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THE INEFFABLE ISSUE for an UNSPEAKABLE CAMPAIGN

<i> Kevin Phillips is the publisher of American Political Report and Business and Public Affairs Fortnightly</i>

As the presidential campaign droops into its final, critical month, Democratic nominee Michael S. Dukakis’ central and conceivably fatal weakness is becoming ever more clear--the man appeared unable, until last week, to nurture the modern Democratic Party’s only reliable issue for ousting Republicans from the White House: public economic discontent.

Texas Sen. Lloyd Bentsen’s rhetoric in his Oct. 5 debate victory over Sen. Dan Quayle of Indiana, and the Dukakis-Bentsen ticket’s Oct. 6 visit to a shut-down Lone Star Steel Co. plant in Texas may or may not be a turning point. But the importance of the Democrats’ failure to act between August and September cannot be overstated.

Through midsummer, Americans were nervous about the economy and its future. The reasons for this apprehension are as valid now as then. The United States, borrowing to pay its bills, had become the world’s largest debtor. U.S. companies and downtown real estate were being sold off to foreigners at a record pace. Small towns were boarding up Main Streets, blue-collar wages were stagnating. Yet some people were making lots of money--the ranks of millionaires were expanding as never before.

In early 1988, the Democrats had seen the emerging issues. Indeed, primary campaigning by Jesse Jackson, Rep. Richard A. Gephardt of Missouri and others fanned public unease. National prosperity, voters began to worry, was living on borrowed time and borrowed money.

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But after Dukakis’ nomination, the Democrats’ earlier feisty criticism of Ronald Reagan’s 1981-88 economic policy subsided into a managerial me-tooism: “Oh, things aren’t too bad, but I can do it better and we’ll add some programs that don’t cost too much.” That was inadequate. If the Massachusetts governor ever learned anything in school about the economic messages of Harry S. Truman, Franklin D. Roosevelt, William Jennings Bryan and Andrew Jackson, there was no sign of it.

The evidence of U.S. electoral history is compelling. In the 20th Century, Democrats have never kicked the Republicans out of the White House without a public perception of tough times, GOP economic policy unfairness or both.

The four times in this century that Democrats have taken the presidency from the GOP--in 1912, 1932, 1960 and 1976--involved situations where an economic downturn was in progress or a major recession had occurred within the previous two years.

Smugly inclined Republicans will counter: Well, that only proves the Democrats can’t win this year because everybody knows times are good.

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Not really. Whatever the truth about America’s current economic status, electoral reality depends on how voters see things. And here’s where the Democrats had been winning the war from January to July--only to start losing it again in August after the little Napoleon from Massachusetts was crowned at the convention in Atlanta.

Take a look at the battlefield of public opinion surveyed as recently as midsummer. For example, joint polling by ABC News and Money Magazine turned up this July voters’ rating: 59% called the U.S. economy “not so good” or “poor” versus just 41% who rated it as “excellent” or “good.” An early August NBC News sampling, in turn, found a 70% to 25% majority agreeing that “unfair foreign competition is ruining this country’s economy.”

Back in May, a massive Times-Mirror poll also charted deep worries about the nation’s future--traceable to foreign imports, ebbing U.S. dominion in science and technology and the caliber of its leadership. And a midsummer CBS News survey drew a line between economic worries and class politics. Voters saw the Republicans as the party helping the rich, while Democrats were better for the middle class.

The electoral importance of these jangling national nerves was enormous. First, large majorities of uneasy Americans told pollsters they wanted the next President to change policies and directions. And second, between May and early August, this same citizenry told survey-takers, usually by double-digit margins, that Democrat Dukakis should be that President, not Republican Bush. Economic discontent was displaying a pro-Democratic cutting edge.

In mid-August, at the Republican Convention in New Orleans, the GOP mounted its counterattack. Both President Reagan and Vice President George Bush returned to 1984’s “Morning Again in America” imagery, trumpeting the success of the economy and the brightness of the 1988 outlook in comparison with the gloomy last days of the Democratic Carter Administration eight years earlier. The President went even further, saying, “We (Republicans) are the change,” and stressing that this GOP brand of change must continue.

Almost immediately, opinion surveys began to register a substantial uptick in national optimism. July’s 15-point majorities saying the United States was on the wrong track and required new policy directions melted to even-steven. Early September’s ABC-Money Magazine poll, meanwhile, charted the most buoyant public view in two years--just about as many people called the economy excellent or good as were negative. And something also happened to Dukakis’ poll margins: They vanished, fading with the public’s nervousness.

Possibly Dukakis never understood the earlier opportunity. At any rate, during August and September and despite pleas from aides, he shrank from the populist economics needed to rebut GOP braggadocio and refocus public concerns so pervasive before the GOP Convention. His occasional populist paragraphs have been few and far between. As a result the Democratic ticket has lost its early leg up on victory.

The sheer perversity of it has had Democratic strategists climbing walls all over Washington. By failing to make the case against 1981-88 GOP economic policies, Dukakis is effectively legitimizing Republican claims.

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Yet essentially the same domestic and international economic circumstances exist today that existed in July and early August--when public nervousness was so pronounced. Because of massive U.S. debt, net investment dollars have begun to flow out of the United States, and the next decade’s prospects are frightening. By 1992, U.S. international indebtedness is expected to exceed $1 trillion. Foreigners are going to be running shopping carts through U.S. cities and industrial parks.

A new book by Daniel Burstein, “Yen! Japan’s New Financial Empire and its Threat to America,” quotes Masaaki Kurokawa, the international division chief of Japan’s giant Nomura Securities, as speculating that Japan might agree to support the dollar by tying it to Japan’s mighty yen--provided the United States allowed California to be turned into a joint U.S.-Japan economic community! A year ago, the Wall Street Journal noted that officials in Tokyo’s Ministry of Finance have charts tracing Japan’s global rise as the United States declines in the manner of Edwardian Britain. “Morning Again” in Tokyo, maybe, but not in the United States of America.

Aspects of the domestic economy are also tinder waiting for a spark. The top fifth of Americans now enjoy their highest percentage of national income--43.7%--since World War II. So many upper-bracket Americans are millionaires the term has become worthless, yet ordinary workers’ wages are stagnating and young families can no longer afford to buy homes.

Dukakis has refused to grapple with taxes as a campaign issue, but Congressional Budget Office studies show that the only real reduction in overall effective federal tax rates during the 1978-88 period took place for the top 1%-5% of Americans. An obvious Democratic issue, one might think. And conservative commentator George Will, detailing how the mushrooming burden of interest payments on the federal deficit involves taxing Middle America on behalf of upper-class and foreign bondholders, observes that if Democrats don’t also protest this kind of wealth redistribution, “What are Democrats for?”

Judging by the 1988 campaign, not much. But the converse is true as well. If Dukakis and Bentsen start sounding more like Truman and Kennedy, their campaign just might acquire a new lease on life.


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