That's a nightmare scenario for Republicans, and it explains why many now embrace the accounting reforms pushed through a House-Senate conference committee by Senator Paul S. Sarbanes (D-Md.). But it isn't Armageddon--yet. Polls show voters aren't ready for a partisan rebuke like the one aimed at Ronald Reagan in the recession year of 1982. That year, the GOP lost 26 House seats while gaining one Senate slot. Indeed, in an Ipsos-Reid poll taken July 11-21, Republicans held a surprising 48% to 40% lead among likely voters in the battle for Congress. Until those numbers turn around, don't expect Teapot Dome II.
Still, House Minority Leader Richard A. Gephardt is convinced a mighty wave is about to propel Democrats back to power in Congress. His strategy is simple: Produce TV ads that blast Republicans for voting to weaken financial safeguards, and let sinking 401(k) portfolios do the rest. "This is a big opportunity," exults David Axelrod, a Democratic consultant in Chicago. "It's true that there hasn't been a shift yet in the generic vote, but in '94 [when Democrats lost the House] the big break didn't come until the fall."
Of course, in 1994 Newt Gingrich managed to nationalize the election around the Contract With America--a mash note to laissez-faire and deregulation. This year, Democrats are undertaking something harder: to channel unfocused anger at business greed into an anti-Republican tide.
Difficult? Yes. But it's not rocket science. Already, American Family Voices, a liberal advocacy group, has run TV ads in New York and Washington that depict Team Bush as soft on corporate crooks. For example, supporters of Michigan Democrat John D. Dingell--a veteran fighting for re-election in a redrawn House district--are airing an ad that trumpets his role as a corporate gadfly. The spot boasts that "BusinessWeek calls Dingell `a large thorn in the side of Big Business."' True, Dingell frequently sides with liberals. But he is also a fierce defender of the auto industry and often tangles with consumer groups and environmentalists.
In Republican ranks, there is growing dread over the economic storm--but no road map to safety. By belatedly signing on to the corporate cleanup drive on Capitol Hill, "Republicans can fight that issue to a draw," says GOP strategist Charles Black. "The real danger is an economic slowdown that works against Republicans as the party in power."
It's not just Republicans who are worried. The backlash against business excesses is also taking its toll on CEOs' legislative agenda. On Capitol Hill, pro-business bills are drawing heavier fire. For instance, legislation to restore fast-track trade negotiating authority is being jeopardized by labor and environmentalist claims that it is a giveaway to corporations. And consumer groups battling a rewrite of bankruptcy laws claim they're also making headway. Why? Because the bill can be portrayed as helping big creditors. Foes hope to prevent passage this year--and to stall the measure indefinitely.
In reality, there's little Republicans or business lobbyists can do now but hang on for dear life. And Democrats, for their part, could still overreach. Says pollster John Zogby: "They could blow it by overusing the `little guy vs. giant corporations' rhetoric." That's because many investors are repelled by class-based appeals and reforms that seem anti-growth. Indeed, Ipsos-Reid found that the GOP has made small gains with independents lately--a sign that an immense opportunity for Democrats could yet be blown by a lapse into retro-politics. Walczak is BusinessWeek's Washington bureau chief.