Rule no. 1 for political handicappers is that a strong economy and a roaring stock market help the incumbent in presidential campaigns, and a weak economy -- or at least a bear market -- does more damage to the incumbent than all the attack ads money can buy. Al Gore, second in command in the incumbent administration, might not get much credit for the most successful economic expansion in history, but he should get the votes of those who don't want to change policy horses in midstream.
That's why some Republicans in the House of Representatives have privately been cheering every dip in the nasdaq and increase in mortgage rates. They think bad economic news will do much more for George W. Bush than his debating skills will. And what's good for George W. is good for the House Republicans who will be riding his coattails in what will surely be another close race for control of the House.
The trouble with this scenario is that Bush has made some policy choices that leave his campaign more dependent on a robust economy than Gore's. Bush's big-tax-cut proposal is the most prominent policy offering of the campaign. He pushed it hard to win the Republican primaries, and Gore attacks it in every speech he gives on any subject. Last week, Gore told the Michigan Education Association that Bush's "major proposal in this campaign is a giant, $2.1 trillion tax giveaway which would be certain to force cuts in public education." (Gore tells every audience that Bush's tax cuts will dry up funding for its favorite government program.) Gore is for tax cuts, of course -- "targeted, affordable tax cuts" about a fourth the size of Bush's.
Still, Bush's tax cuts have yet to gain much traction with voters. Only 13 percent say the best use of the budget surplus is to provide tax cuts. But Gore's relentless attacks -- "I believe George W. Bush's entire economic agenda is built on a foundation of irresponsibility and risk" -- don't seem to be connecting yet, either. Bush's lead in the polls is holding, even though the Clinton-Gore team presided over a growth surge no one thought possible when they took office.
Ironically, one reason voters are not yet as afraid of Bush's tax cuts as Gore says they should be is the astonishing success of the Clinton-Gore tax increases. In their first year in office, Clinton-Gore raised the top tax rate from 31 percent to 39.6 percent as part of a $500 billion deficit-reduction package. Ever since, the government has consistently underestimated the amount of tax revenue to expect in the coming year. So much so that we now have a huge budget surplus where Congress and the president intended only to have a balanced budget. Every six months, new estimates arrive showing the Treasury has much more cash coming in than the last estimate.
This summer, newspapers will likely report that the Congressional Budget Office has just revised its projection of revenue for the year 2000. Expect a bump of $40 billion or $50 billion and a total projected surplus of $230 billion. The administration has always hoped for as much positive coverage of such good news as Intel does when it beats the Street's estimates of its quarterly earnings. But this year is different. How is Al Gore's we-can't-afford-it attack on the Bush tax cuts going to sound on the day his administration once again announces that it has beaten all revenue estimates? Don't be surprised if Bush trumpets this particular Clinton-Gore achievement more than Gore does.
Of course, for revenues to keep outrunning projections, the economy must keep going full-tilt, which is what Bush should be hoping for -- perhaps even more than Gore should. The vice-president wants the economy to keep rolling along because he expects to get some credit for it, but he will not be speechless if the economy slips a bit. Then he'll be able to attack the Bush tax cuts even harder and perhaps have a better chance of turning voter indifference to fear.
But here's another twist. There isn't much time left for an economic downturn to set in before the election, though there's still plenty of time and room for stock prices to keep falling. Normally, this would be bad news for Gore, right? But thanks to Bush's bold, if still vague, Social Security proposal, a sinking stock market could help Gore and hurt Bush. Bush favors an idea that came into its own during the bull market of the nineties -- diverting a bit of the 12.4 percent Social Security taxes into private retirement accounts we can manage ourselves. Along with most Republicans, Bush believes that allowing workers to achieve stock-market returns on a portion of their Social Security contributions will lead to greater overall benefit packages for retirees. It's hard to find anyone under 35 who doesn't think this is a good idea, but Gore talks as if it's the craziest idea he's ever heard. The stock-market slide surely helps Gore get an audience's attention when he warns that the market can be a very risky place to put your money. The bigger the market drop, the riskier Bush's plan looks. But Bush's plan will never be as dangerous as Gore's over-the-top press releases make it out to be: BUSH'S RIGHT-WING ADVISERS PROMOTE IRRESPONSIBLE SOCIAL SECURITY PLANS.
The "right-wing adviser" the Gore campaign condemns most vehemently is Harvard economist Martin Feldstein, the head of the prestigious National Bureau of Economic Research. Feldstein was chairman of President Reagan's Council of Economic Advisers but is now consulted almost as often by Democrats as by Republicans. As an adviser to Bush on Social Security, Feldstein is in a position to create some serious mischief for Gore.
The few Democrats who want to add private investment accounts to the Social Security system think the accounts should be optional, so that no one who doesn't want to has to "risk" investing a few hundred dollars a year over 40 years in stocks, bonds, or anything else. Most Republicans want to make the accounts mandatory. If Feldstein nudges Bush toward optional accounts, that may very well insulate the Bush plan from all further Gore accusations.
The most prominent Democrats in favor of optional accounts are Senators Bob Kerrey and Daniel Patrick Moynihan. They have both endorsed Gore, but Moynihan recently announced that Gore was using "scare" language, and Kerrey actually accepted Bush's invitation to a meeting to discuss Social Security. Now, according to Kerrey, Gore wants to meet with the two Democratic senators, though Gore has already declared his opposition to everything they've proposed. If Bush outlines a plan close enough to the Kerrey-Moynihan plan, Gore would not be able to attack his opponent without attacking his fellow Democrats, who, in turn, would have no trouble shaking Gore's credibility on the subject.
In past campaigns that turned on Social Security, Democrats always won. Scaring voters about what Republicans will do is that easy. But in this campaign, it looks like nothing is going to be easy for Al Gore.