rep. Jack Kemp, who some thought might be hurt by the week’s events because of his close ties to the tax cuts underlying Reagan’s economic policies, issued a statement contending that the plunge in securities prices pointed up the problem of “our unstable world monetary system.”

Kemp followed that up with a call for an international conference to establish stable exchange rates.

Gold Standard Advocacy

But some critics suggested that Kemp’s talk of monetary reform would only serve to recall his advocacy of a return to the gold standard, a notion that American Enterprise Institute analyst Norman Ornstein said many people regarded as “pixilated.”

On the Democratic side, Siegel said Gephardt was “in relatively good position because taxes and trade are his issues.” Gephardt has co-sponsored tax reform and has been a forceful advocate for a tougher trade policy.

But Democratic policy consultant Ted Van Dyk argued that Gephardt was on the wrong side of the trade issue, politically as well as economically, because his proposal was regarded by many opinion makers as protectionist.

Some thought Illinois Sen. Paul Simon’s prospects might be improved because he is regarded as the closest of the candidates to traditional liberalism, a doctrine that supposedly would come back into style in the event of hard times.

But Siegel contended that Simon had little more to offer than “a symbolic message” that would not win wide acceptance among party activists seeking practical solutions, an argument that also would work against the liberal solutions being offered by civil rights leader Jesse Jackson.

State Success

Massachusetts Gov. Michael S. Dukakis has made his own state’s economic recovery the cornerstone of his presidential candidacy, and some believe that his success there could boost his presidential candidacy if the problems in the stock market spread throughout the economy. But others point out that Dukakis’ claims are based solely on his accomplishments within his own state and that his ideas have not been tested nationally.

“I’ll bet the stocks of Massachusetts companies went down this week just as fast as other stocks did,” pollster Mellman said.

As for Arizona Gov. Bruce Babbitt, Van Dyk credited him with candor but argued that the national sales tax he had proposed as a deficit-reducing measure would be perceived as the wrong medicine if the nation’s economy turned down.