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How Bush's World Turned Upside Down

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How Bush's World Turned Upside Down

Market meltdown leaves the President in trouble and congressional Republicans bracing for pain


Saturday, Jul. 13, 2002

Like Wall Street, President Bush had a dismal week. Monday's poorly handled press conference on the goings-on at his own Texas oil company during the 1980s was followed, Tuesday, by a Wall Street speech that left investors and even congressional Republicans unconvinced. That, and the stock market's worst week since September 11 left GOP pollsters aghast at how suddenly, and fundamentally, their world appears to have changed. The political landscape across which George W. Bush rode to power two years ago has been inverted — peace and security supplanted by war and anxiety; boundless prosperity by fretful, seemingly inexorable, decline; a culture that had revered its corporate CEOs suddenly treating the title itself as grounds for suspicion.

And the Bush White House failed to see it coming, believing their man was gold — or at least Teflon — after emerging unscathed from the Enron scandal. "There was (Enron CEO) Kenny Boy (Lay), and all that money he gave, and the video (of Bush being chummy with the Enron chairman)," said a senior White House official. "That had us worried." But Enron came too soon after 9/11, and at the time it seemed like an isolated event. The scandal had no impact on Bush's soaring approval ratings.

But Enron was the harbinger of a looming free-fall in corporate respectability. When that was followed by more bad news from Xerox, ATT, Lucent and Worldcom, the bullet the White House believed it had dodged in March with a tepid "10-point" plan for corporate governance boomeranged and grew. It didn't show up on the White House political radar, though. The worst political week of his presidency opened with front page photographs of Bush riding shotgun with Poppy in a golf cart and grinning as he hauled in a fish off the coast of Maine.

The White House wasn't entirely oblivious. Following the Worldcom revelations, his advisers let it be known that the President would deliver a speech on corporate responsibility on his return from Maine. And they promised he would get tough on offenders. But what the Bush team hadn't expected was the re-emergence of questions about the president's own record in business. It was old news, they thought (correctly). But they didn't appear to understand that events had cast that particular bit of old news in a new light.

Flying back from Maine on Monday morning, the President's aides decided to hold a press conference that afternoon. Its goal was to show Americans that Bush "shares their outrage" over the corporate scandals, and that he "plans to do something about it," according to a top White House official. And also, the official said, to show Bush answering all questions about his own business dealings, to "to get it out of the way" by showing that he had nothing to hide.

Bush's top political and communications aides prepped him for the press conference. Only a handful of their questions covered his dealings at Harken Energy Corporation. And Bush, as is his wont, didn't take the exercise too seriously. When Communications Director Dan Bartlett or Press Secretary Ari Fleischer would try to pin him down on a tough question, Bush would shoot them a glance and deliver a playful response — his way of telling his advisers that he was prepared.

But he wasn't.

Nearly half of the questions asked by reporters concerned Harken, and when the press conference was over, Bush's answers — that accounting rules weren't always "black and white", that he still didn't know what happened to that second filing with the SEC, and that, on a separate matter, his record on civil rights should be judged by the fact that two African-Americans served as top foreign policy advisers — left his aides grimacing. In the Oval Office post-mortem, Bush asked Bartlett and Fleischer what they thought the "headline" would be. "Black and white," they said, gently suggesting that it wasn't the ideal response. Bush understood. That's why he "double-backed" at the end of the press conference, he told them, referring to his explanation that Harken represented a "difference of opinion" on accounting rules, whereas Enron and Worldcom involved deliberate fraud.

The President's advisers were strongly divided over what new corporate governance measures he should propose on Wall Street. One the side of greater toughness were Deputy Chief of Staff Josh Bolten, outgoing political counselor Karen Hughes, Bartlett and, for a time, Karl Rove, Bush's chief political guru. Paul O'Neill, too, favored some tougher measures, though the Treasury Secretary carries little weight in Bush's inner circle. But Vice President Cheney, Commerce Secretary Don Evans and economic adviser Larry Lindsey warned Bush against taking politically popular steps that might do economic harm. Their argument that Bush would have far greater problems in the long run if increased regulation caused the economy to splutter convinced Rove, and Bush. So while tough rhetoric remained in the Presiden't speech, tough proposals — such as forcing corporations to treat stock options as expenses — were discarded.

The result was a widespread perception of disconnect between words and action in the Wall Street speech, which left GOP congressmen grousing privately that the President had put his political interests above theirs. "This is a big problem for Republicans," says Frank Luntz, a prominent GOP pollster. "While Bush is doing a good job of protecting himself, this is going to fall hard on Republicans in Congress. Bush's rhetoric was good. He's in a reasonably strong position, but Congress will take a hit on this."

Luntz believes the midterm elections may be determined by the choices of what he calls the "Irritable Voter" — Republican-inclined middle class, late middle-aged men and women who have been strongly supportive of the President since 9/11, but whose savings have been decimated by the collapse in the markets. In a February poll, Luntz found that a full one-third of Americans aged 50 to 64 had delayed their planned retirement because their assets had shrunk in the market. "There's no doubt there are more now," he says. "They saw their retirement in the near future and they watched it move away from them." It's a section of the population that votes, and its influence may be enhanced in a non-presidential election year. And that should terrify Republicans. "The Irritable Voter is the one I'm afraid of," says Luntz. "Someone who had something and lost it... that voter should be Republican. If the Democrats pry that voter away, they have a shot (at taking the House)." Republicans are nervous, says Luntz. And, he believes, with good reason.

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