Why Wall Street Sighed When Jeffords Jumped

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Less of this with Jeffords in the catbird seat?

In the '90s, Wall Street learned to love gridlock. Under New Democrat Bill Clinton, the traditionally Republican bastion figured out that when Democrats couldn't spend what they wanted, Republicans couldn't cut taxes what they wanted and the whole place shut down over the budget seemingly every fall, things went pretty smoothly. Clinton managed to cut the deficit and do some trade deals, and of course Greenspan was on the job. Enter boom.

But then Al Gore started railing against big business, and George W. Bush started promising it the moon. A new class of "Bush stocks" — energy, tobacco, pharmaceuticals, defense, that sort of thing — emerged, and amid the ruins of the New Economy, the Old Economy was back in a big way. Especially when Bush started delivering. And when the man in the White House is hacking away at regulations, refusing to talk about price caps and recommending a new power plant a week for the next 20 years, the last thing Big Business wanted was gridlock keeping Bush from doing the nation's business, which in this case, Coolidge-like, seemed to be just that. The game had changed.

And now, thanks to Jim Jeffords, it's changed back.

Wall Street took its first Dow-NASDAQ nosedive in seven sessions Wednesday as the news of Jeffords' defection crystallized; Thursday morning, after the Vermonter's official announcement, the selloff continued. However, it's neither major or endemic, and if it sticks it'll be for different reasons than the state of the Senate — like maybe that stocks' recent rise has been too peppy to last. But for the businesses that found the Bush agenda to be a lot like their own, the news that Tom Daschle is now in charge of the Senate to-do list can't be heartening.

The tax cut, first of all, is safe. As a parting gift to Bush, Jeffords decreed that his switcheroo would not take effect until after Bush signs what will likely be a $1.35 trillion across-the-board cut that doles out long-term tax relief to each according to his income. But Jeffords, saying if he was going to disagree with Bush so much he might as well make it official, had a pretty long list of what would have been his future treacheries: Health care, energy, missile defense and the environment (not to mention the judiciary, choice, education "and a host of other issues large and small."). And Jeffords is taking the polarity of the Senate with him.

Big Health Care? The McCain-Kennedy patients' bill of rights bill used to be a Bush annoyance. Now it's next up, right after Memorial Day, in the Daschle Senate. the Alaska National Wildlife Refuge? The new head of the Senate Environment and Public Works Committee is none other than Jeffords himself, who presumably did not have the Administration's environmental interests at heart when he jumped the fence Thursday. The rebirth of nuclear energy? Well, the private sector won't build any more plants until they've got a place to dump the waste, and Jeffords was handed the job as a reward by its true heir, Harry Reid of Nevada. Where he vigorously opposes the opening of Yucca Mountain for said storage purposes.

Thursday, oil-drillers Pride and Marine Drilling merged into the third largest off-shore drilling firm in the world. The new company has to be asking itself into which kind of environment is it entering? Supply-side energy policy won't run into much trouble with the pragmatist Democrats with oil-drenched Breaux at their head, or even the Gephardt crowd, because it's good for labor. But surely it'd rather have George W. Bush and Trent Lott setting the pace.

Environmental-type companies may have something to gain, and any company looking to be called "environmentally responsible" will have to try pretty hard. But with the party roles reversing almost instantly from their tax-cut-fight postures in the wake of the Jeffords news — Democrats promising to run their Senate magnanimously, and Republicans vowing to kick up a fuss — the biggest contribution the Green Mountain Man makes to the nation's capital this year may be to bring it to a halt.

For Wall Street, the only solution may be to resign itself to the Washington — and the economic structure — that Bill Clinton left behind. Next year, in plenty of time for the 2002 elections, the economy will probably pick up nicely.

Bush will still have some power on the executive end, and Breaux and the centrists will still call the shots in the Senate. But Daschle will be calling the tune. The biggest shift is really a political one, a stature issue that's bigger than Jeffords. There are a lot of moderate Americans who took a chance on Bush being a different kind of conservative, and are getting concerned. The way Jeffords tells it, Bush disappointed him. Will the Vermonter bring anyone with him? And will Bush suddenly go from a 52-point president back down to a 45?

But Wall Street knows the lobbyists haven't left the building. Alan Greenspan is still on the job, and Thursday night the Fed Chairman was expected to explain to a New York audience that the long-term prospects for the U.S. economy are just peachy. And if the business climate doesn't veer quite as dramatically from the light-footed course Bill Clinton set, well, there's always more important things to worry about than Washington.

Besides, the '90s may or not have been "eight years of neglect" from Washington. But on Wall Street, they weren't so bad.