Don't take this the wrong way, but everything you know about the link between business and politics is incorrect.
For nearly the entire 20th century, a simple formula held: Businesspeople like Republicans and don't like Democrats. Republican politicians and voters heartily embrace free trade and lower taxes, while Democratic politicians and their constituencies cotton to protectionism and higher taxes. Over the past century, racial, ethnic, and geographic realignments altered the shape of the national parties beyond recognition. But when it came to the wealthy, there was less movement than in the facial muscles of an over-Botoxed newscaster. Until now.
Democrats, who have never out-fund-raised Republicans in the modern political era, are kicking the tar out of their rivals this campaign cycle. Through the first half of this year, Democratic entities—congressional, presidential, and party operations—raised $388.8 million, compared with $287.3 million for their Republican counterparts, according to the Wall Street Journal. In the third quarter, the top three Democratic candidates—Hillary Clinton, Barack Obama, and John Edwards—raised 50 percent more money than the top four Republican candidates.
The Democrats' funds aren't coming just from enraged readers of DailyKos.com who chip in $20.08 via the Internet. They're flowing in from people who can afford to throw $4,000 of post-tax income into campaign coffers. Elections past brought us the Reagan Democrats, NASCAR dads, and soccer moms. Now we have the Fed-Up CEOs and the Angry Yuppies.
Back in 2000, George W. Bush called his base "the haves, and the have-mores." But the have-mores are clearly more receptive to Democrats than they were seven years ago. "It's a much easier pitch drumming up support this cycle from businesspeople, there's no question," says Steve Rattner, founder of the private-equity firm Quadrangle Group, who is a longtime Clinton backer. His take: Fed-Up CEOs are reacting to the bungled war in Iraq, poor fiscal and disaster management, and conscious outreach efforts by Hillary Clinton and Barack Obama.
As happens every four years during the primary season, Republican business leaders are rallying around the establishment candidate. This time, however, it's a Democrat. Morgan Stanley Chief Executive Officer John Mack, who raised more than $200,000 for W's 2004 campaign, came out for Hillary this spring. James Robinson III, the Atlanta-born banker, former CEO of American Express, and co-founder of RRE Ventures, told me: "I've been a Republican all my life. I believe in fiscal conservatism and being a social moderate." But this Fed-Up CEO now makes the case for Hillary as effectively as James Carville. "It seems to me she's the person who has got the broadest experience. She understands the importance of business development, innovation, and entrepreneurship," he says.
The financial and personal endorsements are partially a symptom of the business world's chronic trendiness. As noted management guru Bob Dylan once said: "You don't need a weatherman to know which way the wind blows." Wall Street CEOs can read polls as well as they can read balance sheets, and they like to be on the winning team. Also, many well-heeled donors give the maximum to several Democratic and Republican candidates—the way you and I might buy a few packages of Girl Scout cookies and then toss a dollar into the Salvation Army bucket. For hedge-fund managers, maxing out to multiple candidates is a cheap hedge. And plenty of well-known business leaders are sticking with Republicans. Ebay CEO Meg Whitman was the finance co-chair for Mitt Romney's exploratory committee.
But it's not just the ultra-rich who are abandoning Republicans. CNN's exit poll last fall showed that voters in the East making between $150,000 and $200,000 favored Democratic candidates by a 63-37 majority. Since 2004, the percentage of professionals identifying themselves as Republicans fell from 44 percent to 37 percent, according to a September Wall Street Journal/NBC News poll. The same survey found 59 percent of Republican voters agreed with the statement that free trade has been a negative for the country.
Things have clearly changed. But you wouldn't know it from the campaigns—on either side. In last week's Republican economic debate, the leading candidates sang loudly from the GOP hymnal: hailing income inequality as a wonderful product of the free market, and blaming economic woes on lawyers and Democrats.
With the exception of John Edwards, the Democratic candidates and their congressional allies have been loath to embrace measures that would alienate their new friends. The trial balloon floated earlier this month to enact a war income surtax, which would weigh heavily on high earners, was swiftly shot down. Closing the loophole that allows private-equity and hedge-fund managers to pay low long-term capital-gains taxes on the compensation they get for managing other people's money would be a popular way to pay for Democratic priorities. But last week Senate Majority Leader Harry Reid told private-equity lobbyists that Congress would move no such legislation this year.
After all, it's primary season. And during primary season, candidates must shore up their base.
This article also appears in the Oct. 22 issue of Newsweek.
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