The Insecurity Industry

By Karen Tumulty/Washington

The day before George W. Bush delivered his State of the Union address last week, Senate majority leader Tom Daschle flew to New York City for a private lunch with 50 or so Democratic donors, organized by Indiana Senator Evan Bayh. As Daschle made the case for why his party could pick up seats in the coming midterm elections, despite Bush's 80% job-approval ratings, an Alabama lawyer, Tazewell Shepard, cut through Daschle's gauzy talk. Name one issue, Shepard pressed, where the Democrats have the upper hand. Daschle was ready: The Enron debacle has people worried about their retirement security, he said; an issue that barely registered with voters six months ago has people jittery enough to produce "an escalation in the polling data."

Three days later, at a lush West Virginia resort where congressional Republicans were holding their annual retreat, they heard the same news. G.O.P. strategists told the lawmakers that voter rage over Enron is becoming personal, with people's fears about their own retirement exceeding their appetite for campaign reform and their anger at what the now bankrupt company did. "Many employees looked at what happened to Enron, and it scares them to death," says Ohio Congressman John Boehner, the House Republicans' point man on pension issues. This is why the biggest news out of the retreat was the package of 401(k) and pension safeguards Bush unveiled there Friday.

While the overall economic news is good enough to have some economists ready to declare an end to the recession, Enron's collapse has only deepened worries about the 401(k) plans that 42 million Americans are counting on to carry them through retirement. Suddenly voters are paying more attention to the solvency of the Social Security and Medicare trust funds and wondering whether Medicare will pay for their prescription drugs. Across the country, state employee pension funds are hemorrhaging because of their Enron investments. "Enron has the ability to color a broad range of issues," consultants James Carville, Stan Greenberg and Bob Shrum wrote in a memo to Democrats last week. "The more people hear, the more corrosive it becomes."

Republicans are hoping Bush's popularity can ward off the midterm-election jinx that a President's party usually faces. But they also know G.O.P. candidates tend to suffer whenever the debate turns to issues affecting people at or approaching retirement age. That group votes more dependably than any other, especially in off-year elections, and now includes the leading edge of the baby boom, 76 million strong. Democrats are well practiced at exploiting the group's fears. In 1982 the party stoked anxiety about Social Security reform and picked up 26 seats in the House; in 1986 the same issue toppled the G.O.P. majority that Ronald Reagan had swept into the Senate. And in 1995 Bill Clinton faced down Newt Gingrich and his plan to overhaul Medicare; two government shutdowns and one year later, the issue nearly put the House Republicans back in the minority.

Republicans say the Democrats are already overplaying their hand. But Republicans are fighting back just the same. Bush's new pension-reform plan seeks to fix some of the things that went wrong for Enron employees, and like-minded G.O.P.-sponsored measures are going off like popcorn in both the House and the Senate. The proposals don't go as far as Democrats want, but businesses fret that they are just an opening bid. Too many restrictions, the lobbyists say, will discourage companies from making any matching contributions to employee retirement funds.

Late last year, even before Enron began to dominate the headlines, House Speaker Dennis Hastert persuaded Bush to shelve until after the election his plan to privatize part of the Social Security program. Bush has not given up on the idea of letting people decide for themselves how to invest part of their Social Security taxes; he mentioned it again in his State of the Union speech. But the White House can't count on Republican congressional candidates to make that case on the stump this year. That's because when voters start thinking about retirement, it often means early retirement for politicians.