After September 11, Team Bush faced a twin challenge: fighting the war on terrorism while getting back to the administration’s original goals. The January 2002 State of the Union Address, with its focus on the “axis of evil,” helped to accomplish part of this goal. The president suggested that the “axis” nations were involved in terrorism and that, therefore, an effective antiterrorism campaign required them to change their ways.
That provided a bridge on the international issues, but getting back to the domestic issues proved more difficult. The administration tried to bring back its effort to privatize social security, and it explored several prescription drug measures. But soon another crisis emerged, this one—Enron—hitting disastrously close to Bush in Texas.
By 2000, Enron had established itself as the sixth-largest energy company in the world. Revenues had doubled from the year before, and the company proudly put its name on the new baseball stadium in downtown Houston. Enron chairman Ken Lay—nicknamed “Kenny Boy” by his old friend, George Bush—had not only led the effort for the company to buy naming rights, he also helped raise substantial support for building the new stadium. It was the symbol of the company’s leap to international prominence and the leadership of Texas in the energy business.
By October 2001, however, warning signs were everywhere. Wall Street analysts were asking for detailed financial information, and the company announced it was taking more than $1 billion in charges against third-quarter earnings. The federal Securities and Exchange Commission launched a formal inquiry into suspicious partnerships. Disclosure reports revealed that the company had made a $50,000 donation to the Republican Majority Issues Committee, and the gift fueled political as well as financial inquiries into the company’s operations. Rival company Dynegy explored buying Enron, but the deal collapsed in late November. By December 2, Enron filed for bankruptcy.
For Bush, it was a nightmare. Enron’s collapse meant the loss of thousands of jobs in his home state. Moreover, the political links to Republican officials—and Lay’s close personal ties to Bush—sparked investigations. Bush had run for office as a president who would restore integrity to the White House. The collapse of Enron, involving friends and financial misdealing, undermined that pledge. It also fed the suspicions of some critics who had long believed that Bush was too closely tied to corporate America in general and to the oil industry in particular. When the General Accounting Office filed an unprecedented lawsuit against Vice President Cheney two months later, which suggested that Enron officials had exerted undue influence over Cheney’s energy task force, the suspicions began to stick.
The problem escalated with a string of other corporate collapses and investigations in the first half of 2002.
Telecommunications giant WorldCom started hemorrhaging money and jobs. Standard & Poor’s downgraded the company’s debt to junk bond status and removed it from the S&P 500 index in May. The company scrambled to win new financing from its banks, only to announce in late June that it was firing its chief financial officer. An investigation uncovered $3.8 billion in expenses that had been improperly accounted for since early 2001. The loss prompted the company to eliminate 17,000 jobs, one-fifth of its work force.
Spurred by the constant stream of bad financial news, from Enron and WorldCom as well as other companies, the stock market continued its downward spiral in 2002. The year had little but bleak economic news, with a sluggish recovery that produced few new jobs. Columnists repeatedly warned that Bush 43 was sliding toward the fate of Bush 41: gaining a huge public support rating from foreign affairs, only to have a weak economy push him to political disaster.
No one saw the risks more clearly than Karl Rove. In January 2002, Rove received warnings from the administration’s pollsters that Enron was a much bigger story than anyone in Washington realized.
Research then, and throughout the year, was clear. The president’s personal popularity was high because of the way he dealt with September 11. If voters focused on terrorism and foreign policy, Bush would remain popular and his fellow Republicans would do well in the fall midterm congressional elections. On the other hand, if Enron, WorldCom, big business failures, and the plunging stock market dominated public opinion, Bush would be in a heap of trouble, which would likely result in the Republican loss of seats in both the House and the Senate in the midterm election.
For most of the year, Rove kept the spotlight on foreign policy. The president’s foreign policy team had long since concluded that Iraq had weapons of mass destruction and that they constituted a genuine threat. During the summer, the administration’s planners debated the options, and the unmistakable hint was that war would come in early 2003 if Hussein refused to be disarmed. The president made that point clear in his September 12 speech to the United Nations, and the administration kept up the Iraq drumbeat. He told the delegates:
If we meet our responsibilities, if we overcome this danger, we can arrive at a very different future.
The administration was especially skillful in keeping the focus on Iraq and off the sagging economy. As Congress returned to Washington from its summer recess on September 4, the Dow Jones industrial average dropped 355 points. The next day, however, newspapers headlined Bush’s plans to press his Iraq case with key lawmakers. Every time economic issues threatened to swamp the foreign policy strategy, the administration arranged interviews, background briefings, and carefully orchestrated meetings to bring the focus back to Iraq. Foreign policy advisers talked about the dangers that Saddam Hussein posed and the risks that weapons of mass destruction could bring. Team Bush pressed the foreign policy message by repeating it over and over again.
Several highly publicized arrests of corporate executives helped defuse the scandals issue. Agents hauled away executives from Tyco International and ImClone Systems in televised “perp walks.” They handcuffed and hauled away the founder of Adelphia Communications, along with his sons, on charges that they had used the company’s finances as their “personal piggybank.” The head of the investigation told reporters that the arrests sent “a clear message to corporate wrongdoers that handcuffs and a jail cell await those who violate the trust placed in them.”
Bush himself put it sharply:
It should be clear to every shareholder, investor, and employee in America that this administration will investigate, arrest, and prosecute corporate executives who break the law.
The drumbeat of corporate scandals had threatened to squeeze the administration’s agenda—and, especially, its Iraq initiative—out of the public debate. By defusing the scandals and repeating the foreign policy theme, the administration got the debate back on track and refocused attention on the message it preferred. In fact, over just a few months, Bush changed the public debate on Iraq from whether to invade to how, when, and under what conditions an invasion would be most successful.