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USA: Enron Election Fallout Expected to be Minor

by Michael HedgesHouston Chronicle
October 22nd, 2002

WASHINGTON -- After Enron went through its high-profile collapse, elected officials trembled at the price they might have to pay this November.

But what was once expected to be a political earthquake now seems little more than a tremor.

Experts now expect the corporate-corruption issue symbolized by Enron to be decisive in very few races and to have only a mild impact on others.

"There has been a political impact, but probably less than most of us anticipated," said Larry Sabato, a political science professor at the University of Virginia. "It is tough to think of more than a few races where it is likely to make a difference."

"Democrats around the country are still using it in their advertising, so it is playing in races, but it may not be as determinative in races as it was once expected to be," said Stuart Rothenberg, a Washington-based political analyst.

That's not to say that people have forgotten the Enron scandal or are not upset about it.

"Ken Lay is a permanent part of the cultural landscape. Enron is, too, as a symbol of sickening excess," said Sabato. But voters just don't seem inclined to punish either party for the perceived sins of Enron.

A comprehensive Pew Research Center study of what would move voters released in mid-October found, "for the most part, the wave of recent business scandals has not become a significant factor in the November congressional elections."

Only 2 percent of voters volunteered it as an issue politicians should be talking about. "Moreover, there is little evidence that either party has a clear advantage on the issue," the Pew researchers said.

Nonetheless, some say, Enron will have an impact on national policy by shifting a key ideological battleground.

"Enron symbolizes the end of a 20-year period of Republicans pushing for government deregulation," said Marshall Wittman, a senior fellow with the Hudson Institute. "Although there doesn't seem to be any short-term political gain for Democrats, it probably brings an end to the old conservative ideal that the bestgovernment is the least government."

Peter VanDoren, of the libertarian think tank Cato, believes the intellectual case for deregulation is as strong as ever, but conceded that Enron and related corporate frauds are going to make politicians queasy about supporting it.

"As a pragmatic matter, if I am a politician I could make the case that deregulation has really been good for lots of markets and consumers, but then my opponent is going to attack me with Enron," he said.

In one direct legacy of Enron, Congress passed, and President Bush signed, a law that tightened oversight on the accounting industry and increased criminal penalties for corporate fraud.

Another Enron-inspired piece of legislation, the pension reform act, is languishing in Congress but will likely be reintroduced next year. That bill would add some protections to 401(k) and pension plans. But critics, including Democratic congressional leaders and labor unions, describe the reforms as too little, too late.

Supporters say pension reform measures pushed by Republicans with some Democratic support would make it easier for workers to diversify and obtain investment advice, helping avoid another Enron-like debacle where many workers had their retirement plans completely invested in the now-bankrupt company.

But opponents say the House bill that stalled this year had a provision that would have made it easier for some companies to renege on pension protections for low- and middle-income employees while maintaining generous retirement plans for upper level management.

In mid-summer, to much fanfare, Bush signed an executive order creating a national task force to pursue corporate fraud.

Headed by Deputy Attorney General Larry Thompson, the task force linked the FBI and U.S. attorneys in several major cities, including Houston, into a single team and created a rapid-reaction squad of experts to handle future corporate crime cases.

The speedy passage of the new accounting law and the swift formation of the corporate fraud task force helped insulate the White House and Congress from more severe fallout, experts said.

"Republicans proved to be adroit cross-dressers on the corporate fraud issue," Wittman said. "The legislation passed by Congress and signed by the White House helped defuse it."

In the end, as Wittman said, "To the average voter it was not clear there was a political bad guy."

While Republicans might seem to be a natural target of voter scorn because of traditional ties to business, the Clinton administration also publicly embraced high-tech and other business sectors that fueled much of the boom in the 1990s, analysts said.

When that bubble burst, the blame did not fall on one political party. In fact, Pew researchers expressed surprise that, by a margin of 36 percent to 31 percent, voters felt Republicans were the better party at "dealing with corporate corruption."

Analysts said another factor lessening the impact of Enron is that political parties have improved at rapidly heading off potential disasters.

"Thirty or forty years ago, Republicans might just have said this is unfortunate but it will go away," Rothenberg said. "But I think both parties have learned they need to get out ahead of these types of issues and vaccinate themselves."

Several other factors have helped minimize the Enron fallout for candidates facing mid-term elections, experts said. Most importantly, perhaps, is that the political angle never really gained traction.

"I think collectively we overestimated Enron itself as a political story rather than a business story," said Rothenberg. "Early on, there seemed to be a lot there. There was a lot of smoke anyway."

The "smoke" emanated from the facts that Enron was a Texas company, contributed significantly to the president's campaign and the fact that Lay was friends with the Bush family. But no fire was found.

Also, the timing was off. The company's downfall came a full year before the mid-term elections, and at a time when America was rattled and angry about the Sept. 11 attacks.

"The Enron story came early enough that the public was still overwhelmingly concerned about war and peace," said Rothenberg. "If it had come later, it might have had more impact."

That is not to say the issue of corporate fraud will not be crucial in a few races.

Rep. Charles Pickering, R-Miss., who represents the district where bankrupt telecommunications giant Worldcom is headquartered, could be in a tougher than expected race because of the number of people there directly damaged by that company's collapse.

On the other hand, Sen. Paul Wellstone, D-Minn., who was believed to be vulnerable, may have been helped by his record as a critic of corporate wrongdoing.

And in Connecticut, Democrat William Curry has tried to make Enron an issue in his effort to defeat incumbent Gov. John Rowland. Curry has built his campaign around attacking Rowland for a controversial $220 million deal the state made with Enron in which the company was to buy steam electricity from the state at set prices for 11 years. But Curry has not been able to make much headway in the polls with the issue.

The last gasp at making Enron a national issue before the elections could come next Tuesday -- one week before voters visit the polls -- when the Democrat-controlled Senate Governmental Affairs Committee holds a hearing into whether government oversight of Enron failed. That hearing, chaired by presidential hopeful Sen. Joe Lieberman, will occur despite the fact that the Senate is on election recess.

Last week, Enron was raised as an issue by Democratic senate hopeful Ron Kirk against his opponent, GOP candidate John Cornyn, state attorney general.

"While Enron was collapsing, who was Cornyn protecting? First, Cornyn collected $193,000 in campaign cash from Enron. Then, just two months before bankruptcy, Cornyn ruled Enron could keep its finances secret," claimed a televised campaign ad.

A Cornyn spokesman dismissed the ad, saying Cornyn simply enforced existing state law governing trade secrets.

Though the issue resurfaced in their most recent debate last week, experts doubted the Enron issue would make any difference. The most recent poll showed Cornyn with a double-digit lead.

"You'd think (Enron would) be a big deal in the Texas races, but while it is being talked about it doesn't seem to be decisive," Sabato said. In the longer term, Enron, as a metaphor for corporate fraud, might deter some from seeking major offices, Sabato said.

"In recent Senate races you've seen lots of big business types running by financing their own campaigns," Sabato said. "Jon Corzine is a good example of the kind of guy who might have had a hard time running this year."

Corzine, after retiring as co-chairman of investment banking firm Goldman, Sachs & Co., won election in 2000 as a Democratic senator from New Jersey by spending about $60 million, most of it his own money.

The current wave of corporate scandals is unlikely to cause any lasting antipathy for corporate leaders. Experts noted that the robber barons of the 19th century, the Great Depression, the savings and loan scandals of the 1980s and other events did not shake people's faith in the free marketplace.

"America is a very pro-business country," Wittman said. "There may be more skepticism about big corporations, but I don't think that will change."





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