The Investor

Nancy Drew a Blank on Bush’s Economic Plan

Will Nancy Pelosi listen? No one listens to her.

By 1.8.03

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When I see a public figure in trouble, I feel it's my duty as an American to tell them what they are supposed to do. House Minority Leader Nancy Pelosi certainly qualifies. Her response -- which is the Democratic response -- to President Bush's economic plan was underwhelming. With the following advice, Rep. Pelosi can consider me a Dick Morris-type strategist -- better, even, because I don't care what kind of shoes she wears.

Dear Nancy:

I want to be the first to welcome you as the House Minority Leader. Well, the first from this publication.

Let's be frank here: you are blowing your party's best, and maybe only, opportunity to take away swing voters from President Bush and the Republicans. With so many international threats to Americans, you aren't going to touch Bush on foreign policy. In contrast, no one is very happy with the pace of the economic recovery, and the President had to fire his economic team.

Over the last three days, you let him off the hook. He proposed an economic plan that faces many legitimate criticisms as a means of stimulating economic growth. (I pointed these out in my column last week, but I'm assuming you aren't a regular reader.) You could have said that encouraging companies to pay more in dividends diverts money from pro-growth activities like hiring workers and R&D. Or claimed the plan encourages corporate irresponsibility because dividends are still tax-disadvantaged to the corporation, yet, to attract investors and pump up stock prices, corporations will still pursue them.

Instead of pressing these kinds of arguments and positioning the Democrats as the party of growth, what did you do instead? You categorized it as "more tax cuts for the wealthy." Before Bush even presented the plan, you commented, "The vast majority of the benefits will go to the wealthy."

How did that argument work in the mid-term elections? Or in 2000? There are certainly people who feel that way. They are called Democrats-Who-Won't-Vote-Republican-No-Matter-What.

If you don't want to be pro-growth, how about being pro-tech? Don't companies like Intel and Cisco Systems and Oracle have a presence in Northern California? Here, those companies are being prudent and responsible, waiting to deploy their profits for an economic recovery. You could have said that Bush's plan bullies them into paying out that money as dividends instead of using it to fuel the next tech revolution. Remember how Clinton beat up on Dole with that "bridge to the 21st century" stuff? You could have said Bush is trying to dig a ditch back to the 20th century, benefiting dividend payers like GM and Caterpillar and Exxon Mobil, at the expense of the real companies of the future. You could even work out on some of your enemies like Philip Morris and RJ Reynolds, which pay big dividends.

The only Democrat who gets any of this is Bill Clinton, and you treat him like a pariah. Granted, he has more Achilles heels than a spider but he had a one great play in his playbook: ignore your base and fight for the middle.

While you're at it, you better wake up and realize George Bush is playing chess while you and the other Democratic leaders are playing checkers. Take the phrase "double taxation." He used the term eight times in less than two minutes during his Chicago speech. If you let him get away with that, he'll say it as often as his dad said "Willie Horton."

Movie tickets are subject to the same kind of double taxation. So are cars and soft drinks and all other things on which Americans spend disposable income. Workers pay income tax, and then use that money for goods and services that are again taxed as corporate profits. Part of what doesn't get taxed to the corporation - what it pays to the workers who made the goods or provided the services - will get taxed that second time as part of those workers' income.

The closest you've gotten to economic realities is complaining about increasing the deficit. Has anyone won or lost a national election on the issue of the deficit? That's a third-party candidate issue, especially when a hunk of government spending is going to pay for new military and national-security threats. Furthermore, isn't sending a check for $300 to $600 to every working American going to take some money from the coffers?

You also need to stay away from this argument because Bush hasn't even used one of his best weapons to sell his plan, his ability to let interest rates drift higher. This isn't exactly the sort of thing politicians like to brag about, but the past few years of fiscal policy have given him the breathing room. If the government has to sell more Treasuries because of the tax cut, or to compete with tax-free dividends, it does so in a dramatically different environment than Presidents in the recent past. Just since 2000, the interest rate on 5-year Treasuries has dropped from 6% to 3%. In this environment, a little more debt, or slightly higher interest rates, simply isn't going to scare people.

Your party is at the crossroads, Nancy. The economy is your best issue for the 2004 elections. You can try to win a giant uncommitted block of voters by positioning Democrats as the party of growth. Or you can keep preaching to the choir by calling the Republicans the party of the wealthy.

If you choose correctly, I'll drop you a line on how to handle "the death tax." Go Niners.

Mike

P.S. You might want to put this letter in the shredder. It's not good for either of us if word gets out that you get your instructions from The American Prowler.

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About the Author

Michael Craig is a writer in Scottsdale, Arizona.