By Steven Pearlstein
Wednesday, October 25, 2006

There are lots of reasons why businesses run into trouble, but a few pop up with remarkable regularity.

Misreading or ignoring market signals.

Focusing more on competitors than customers.

Confusing management with leadership, tactics with strategy.

Promoting leaders who misunderstand their jobs and surround themselves with blind loyalists.

It should be no surprise that these business missteps are also common in politics.

They are the key mistakes that led Republicans to overplay their hand and perhaps throw away the chance to renew their political lease on Congress and the White House.

Though the election is still two weeks away, there are signs the Democrats, if they win, are determined to make the same mistakes.

Let's start with the "Six for '06" plan that Democrats promise to ram through the House in the first 100 hours, or 100 days -- I'm a bit confused as to which. The very premise of the document represents a fundamental misreading of the political marketplace.

First, there is no mandate for a Democratic agenda because until last week, there wasn't one. Like most political turning points, including the one in 1994, this election is fundamentally a referendum on the party in power rather than on the promises of the opposition. The voters are angry at Republicans, dissatisfied with their programs and disenchanted with their governance. It's less that Democrats will have won this election than Republicans will have lost it.

Second, if Democrats want to show they are different from Republicans in how they would govern, it inspires little confidence that they want to push a Democratic version of former House speaker Newt Gingrich's "Contract with America" through the House without consulting the Senate, the White House or the other party. That's precisely how the House has been run for the past four years, with little to show for it.

Worse still, the Democrats' six-point program is more a compendium of political slogans and ideological hot buttons than a serious policy agenda -- again, the very thing the customers say they don't want.

It may be fun to talk of ending "tax giveaways" to big oil companies and big drug companies and corporations that send U.S. jobs overseas, but people serious about governing know those are complicated issues involving powerful interest groups that can't be resolved in isolation.

Or take rising college tuition, which everyone would agree is a problem. Unfortunately, if Democrats had bothered to consult any good Democratic economist, they would have found that creating an expensive new tax deduction for tuition payments is not only lousy and regressive tax policy but will drive tuitions even higher.

You'll be relieved to know that once the Democrats take power, there will be "no privatization of Social Security, in whole or in part." But don't bother looking for how they plan to make this bedrock social program solvent again. It ain't there.

Certainly, I feel much safer knowing that Democrats plan to "require the Iraqis to take responsibility for their country" -- no details on that one quite yet. And I'll be fascinated to learn how Democrats plan to "double the size of special forces," "rebuild a state-of-the-art military" and screen every car, truck, airplane and cargo container crossing the border while "restoring fiscal discipline." And all that before the Easter recess!

Indeed, reading through the "Six for '06" document, it's pretty clear Democrats have followed Republicans into the trap of thinking more about competition (winning elections) than consumers (voters). Instead of offering a credible strategy for extricating us from the horrible mess in Iraq, confronting difficult fiscal trade-offs and reversing the powerful market forces that are leading us toward economic insecurity and inequality, they offer nothing more than political tactics.

One House member told me this week not to pay much attention to the "Six for '06" plan, that it was just some "easy stuff" designed to build momentum by gaining quick passage in the House. What he and his colleagues seem to miss is that the voters have become disillusioned with the focus on the easy stuff. They're ready to follow politicians with the guts and creativity and honesty to tackle the tough stuff.

The chief architect of Democrats' strategy has been House Minority Leader Nancy Pelosi of California, who would be the first female speaker of the House if the Democrats win control. Pelosi comes honestly to the role of political boss and manager: Her father was a Baltimore mayor and congressman who taught her the art of ward politics, the effective use of the "favor bank" and the bedrock importance of party and personal loyalty.

But it's an open question whether Pelosi can make the transition from being a tough, effective manager of the opposition to leader of the whole House in what will remain a divided government. The times call for a speaker who can stand above the partisan fray, who is wise enough to hold her enemies as close as her friends, and trusted and respected enough by the other party and the other chamber to broker deals and get things done.

For Pelosi, those skills would be a stretch. Even now, she has trouble with Democrats who once opposed her election as majority leader, let alone those who defied her by cooperating with Republicans. And she has surrounded herself with loyal colleagues and staffers who reflect her weaknesses more than compensate for them. She has turned down compromises that might have won half a loaf for her side and refused to stand behind President Bush when national unity was called for. But she has rarely missed an opportunity to pile on when Republicans were down. It's telling that despite a lifetime in politics and six years as opposition leader, Pelosi has never mastered the art of losing gracefully.

In politics as in business, the way to create enduring advantage is not by beating the competition at its game but changing the nature of the game. Up to this point, all Democrats have been doing is beating the Republicans at their game.