Democrats Move to Profit From Red Ink

To hear national Democratic leaders tell it just a few weeks ago, this year’s congressional elections were mainly about preserving Social Security, expanding Medicare and ending GOP mismanagement of the federal budget. But now, with the latest cascade of business scandals, they are humming a different tune.

At the urging of party leaders, Democrats around the country spent this week’s congressional recess back home trying to cast the election as a choice between friends and foes of corporate corruption and greed.

In Mississippi, a House Democrat lambasted his GOP opponent for refusing to return donations from WorldCom Inc., whose accounting shenanigans reignited the issue of corporate wrongdoing.

In other cases, Democrats focused on broader questions of corporate accountability.

In New Hampshire, a Democrat attacked the House Republican incumbent for opposing legislation that might have prevented a local company from evading U.S. taxes.

In South Dakota, a Democratic senator departed from his previous emphasis on local issues to unveil a wide-ranging proposal to crack down on irresponsible corporate executives.

And Democratic officials have recommended that party candidates everywhere spotlight the voting records of Republicans on corporate reform measures.

After months of groping without success for a campaign theme of national resonance, the Democratic leaders clearly are hoping that the snowballing revelations about corporate scandals will finally tilt the campaign playing field in their direction.

“The Enrons and WorldComs have contributed significantly to an important shift in the national political environment, not just by putting voters in a more populist mood generally but also by helping to tie together issues like retirement security, jobs and a shaky economy in a way that benefits Democrats,” said Jim Jordan, the executive director of the Democratic Senatorial Campaign Committee.

Republicans are skeptical, saying this is just the latest in a series of efforts by Democrats to find a “silver bullet” issue that would nationalize the 2002 campaign.

“First it was energy, then the economy, then airport security and Social Security,” said Carl Forti, spokesman for the National Republican Congressional Committee, in a memo to Republican candidates. “Having failed to gain political mileage on these issues, Democrats have now staked their hopes for winning this November on corporate accountability.”

Independent analysts say the Democrats may have some trouble gaining traction on the issue unless it is coupled with serious instability in the economy.

That’s in part because Democrats themselves have accepted corporate donations and been swept up in scandals involving companies such as Global Crossing Ltd., the troubled telecommunication firm.

“Most voters still see all politicians in the same light: They are all raising special interest money, all friends with the big fat cats,” said Amy Walter, an analyst for the nonpartisan Cook Political Report.

But Democrats remain confident they can score political gains by depicting Republicans as reluctant to respond to corporate abuses--and link that message to the stereotype of the GOP as the party of big business.

“If being for big corporations is not the first thing people think about the Republican Party, it is at least the second thing,” said Geoff Garin, a Democratic pollster. “It is part of the Republican brand identity.”

And despite their public bravado, Republicans are reacting defensively.

Forti’s memo was a “Candidate Alert” sent just before the Fourth of July recess to arm Republicans with arguments about what legislation the House passed to strengthen pensions and corporate accounting. “The GOP takes a back seat to no one on this issue,” the memo said with emphasis.

Some moderate Democrats are concerned that a stridently populist campaign will undercut the party’s Clinton-era efforts to shed their image as being reflexively anti-business and hostile to policies that promote economic growth.

“Democrats are going to have to be very careful to make sure we don’t look like what we’re trying to do is only beat up on corporations,” said Simon Rosenberg, president of the New Democratic Network. “If at any point we’re seen as being anti-growth and anti-business, it will diminish our effectiveness.”

But for many Democrats, that’s a concern to worry about later. The issue of corporate malfeasance is hot, for example, in the Mississippi district of Democratic Rep. Ronnie Shows, which is home to WorldCom’s headquarters. He faces a tough race because redistricting forced him to run against another House member, GOP Rep. Charles W. “Chip” Pickering, and Shows has been quick to try to use the WorldCom scandal to his advantage.

He immediately called for an investigation after it was disclosed recently that WorldCom had overstated its earnings by nearly $4 billion. He announced he would return the $6,000 in campaign contributions he had received from WorldCom to set up a fund for employees who lose their jobs. He denounced Pickering--who was the top recipient of WorldCom donations, according to the nonpartisan Center for Responsive Politics in Washington--for failing to do the same.

Henry Barbour, Pickering’s campaign spokesman, said he sees no need to return the donations because there was nothing illegal about the money. He said Shows was “grasping at straws” in raising the issue, trying to win a race in a district that is too conservative for a Democrat to easily win.

“He has to come up with some created issue to have a prayer,” Barbour said.

Corporate responsibility also has become a key issue in other places where companies have tried to take advantage of a loophole in U.S. law that allows them to evade taxes by changing their legal address to foreign tax havens.

Such is the case in the Connecticut House district that is home to Stanley Works, a big tool company that is trying to reincorporate in Bermuda.

The district also is the scene of another contest between two incumbents thrown together by redrawn boundary lines--Reps. James H. Maloney, a Democrat, and Nancy L. Johnson, a Republican. Maloney has sponsored legislation to cut off the tax break for such corporate “inversions.” Johnson wants to impose a moratorium on the loophole, but Maloney says that does not go far enough.

The issue also has come up in New Hampshire, the home to Tyco International, which employed the loophole to shift its legal address to Bermuda in 1997. Democratic House candidate Katrina Swett has criticized GOP Rep. Charles F. Bass for opposing the bill to close that loophole.

Bass’ spokeswoman said he opposed the Democratic bill because he supported an alternative that would make the U.S. tax law less onerous, and thus less likely to seek offshore tax shelters.

In South Dakota, no community has been hit directly by the corporate scandals.

But the two candidates locked in a closely watched Senate race there are sensitive to the economic anxiety sparked by business misdeeds.

Both Sen. Tim Johnson, the Democrat seeking reelection, and his GOP opponent, Rep. John R. Thune, announced that they would give back donations they received from WorldCom. And Johnson, who has built his campaign largely around his ability to deliver federal funds for local projects, on Friday offered his own proposals to protect workers and investors from accounting fraud and other anti-abuse measures.

One House candidate who has already used anti-corporate themes in his television ads is Jim Humphreys in West Virginia, who is trying to unseat GOP Rep. Shelley Moore Capito. “He’ll take on big corporations like Enron and protect workers’ pensions,” Humphreys’ TV ad says. “The big money interests can’t buy him and they can’t boss him around.”