The public rethinking of the Democratic Party's economic policies in the wake of successive electoral disasters has reached a fever pitch. About 90 elected Democrats, including some Presidential hopefuls, have split from the national party to form an alternative Democratic Leadership Council (DLC). The DLC hopes to revitalize the party by devising fresh economic-policy proposals and acting as a "political rapid-deployment force" in Democratic trouble spots around the country.
"New ideas" Presidential candidate Senator Gary Hart (D-Colo.), not to be outdone, has formed his own glitzy Washington think tank, which is called Center for a New Democracy. Its goal, says Hart, "is to pursue the same [kind of] innovation and risk-taking as have the entrepreneurs who have contributed so much to our economy."
All of these maverick Democrats are eager to capitalize on the nation's fascination with what one critic recently called "the cult of the entrepreneur." The young Turks argue that their party has strayed from the centrist, pro-growth path it followed under Presidents Truman and Kennedy, and that the current popularity of small business offers a political opportunity to return to those fondly remembered days of Democratic dominance. Small business, the argument goes, is a key element of the moderate middle-class swing vote that decides U.S. Presidential elections.
On economic policy, division among Democrats about how to recapture middle-class support has splintered the party into three factions: the old-line Democratic National Committee (DNC), which doesn't think radical change is necessary; supporters of Gary Hart -- the leading candidate for the party's 1988 Presidential nomination -- who are building an independent agenda for that campaign; and leaders of the DLC, some of whom hope to challenge Hart in 1988.
But are these "new generation" Democrats really serious about entrepreneurship? Or is all the current talk only an attempt by some desperate candidates to escape the party's worsening crisis by jumping on the small-business band-wagon?
The case of Gary Hart, at least, suggests that it is the latter. While paying lip service to entrepreneurship, Hart continues to promote the vague and politically unpopular tenets of "industrial policy," one of the new ideas that caused Walter Mondale to ask, "Where's the beef?" during the 1984 campaign. Hart says that he hopes to develop "a series of proposals to promote entrepreneurship" as well as an economic platform that will guide the nation in its "transition from a fundamentally industrial to a postinudstrial age."
Hart's think tank, however, is dominated by academic intellectuals, lawyers, and public relations experts. Of his 30 key directors and advisers, no more than a handful could fairly be described as entrepreneurs. At seminars the center is sponsoring, such "celebrity thinkers" as Harvard professor Robert Reich and Megatrends author John Maisbitt are winging to Washington to hold audience with Hart and to discuss new federal programs that might aid entrepreneurs.
But such high-mindedness and celebrity-seeking is precisely the party's problem. "The national party leaders can't see beyond Washington," complains Alan Suits, president of Recomtex Corp. in East Lansing, Mich., and co-chair of Democratic Governor James Blanchard's small-business commission. Suits points out that since the 1984 rout, the Democratic National Committee has done nothing to revamp the party's economic-policy platform. In fact, Paul Kirk, a former aide to Senator Edward M. Kennedy (D-Mass.) and the DNC's new chairman, has devoted nearly all of his energy to refashioning the party's internal structure. But Kirk hasn't pushed for any new policy proposals. "The national party is wringing its hands about what happened to Mondale," Suits says. "They ought to look at the states, closer to where the action is, where there's been a complete rethinking of the relationship between Democrats and small business."
Indeed, it is the Democratic Leadership Council's young state governors, mainly from the South and West, who offer the only solid evidence that the party's recent courtship of small business is serious. Arizona's Bruce Babbitt, for example, is about to campaign nationally for a bold new proposal he developed this summer to exempt small businesses from most federal taxation. Under Babbitt's plan, small companies would pay no corporate taxes on the first $250,000 to $500,000 earned, and backers of start-ups would be exempt from capital gains on the first sale of stock. The Arizona governor says that he would make up the lost tax revenue by closing loopholes used by large, capital-intensive corporations.
"I was struck by the neglect of small business in the tax-reform debate," Babbitt says. "I think you have to focus on the needs of entrepreneurs. They are mavericks by definition; they tend to shy away from political action. But skeptics [like these] are converted by serious proposals and results. And it has to be macroeconomic policy such as taxes and fiscal policy -- I think entrepreneurs are way too sophisticated to be bought off by federal grants."
Babbitt and other DLC leaders, such as tax reformer Representative Richard Gephardt (D-Mo.), think that small business is still politically "up for grabs," despite President Reagan's economic successes. Babbitt points to such problems as high real interest rates and the keyrocketing trade deficit. In a test of that hypothesis, the DLC's most visible members have embarked on a cross-country tour to lure small-business people and disaffected Democrats back to the party in time for midterm elections in November.
That campaign may help determine, as one party strategist in Washington says, "whether the Democrats have lost, for what could be a long time, any claim to leadership on growth-oriented, entrepreneurial economic policy."