Kudlow’s Money Politics

Surprise, Surprise

A series of late-October, early November surprises has turned the midterm elections into a real horse race. The bullish stock markets of recent months have been saying all along that a Democratic tsunami will not materialize, but now even a decent Dem wave seems a long shot.

First we have the John Kerry blunder: The Massachusetts senator badmouthed American troops in Iraq as a bunch of uneducated losers. This was typical anti-war elitism from Kerry, but his timing was impeccable. In a scorched-earth negative response, undecided and independent voters are flocking into the Republican camp, according to late-breaking polls from Pew and Washington Post/ABC.

Just as Walter Mondale infamously became the face of the Democratic party on the eve of the 2002 midterms when he replaced Sen. Paul Wellstone on the Minnesota ballot (Wellstone was killed in a plane crash), John Kerry has become the face of the Democrats on the eve of the 2006 vote. It’s a disaster for the Democrats — and they know it. ‘Kerry’s Blunder, Wall Street’s Gain,’ read one financial headline.

Then we have the blockbuster 4.4 percent unemployment rate, the last major front-page economic statistic to appear before the election. Jobs in the U.S. are booming, as government revisions clearly show. Corporate payrolls are rising at nearly 150,000 a month, but the more accurate household survey — which measures the number of people working — rose 426,000 in October, 420,000 per month over the last three months, and 226,000 monthly across the whole year. Meanwhile, wages are growing at 4 percent — almost twice as fast as the 2 percent inflation rate, which itself has been cut in half with plunging gasoline prices.

New polls show rising public approval of the economy as a result of blockbuster job creation, low unemployment, falling gas prices, and a roaring stock market. It’s not a coincidence that the Dow soared over 100 points on Monday on news of the Pew poll that shows the Republican comeback. Democratic House campaign manager Rahm Emanuel told a Sunday TV news host, ‘This is making me nervous . . . I don’t know what to make of it.’ It’s called the low-tax economic boom, stupid.

Then we have Saddam Hussein’s conviction and death sentence. This reminds American voters that there has been a good deal of progress in Iraq. Saddam and his mass-murdering crimes against humanity are a thing of the past. The Iraqi people have participated — and in large numbers — in three democratic elections in this former dictatorship. What was back-burner material is suddenly front-burner again.

Indeed, as tough as the Iraq story has been, the Saddam conviction reminds voters that President Bush’s vision of overthrowing the jihadist totalitarian order is worth the fight. In terms of American values, U.S. security, and human-rights democracy improvements in the Mideast and around the world, victory in Iraq matters.

And finally we have President Bush’s indefatigable campaigning on Iraq, homeland counterterrorism, low taxes, and economic growth. Bush has been written off so many times by the mainstream media, but he keeps coming back — standing tall, resolute, and with an incredibly strong backbone of character.

Without question, Bush versus Kerry in the final days of the midterm campaign is a solid plus for Republicans who are cutting their deficits in key House races and reinforcing their hold on the Senate. But even if the Democrats capture the House, they will have done so with many pro-life, pro-business, pro-national-security ‘Blue Dogs’ — conservative Democrats who may deliver a 2006 post-election surprise.

Just as Ronald Reagan relied on conservative House Democrats to pass his key legislation on lower taxes, reduced domestic spending, and a stronger defense — thereby overthrowing the Tip O’Neill liberal Democrats with a functional majority that included 35 to 50 ‘Boll Weevil’ votes — George W. Bush should be able to reach across the aisle for Blue Dog support in the next two years. These Blue Dogs are not Pelosi Democrats.

Another post-election surprise just might come from the House Republicans: Mike Pence and his allies in the conservative Republican Study Group — John Shadegg, Paul Ryan, Jeff Flake, Marsha Blackburn, and others — could stage a leadership revolt that will get House Republicans back on the messages of limited domestic spending, earmark reform, broad-based tax reform, expanded investor tax-free savings accounts, and Social Security reform.

Put simply, while the Democrats may get a Pyrrhic victory in a six-year-itch close House win, in effect they will have suffered another substantial defeat. A lost opportunity with a losing message.

Larry Kudlow is the author of JFK and the Reagan Revolution: A Secret History of American Prosperity, written with Brian Domitrovic.

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