Enron Debacle Shakes Up Congress’ Agenda; War Now Shares Spotlight

WASHINGTON —  In the political pond that is Congress, Enron has dropped a boulder. And the ripples are rocking lawmakers who find their legislative agendas and electoral prospects roiled by a company many Americans had never heard of a few months ago.

Enron’s financial collapse has shoved to the fore an array of issues--pension protection, accounting procedures, the fundamental role of government in regulating business--that were far off the radar screen just a month ago, when a war-obsessed Congress recessed for the holidays.

The Enron debacle also has given new life to issues that had been foundering, such as campaign finance reform. A reform bill has elbowed its way onto the House calendar, as congressional concern grows that Enron has emerged as a striking symbol of the influence wielded by big-money contributors.

And a major casualty of the Enron scandal may be GOP plans to replace portions of Social Security with private accounts more closely linked to the stock market. It was an idea that already had been hurt by stock market declines and the sharp reduction in budget surpluses that advocates hoped could ease the transition cost. But privatizing Social Security will be an even tougher sell if Enron makes people more edgy about the stability of 401(k)s and other private pensions, analysts from both parties say.

“At the same time we are looking at the security of private pensions, we also need to be protecting, not privatizing, Americans’ public retirement system,” Senate Majority Leader Tom Daschle (D-S.D.) said Saturday in the Democrats’ weekly radio address.

As Congress reconvened last week, committees were tripping over one another to hold hearings on Enron. Often, this type of investigative frenzy results in harsh rhetoric and an occasional moment of high drama, but little else.

The Enron case may be quite different. Unlike the probes of President Clinton’s financial and personal problems, the House’s check-bouncing scandal of the early 1990s or the Iran-Contra affair of the 1980s, the Enron investigation may address pocketbook issues that directly affect people outside the Washington political bubble.

A clamor is already rising for legislation to protect workers’ pensions from an Enron-style meltdown, which wiped out its employees’ retirement nest eggs. Bills already have been introduced to limit how much of a company’s own stock can be put into retirement savings plans and to provide employees with more information about their company’s finances.

“This is what congressional investigations should be about,” said Thomas Mann, an expert on Congress at the nonpartisan Brookings Institution think tank. “It’s about something consequential that has potential legislative consequences.”

The Enron investigation also has raised a more far-reaching question: How much government oversight and regulation is needed to keep the free market running smoothly and fairly?

“Executives sold stock and got out while the little people got wiped out; those are not good facts . . . for those of us who believe in private markets over government,” said Bill McInturff, a Republican pollster.

They also are facts that he predicts will have “an enduring impact in public policy debates.”

That may put Republicans at a disadvantage in those debates. But as a political matter, the issue does not cut cleanly across partisan lines.

Although Republicans were the primary recipients of Enron’s largess, Democratic candidates and party organizations received 26% of the $6 million in political contributions the company and its employees have made since 1989, according to a study by the Washington-based Center for Responsive Politics, which tracks such donations.

Last fall, the Democratic Senatorial Campaign Committee received $100,000 from Enron. (Like several politicians from both parties, the committee has sought to distance itself from the company by sending the donation to relief efforts set up to help Enron employees.)

The Democratic beneficiaries of the company’s giving included Sen. Joseph I. Lieberman of Connecticut, chairman of the panel that is leading the Senate’s Enron investigation. He received $2,000 from Enron and $4,500 from its accounting firm, Andersen.

To the dismay of some Democrats, Lieberman so far has taken a more measured, low-key approach to the investigation than the Republican chairman of the House Commerce Committee, W.J. “Billy” Tauzin of Louisiana, who from 1989 to 2001 received about $6,400 in contributions from Enron and its employees.

Nonetheless, some political strategists argue that the GOP faces bigger political risks as the Enron story unfolds because the controversy fuels Democratic attempts to tar Republicans as cozy with wealthy business interests.

“The main political damage will be to reinforce the image that Republicans had: that the GOP is in bed with the big boys,” said Larry Sabato, a political scientist at the University of Virginia.

Enron already has made its way into the lexicon of Democrats, especially those with presidential ambitions, as a metaphor for Republican policies they oppose.

Daschle recently charged that President Bush is “Enronizing the budget” by pushing tax cuts, especially those aimed at helping the wealthy. Daschle and other Democrats say the tax cuts would undercut the future solvency of popular programs such as Social Security.

“We are taking the same approach Enron used in sapping retirement funds and providing them to those at the very top,” Daschle said. “We are taking money from Social Security, taking money from Medicare and putting it in the form of tax cuts to those who are at the very top of the income scale.”

However the politics plays out, the Enron controversy already is reshaping policy debates.

A few months ago, for example, few outside the accounting industry paid attention when conflict-of-interest rules were proposed to prohibit accounting firms from doing consulting work for clients they also audit. Those rules were blocked by the powerful accounting lobby, with the help of lawmakers from both parties.

Now that accounting irregularities seem to be part of Enron’s fall, lawmakers are suddenly more interested in the issue of auditor independence. Sens. Christopher J. Dodd (D-Conn.) and Jon Corzine (D-N.J.) introduced legislation aimed at ensuring such independence, saying it was needed to prevent repeats of Enron’s collapse.

On the pension front, lawmakers are discussing ways to address problems highlighted by the Enron case. A huge chunk of the retirement savings for Enron employees was invested in company stock and so was decimated when the stock value plummeted. And while Enron executives were selling stock before the company went belly up, the rank-and-file workers could not.

“Perhaps the only good thing to come from the Enron debacle is that it helped expose a little-remarked sea change in America’s retirement system,” said House Minority Leader Richard A. Gephardt (D-Mo.) in a speech last week calling for a new pension system that allows employees to carry benefits from job to job.

Corzine and Sen. Barbara Boxer (D-Calif.) have introduced a bill to set a 20% limit on company stock in retirement plans. A House version of the bill would set an even lower cap of 10%. Such limits are expected to be opposed vigorously by employers and business groups.

While many proposals to increase government regulation of pensions and accounting are coming from Democrats, GOP consultant McInturff said he would urge Republicans to actively respond to the Enron case.

“I would, as a Republican, try to do two or three very aggressive things to explain what I had learned from this and why it would never happen again.”