- The Washington Times - Thursday, September 5, 2002

Democratic National Chairman Terry McAuliffe changed his party's message on Labor Day weekend. After months of bashing President Bush's tax cuts, he now says Democrats also want to cut taxes to stimulate the economy.

"People are worried about their economic future and, when they vote on Nov. 5, they are going to be looking to the Democrats to put people back to work," Mr. McAuliffe told me in an interview Friday, the start of the holiday weekend and the traditional kickoff of the election season.

Sounding a new campaign theme that hasn't been heard in his party, Mr. McAuliffe called for "tax cuts that will get this economy moving again. We want to cut taxes for middle-class Americans and for small businesses."

This tax-cutting message must be a surprise to Democratic congressional leaders who have been relentlessly pounding the Bush tax cuts, blaming them for just about every problem the country faces. But the fact remains that, while Democrats complain a lot about the economic slump, they have not offered a plan to do anything about it.

I doubt that the rest of the party will pick up Mr. McAuliffe's new tax cut theme. If Democrats have a plan to cut taxes for middle-class America, it has been one of the best-kept secrets of the 2002 midterm elections. So, why is he pushing this message now?

The answer can be found in a memorandum titled "Why The Democratic Attacks Aren't Working" that was sent around to party officials late last month by Matthew Dowd, President Bush's campaign pollster. Forget about the GOP gender gap that the pundits are always talking about, Mr. Dowd says. The Democrats suffer from a much bigger problem: The investor gap.

Two-thirds of all likely voters are invested in the stock market, and they are supporting Republicans over Democrats, 45 percent to 32 percent. Surprisingly, this margin has grown since January when the GOP advantage among investors was 40 percent to 32 percent.

"Today, Democrats are having difficulty at the polls to a large degree because of their inability to garner a competitive number of votes among this rather dominant group of voters who invest," Mr. Dowd's memo says.

"A key reason they don't have strong support is the party's lack of a clearly defined economic agenda as a companion to their attacks.

"Further complicating things for Democrats is the fact that this investing group of voters is more moderate than non-investors, contains a larger share of union households, is split evenly between men and women, and nearly two-thirds of the women in this group work outside the home," he says.

Needless to say, with two out of every three voters in this group, this poses a immense political gap for the Democrats to overcome.

This is not to say that investors, who tend to be more optimistic than the rest of the electorate, are happy campers. Though worried about their retirement and savings, investors understand that "while things are not where they would like them, the market has a tendency to rise over time," Mr. Dowd says.

Investors also understand the relationship between the long-term health of the economy and lower tax rates, free trade agreements and less regulation of businesses.

Evidence of this growing voter gap may be what drove Mr. McAuliffe to call for a midcourse correction in his party's message. He, too, has seen polls showing his party is not doing well with investors and has concluded that the Democrats are going to have to find a way to appeal to this pivotal group of voters or else lose on Election Day.

Investors, perhaps more than any other group, feel overtaxed. Their capital gains are taxed. Their dividends are taxed. Their savings are taxed. The White House is working on a campaign plan to cut these taxes, but they are not on the radar screen for the Democrats.

According to the dominant media culture here, taxes are not an issue for voters. But it is an issue out in the real world.

Earlier this summer, Missouri residents voted on a ballot referendum to raise the state gasoline sales tax to pay for needed statewide road and bridge repairs. Pollster John Zogby, who did focus-group surveys on the issue, was convinced that the proposal would be "a slam dunk," since voters loudly complained about the disrepair of state highways. Not so.

They overwhelmingly crushed the tax increase by a vote of 71 percent to 29 percent.

"I walked out of focus groups where they beat this thing up. And I'm not just talking about conservative, anti-tax people, but liberal professors were against it, too," Mr. Zogby told me. "I was amazed. They don't think the money will be spent well by the government."

With Congress and the electorate evenly divided, this will be one of the closest midterm elections in decades. But two things are clear. Investors will be the key factor in its outcome, and the Democrats are still struggling to put together an agenda that appeals to them.

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