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2004 - CAN THE DEMOCRATS SAVE THEMSELVES?

June 10, 2003

IN THIS ISSUE:

1.  The 2004 Field Of Democratic Presidential Hopefuls.

2.  Hillary Clinton - The 2004 Wild Card?   No, In 2008.

3.  Clintons Will Stay In Spotlight – Books, Movies, Etc.

4.  Will Bush Make Mistakes As His Daddy Did In 1991?

5.  Bush’s Brilliant Tax Cut Strategy For 2004 Re-Election.

Introduction

This week I will analyze the current political landscape as the presidential race is heating up.  There are some very interesting things going on behind the scenes in both the Democratic party and the Republican party that most people don’t know about.  I’ll let you in on some of their strategies (and schemes).  We’ll look at how the 2004 election is shaping up, including the likelihood of Hillary Clinton becoming the Dems’ nominee at the last minute and the impact her new book is having on the party.

As a reminder, I am not a member of any political party, and never have been, but my views are generally conservative.  But even if you are a liberal or a moderate, you probably should read what follows.  Better to know than not to know.

If The Election Were Today…

If the election were held today, George W. Bush would win in a landslide.   It is possible it could look like Reagan/Mondale (Reagan won every state but MN and the DC), or if not, maybe Bush/Dukakis (40 states and 426 electoral votes).  If you are a Democrat, my apologies, but this is roughly how the race looks if the election were held today.  Bush is incredibly popular, whether you agree with him on the issues or not.

Of course, we all know this can, and probably will, change between now and November 2004.  We all remember 1991 when Bush 41 (the elder) had sky-high approval ratings coming off of Gulf War I.  He looked so unbeatable that several Democrat heavyweights took a pass on the presidential race, thus opening wide the door for a relatively unknown Arkansas governor and a host of other unexpected Democratic challengers.

The big question now is, will Bush 43 make some of the same mistakes his father did?  The Dems certainly hope so and are planning to do everything they can to make it happen.  The Bush team, on the other hand, learned painful lessons from Bush 41’s fall from grace.  I’ll come back to this issue later on.

The Democratic Wannabes

There are nine Democratic contenders, ranging from Dick Gephardt and Joe Lieberman to Rev. Al Sharpton and Carole Moseley-Braun.  Of this group, the three strongest candidates appear to be (in order, quite possibly): Gephardt, Kerry and Lieberman.  I know some of you will disagree with this ranking, but from everything I read and hear, this is the likely standing at the moment.

Gephardt and Kerry are solid liberals, although both supported the war in Iraq.  Lieberman is more of a moderate/centrist liberal who also supported the war.  Gephardt wants to repeal the Bush tax cuts and use the money (plus a lot more) to radically reform health care.  Lieberman is big on gun control and the environment, energy in particular.  At this point, I can’t tell what are Kerry’s centerpiece issues.

I would consider Gephardt the frontrunner – for now – because he has the support of House Minority Leader Nancy Pelosi, Minority Whip Steny Hoyer and 28 other members, most of whom are skilled fundraisers and all of whom will be convention delegates.  He is currently favored to win the Iowa (Jan. 19) and Arizona (Feb. 3) primaries, plus he may even have a good shot at New Hampshire (Jan. 27).  Gephardt is a seasoned politician, good fundraiser and he’s been down this road before. 

Democratic Party Swerves To The Left

Following the Dem’s heavy losses in the 2002 mid-term elections, the party leadership seems to have decided they must move to the left.  They have elected Nancy Pelosi as House Speaker, the most liberal speaker in many years.  They, of course, have Tom Daschle, also very liberal and an outspoken Bush critic, in the Senate.  In my view, these people, and the party in general, are very much out of touch with the American people, and seemingly getting more so. 

By trying to oppose President Bush, they have made themselves appear to be soft on national security.  This is a BIG ISSUE with the American people and will clearly be a litmus test in the campaign.  Bush has a commanding lead on this issue. By vehemently opposing Bush’s tax cuts, the Dems have the image of being for tax increases.

There are some in the Democratic ranks who are very unhappy with the leadership and the direction the party appears to be headed (i.e. – to the far left).  Among them is Leon Panetta, the former White House Chief of Staff and Budget Director).  He thinks his own party is headed for disaster, if they don’t radically change directions.  You can read Panetta’s latest warning to his party in SPECIAL ARTICLES below.

Hillary The Wildcard??

The Democratic presidential hopefuls have to shake their heads every time a poll comes out showing that Hillary Clinton is more than twice as popular as the closest presidential contender.  Ditto for polls showing that Al Gore would handily beat any of them if he were running.

Clients frequently ask me if I think Hillary will put her name in the hat later on in the campaign, or if the Democratic party will be so frustrated that they might “draft” her as the nominee at their convention in August next year.  Based on what I read, Hillary will NOT run in 2004; they will not put her up against George Bush.

Despite her comments to the contrary, most politicos believe Hillary has her sights set on 2008.  Bush will be gone.  There is no obvious Republican frontrunner for 2008, save possibly Colin Powell who is not likely to run.  Despite all the Clinton scandals and alleged scandals, Hillary is still the most popular Democrat in Washington.  She should have a good shot in 2008.

Clintons Back In The Spotlight

The Democratic hopefuls have to be even more frustrated with Hilary’s new book that was released on Monday, complete with Hillary’s version of how she learned of Bill’s affair with Monica Lewinsky.  I could dive into that one, but I won’t.

The thing to note about Hillary’s book is this: just at the time the 2004 campaign is gearing up, and the Dem hopefuls are struggling for attention, along comes Hillary’s blockbuster book.  Just at the time the Democratic hopefuls thought they were getting some traction against Bush, boom, out comes Hillary’s book, and the spotlight is instantly right back to the Clintons.

Hillary needed to get her book out early to get all her past issues out in the open (with her own spin, of course), not to mention the $8+ million she’s being paid.  She does not want to debate and wrestle with these issues in the 2008 campaign.  So, it comes out now.  Let’s face it, the Clintons are indeed more interesting than the Dem hopefuls!

It’s not over, by the way.  Bill Clinton’s own new book will be coming out sometime in 2004, reportedly next summer.  The public will be waiting with baited breath to read Bill’s account of his years in the White House, and specifically how his version compares with Hillary’s.   So, once again next summer, at the height of the campaign, the Clintons will once again steal the spotlight.

Also, last Thursday (June 5) the Arts & Entertainment channel (A&E) announced that it is going to make a movie about Hillary, covering her years in the White House and up until her election as a senator from New York.  FOX News reported that the directors of the film have talked to Sharon Stone about playing Hillary.  One wonders who will be cast to play Monica!  In any event, the Clintons will continue to be front-and-center.

The Democratic Leadership 

Terry McAuliffe is the head of the DNC.  You will recall that he was handpicked by Bill and Hillary.  Many believe, and I am one of them, that McAuliffe still takes his marching orders from the Clintons.  I know this will spark many nasty e-mail responses from our more liberal readers.  So, let me say that I don’t know this for sure.

True or not, there are those who believe that McAuliffe has already written-off the 2004 election.  There are a growing number of Democrats who are now questioning his leadership.  Once again, I don’t know this to be true, but there are those who believe McAuliffe has basically written-off the 2004 election, at least privately. The question is why. 

Two possible reasons: 1) George Bush is very likely unbeatable; and 2) If one of the current Dem hopefuls should somehow win, that would complicate things for Hillary in 2008.  If one of the Democratic candidates should somehow beat Bush and become president in January 2005, that would mean that Hillary would have to defeat an incumbent Democrat president to get the party’s nomination in 2008.  That would complicate things.

While they will never admit it, the real top leadership in the DNC – Bill, Hillary and Terry – may be satisfied to see Bush win a second term.  Obviously, this is just speculation, but I would certainly not rule it out.

The recent swerve to the left by the Dems will also serve Hillary well in the 2008 campaign.  Even though she is extremely liberal, she will position herself as a “centrist” just like her husband did.  With the party far to the left and likely in even further disarray, Hillary can run in 2008 as a centrist, “New Democrat,” who can save the party, just as Bill did.  I know some of you will disagree, but let’s just wait and see.

Similarities & Differences With 1992

As noted earlier, everyone is wondering if Bush 43 will suffer the same re-election fate as his father in 1992.  Let’s look at the similarities with 1992 first:  1) A very popular war-time president who looks unbeatable; 2) A large field of generally unimpressive challengers; and 3) A struggling economy just coming out of a mild recession.

Now let’s look at the differences, as I see them.  1) Bush 43 is more conservative than his father; 2) Bush 43 cut taxes whereas 41 broke his famous promise and raised taxes; 3) Bush 43 is viewed as stronger on national security than the Dems; 4) The War On Terror will still be ongoing next year; 5) Bush 43 has developed a strong, personal bond with a majority of Americans, whereas his father was generally viewed as out of touch; 6) the economy should be stronger next year than it was in 1992; 7) The Dems are swerving to the left, while the public has moved to the right; and last but not least, 8) Bush has Karl Rove, arguably the most brilliant mind in politics today.

I believe it will be next to impossible for any of the current Democratic hopefuls to beat Bush in 2004.  That could change, of course, but I don’t believe there is any way Karl Rove will let Bush make the mistakes his father did.  Some other surprise may well come along to derail Bush’s juggernaut, but absent that, he should win handily.  Again, my apologies to our Democrats in this audience, but that is how it looks today.

The Bush Strategy On The Smaller Tax Cut

Many conservatives were very disappointed at how easily Bush “caved” on the latest $350 billion tax cut.  Many were upset that he didn’t fight for more.  In contrast, political columnist Dick Morris believes Bush’s acceptance of a much smaller tax cut was “an unparalleled act of political brilliance.”

Morris, you may recall, was Bill Clinton’s top political advisor during his first term, in essence, Clinton’s Karl Rove.  While many people dislike Morris for his own scandals during the Clinton years, the guy has reportedly cleaned up his life, reconciled with his wife and is now a very popular political columnist.  Like him or loathe him, he is very savvy.

In essence, Morris believes that Bush/Rove had a strategy, from the beginning, to ask for a $750 billion tax cut, but be willing to accept less than half that amount, as well as the “sunset” provisions the Democrats insisted upon.  Why?  So that Bush could continue to run on the tax cut issue in 2004.  Here’s what Morris said:

“That [tax cut] deal - with the Democrats and moderates in his own party - looks like typical legislative compromise, but is actually a move of incredible political acumen: The “sunset” provision, under which the tax cut automatically lapses unless expressly extended by new legislation, makes taxes a front-and-center issue of the 2004 election.

Now Bush can send refund checks of $400 for each child to 25 million households this summer, slash the tax on dividends and capital gains to 15 percent and reduce tax rates on all three brackets - all effective immediately - and still be able to base his re-election campaign on the need to preserve his tax cuts.  The president can run for re-election with an economy stimulated by his tax cuts and still have the issue to use in the ‘04 contest.”

Several of the key tax cuts in the latest bill are set to “sunset” (expire) in 2004.  Morris and others now believe that one of Bush’s big campaign issues will be to preserve those cuts by extending them or making them permanent.  Thus, Morris believes every Democratic candidate will have to answer the question: “Will you support extending the Bush tax cut?”   Morris goes on:

“A ‘NO’ [answer to extending the tax cuts] will be required to win enough primary votes to get the [Democratic] nomination. But a ‘YES’ will be necessary to prevail in the general election. Bush has put the Democrats in an impossible position.

But the maneuver is even more impressive: It shows a really sophisticated appreciation of how the tax-cut issue works on a political level… the issue in 2004 won’t be whether to cut taxes - it will be whether to RAISE them, by letting the cut[s] expire. And any poll asking if voters want a tax increase will find huge majorities saying, “No way!”

Accordingly, Bush won't accuse his rivals of opposing the tax cut. Rather, he'll charge that they want a tax hike… an unparalleled act of political brilliance.”

How is it that Bush is SO DUMB, yet he continues to score major points on several fronts, including now even Mid-East peace of all things?  The Democrats just can’t seem to figure it out.

Conclusions – It Is What It Is, At Least For Now

I have no doubt that this will be one of those weeks when I get 100-200 or more responses to this analysis.  Many will disagree with the case above.  Some will be “hate mail.”  Again, even though I’m not a member of any political party, there will be those who will call me a radical conservative and rail on me to stop writing about politics.

But like it or not, the Democratic party is in real trouble today.  They are moving to the left when, in fact, the majority of voters are either moderates or conservatives.  They face a very popular president who may raise as much as a record $300 million for his re-election campaign.  That may be three times or more what the Democrats can bring to the campaign.

At the same time, the current group of Democratic candidates is largely unimpressive, and they badly trail Hillary and Gore in the popularity polls.   The Clintons aren’t helping either with her book out now and Bill’s on the way, probably next summer.  Whether this is by design or not, it’s not helping the current candidates.

The Democrats could lose 4-6 Senate seats in 2004, at least looking at recent polls, including possibly Tom Daschle’s South Dakota seat.  And even more House seats.

In a way, it is sad.  I enjoy politics.  I enjoy spirited debates on the ideas of the day.  I enjoy close contests.  I didn’t really enjoy the 1992 SuperBowl when the Dallas Cowboys routed the Buffalo Bills 52-17, even though I was a big Cowboy fan back then.  I would welcome a strong Democrat candidate with a centrist vision.

I think, for example, that Joe Lieberman is the best Democrat candidate of the current field of challengers.  He’s intelligent, scandal-free and has strong moral principles; he’s strong on defense; he’s strong on faith-based initiatives; and for years, he has been after Hollywood and the recording industry to reduce sex and violence in their films, records and videos.  He is more of a centrist, and not a left-wing kook.  But Joe Lieberman stands very little chance of getting elected, in my opinion.  He doesn’t have the charisma, the stature and most of all, the money to win.

The worst part for me, is that if the Democrats don’t get their act together and we have a very strong Republican victory in 2004, that will indeed pave the way for Hillary to be the Democratic nominee in 2008.  I’m sorry, but I just don’t want to see the Clintons back in the White House in 2009-2012 when the Social Security crisis could finally hit.

But all this could change – that’s the hope for the Democrats.   Bush 41 had even higher approval ratings in 1991 than Bush 43 does today.  The Democrats hope they can pull off a replay.  But as discussed herein, they’ve got a steep hill to climb.

The Bank Credit Analyst’s Latest Upbeat Forecasts

The June issue of the highly respected Bank Credit Analyst includes a much more positive outlook for the economy and for the stock markets.  You can read a summary of their latest thinking in my June Forecasts & Trends newsletter, pages 6-8.  Click on the link and it will take you there.  You can get my newsletters free each month by going to my website.

All the best,

Gary D. Halbert

SPECIAL ARTICLES

Leon Panetta warns Democrats not to go far left.

It’s the economy, genius!  A journalist sizes up the Dem’s problems.

Clintons jump back in the spotlight.

The Democrats’ WMD fraud.


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