REPUBLICANS have been pretty sanguine about their prospects in this fall's midterm elections. They shouldn't be. It's true that President Bush's popularity ratings remain high and that, asked which party they would like to see control Congress next year, the voters are still evenly divided. But these numbers may be misleading. In the first place, the corporate scandals will serve to motivate Democratic voters. And in midterm elections, motivation trumps polling, because party loyalists have to be propelled to actually go out and vote. Second, a powerful wave of anxiety is now sweeping across the country as the markets tank. Americans don't connect this anxiety to politics, because it's July. But as November approaches and people begin to think electorally, there could be sharp swings. This has happened in past midterm elections. One party looks fine for months and then suddenly, 10 days before the election, its numbers collapse.

Third and most important, the landscape favors the Democrats. Any number of issues could break their way. The markets could continue their slide. More corporate scandals could come to light. Prescription drug benefits could return to the fore. The SEC could be critical of Dick Cheney's Halliburton stewardship. Democratic attacks on the alleged evils of Social Security privatization could decimate Republicans, as Democrats tie seniors' worries about their pensions to the collapsing markets.

Liberal blogger Joshua Micah Marshall (www.talkingpointsmemo.com) recently published the leaked results of a Tarrance Group study commissioned by the National Republican Campaign Committee. The Tarrance recommendations make for disconcerting reading for Republicans. "Democrat attempt to label GOP position on Social Security as favoring 'privatization' presents serious threat. GOP, Members, and candidates must fight back against this label," the study reported. "AARP is a dangerous adversary in this debate. They have greater credibility than any entity on this issue and are not viewed as partisan," the consultants continued. They recommended that Republicans respond to the issue by declaring, "Social Security is a sacred trust. It must be saved." They suggested that Republicans not try simply to change the subject or laud themselves for having the courage to tackle the entitlements issue.

The Tarrance Group offers effective recommendations on how Republicans can portray themselves as fervent anti-privatizers and so neutralize the issue. And Republicans may be able to neutralize other Democratic issues. But that's cold comfort, because there are few issues that offer significant Republican upside. The political benefits from the war on terror have been reaped. Domestically, the Republican party is as bereft of plausible policy ideas as at any time in the past quarter century. How exactly do Republicans respond to the current moment? With cuts in the capital gains tax rate? With the flat tax? With deregulation? With a crusade to shrink the size of government? With entitlement reform? These ideas, admirable on the merits, are as politically implausible now as any that can be imagined. Worse, many of them have the feel of a bygone era.

The public may not blame Republicans for the market's collapse, but sooner or later people will ask, What are you going to do to get us out of this mess? It won't be enough to repeat that the fundamentals are sound, or to mention the important work that was done to organize the Office of Homeland Security.

Part of the reason some Republicans have been lulled into a false sense of security is that the Democratic diagnosis of the coming election is wrong. Many Democrats--including Dick Gephardt, who last week predicted his party would pick up as many as 40 House seats--seem to think they can win by linking Republicans to dishonest corporate fat cats, by keeping the issue of CEO scandals alive and in the public eye straight through the fall.

That's unlikely. The Enron scandal broke months ago. That was the scandal that presented maximum peril to Republicans. (How many times in U.S. history has such a huge scandal revolved around one of the closest supporters of the president of the United States?) But Enron produced no political fallout.

Still, the Democrats seem to think that there is this organized entity called Corporate America, made up of senior executives, Republicans, white country clubbers, and people who were cheerleaders and prom kings in high school. If they can get the rest of the country to hate these people as much as they do, then they will win elections. Because they have this category in their heads, Democrats see the corporate scandals as tainting the whole Republican party.