IMPEACH BUSH

WASHINGTON -- The Republican Party, known since the late 19th century as the party of business, is losing its lock on that title.

New evidence suggests a potentially historic shift in the Republican Party's identity -- what strategists call its "brand." The votes of many disgruntled fiscal conservatives and other lapsed Republicans are now up for grabs, which could alter U.S. politics in the 2008 elections and beyond.

Some business leaders are drifting away from the party because of the war in Iraq, the growing federal debt and a conservative social agenda they don't share. In manufacturing sectors such as the auto industry, some Republicans want direct government help with soaring health-care costs, which Republicans in Washington have been reluctant to provide. And some business people want more government action on global warming, arguing that a bolder plan is not only inevitable, but could spur new industries.

Already, economic conservatives who favor balanced federal budgets have become a much smaller part of the party's base. That's partly because other groups, especially social conservatives, have grown more dominant. But it's also the result of defections by other fiscal conservatives angered by the growth of government spending during the six years that Republicans controlled both the White House and Congress.

The most prominent sign of dissatisfaction has come from former Federal Reserve Chairman Alan Greenspan, long a pillar of Republican Party economic thinking. He blasted the party's fiscal record in a new book. In an interview with The Wall Street Journal, he said: "The Republican Party, which ruled the House, the Senate and the presidency, I no longer recognize."

Some well-known business leaders have openly changed allegiances. Morgan Stanley Chairman and Chief Executive John Mack, formerly a big Bush backer, now supports Democratic front-runner Sen. Hillary Clinton of New York. John Canning Jr., chairman and chief executive of Madison Dearborn Partners, a large private-equity firm, now donates to Democrats after a lifetime as a Republican. Recently, he told one Democratic Party leader: "The Republican Party left me" -- a twist on a line Ronald Reagan and his followers used when they abandoned the Democratic Party decades ago to protest its '60s and '70s-era liberalism.

Concern for their fiscal reputation is reflected in the fights that President Bush and congressional Republicans now are picking with the new Democratic majority over annual appropriations and an expansion of a children's health program, in hopes of placating party conservatives.

For all the disillusionment among Republicans, the party retains strong support in many parts of the business community, in part because of fears about the taxing and regulating tendencies of Democrats. Danny Diaz, spokesman for the Republican National Committee, says, "Americans of every political persuasion that value hard work, keeping more hard-earned dollars, and economic independence and entrepreneurship will continue to stand behind the Republican Party."

Polling Data

But polling data confirm business support for Republicans is eroding. In the Wall Street Journal/NBC News poll in September, 37% of professionals and managers identify themselves as Republican or leaning Republican, down from 44% three years ago.

Richard Clinch, a 69-year-old New York native, illustrates the party's plight. The retired Westinghouse manager and mechanical engineer says he has been "a lifelong Republican." As a young fiscal conservative, he was attracted by the party's reputation for frugal and competent governance, he says. The Democratic Party left him cold, he says, because of its social spending and ties to the unions that exasperated him at work. As a retiree in Annapolis, Md., he became a local Republican officer.

Yet next year, for the first time since he began voting in 1960, Mr. Clinch won't support the Republican presidential nominee, he says. He only "very reluctantly" voted for Mr. Bush's re-election in 2004. "Like many Republicans, I am frustrated," he says. "We've lost control of spending," and the administration's execution of the Iraq war has been "incompetent." Mr. Clinch says he is liberal about rights for women and gays, and vexed that "we [Republicans] get sidetracked on these issues like gay marriage."

Jumping Parties

Such misgivings do not necessarily translate into long-term gains for Democrats. Mr. Clinch says his two sons -- one a 50-year-old ophthalmologist, the other a 42-year-old economist -- have both jumped from the Republican to the Democratic Party. But Mr. Clinch isn't necessarily voting Democratic. "I think I'm becoming an independent," he says. "If I were 21 years old, I'd be an independent definitely."

For his part, Mr. Greenspan says he doubts he will vote for a Democrat for president next year, because the party is moving "in the wrong direction," becoming more populist and protectionist.

Federal campaign-finance reports document shifting support in some quarters of the business community. Hedge funds last year gave 77% of their contributions in congressional races to Democrats, up from 71% during the 2004 election, according to the Center for Responsive Politics, a nonpartisan analyst of campaign finances. Last year the securities industry gave 45% of its money to Republicans, down from 58% in 1996, the center said.

"You see it in the lack of donor support" for Republican presidential candidates, says longtime strategist John Weaver. As former top adviser to presidential candidate and Arizona Sen. John McCain, Mr. Weaver recalls hearing Republican businesspeople grouse about the party's focus on moral issues and Iraq.

Overall, Democratic presidential candidates have raised more than $200 million this year, about 70% more than their Republican rivals.

Some of the most compelling evidence suggesting a redefinition of the Republican Party comes from prominent Republican pollster Tony Fabrizio. Earlier this year, he surveyed 2,000 Republican voters, updating his similarly exhaustive poll of 10 years ago. In 1997, about half of Republicans said they were motivated mainly by economic issues, and about half by social and moral issues. This year, the culturally conservative wing was roughly the same size, but economic conservatives accounted for just one in six Republicans. In the wake of the 9/11 terrorist attacks, the ranks of Republicans whose main concern is defense have grown after subsiding with the end of the Cold War.

The economic conservatives, Mr. Fabrizio found, are split into opposing camps: "free market" conservatives opposed to any new taxes, spending and regulations; and what he calls "government-knows-best" moderates, who sometimes favor regulations and higher taxes for causes such as education, environmental programs or infrastructure.

The once-dominant "deficit hawks," who put balanced budgets ahead of tax cuts (think former Sen. Robert Dole, or Mr. Bush's father), are all but extinct. A quarter-century of infighting between those Republicans and others who seek lower taxes regardless of deficits has been decisively settled in the current Bush administration in favor of the tax cutters.

The result has been big tax cuts, and in the dozen years when the Congress was under Republican control, big spending increases as well.

New York City Mayor Michael Bloomberg, the billionaire former Democrat who left the Republican Party three months ago, complained Sunday at Britain's Conservative Party conference that conservative politicians in the U.S. were guilty of "lunacy" for running up deficits for future taxpayers to pay.

Many old-school fiscal conservatives are also upset. Economist Bruce Bartlett, a Treasury official in the Reagan years, recently commiserated with like-minded conservatives on a blog. "I haven't changed my philosophical views in any significant way over the last 10 years, but in the pre-Bush era, I felt comfortable in the Republican mainstream," he wrote. "Today, I don't really feel there is any significant element of the Republican coalition where I am comfortable."

One glue holding the party together is that social conservatives often share the goals of economic conservatives. Social conservatives supported the Bush tax cuts and wanted to make them permanent. But their priority, and what keeps them Republicans, is opposition to abortion, gay rights and the like.

Some intraparty tension is rooted in cultural differences. Social conservatives tend to be relatively lower-income, less educated, concentrated in the South and West, and newer to the party than many old-line Republicans of an economic or business bent. Each blames the other for the party's current state -- often employing pejoratives such as "Bible-thumpers" or "country-club Republicans."

In Washington, Republican leaders' relations are no longer as cozy as they once were with the U.S. Chamber of Commerce, the nation's foremost business group, with its temple-like headquarters facing the White House. "It's a much more complex relationship than it used to be," says Chamber political director William Miller.

Funding Highways

For example, he says, the Chamber supports a higher gasoline tax if revenues are dedicated to funding highways and bridges that truckers and other businesses want, and to hold down deficits. But that has put the Chamber at odds with antitax Republicans in Congress and the administration. That split comes atop other tensions over trade and, especially, immigration. As the party's base has shifted south and west, it has become more protectionist and focused on secure borders. Business generally favors free trade and liberal immigration laws that keep workers coming and employer sanctions to a minimum.

Richard Cooper of Winnetka, Ill., a 67-year-old investor and former chairman of Weight Watchers Inc., hasn't just switched parties -- he is helping Sen. Clinton's campaign. An early Reaganite, he unsuccessfully sought the Republican nomination for Illinois governor in 1976. He says he has been alienated in recent years by Republican policies across the board. A leader of the international "Responsibility to Protect" project for global action against humanitarian crises, he opposes Bush foreign policies. The father of a daughter with lupus, he wants funding for stem-cell research, which antiabortion Republicans oppose.

As for fiscal policy, Mr. Cooper contends that "Democrats are the new conservatives." Republicans "are still talking about tax cuts. It was one thing when Ronald Reagan was doing it and the top [income-tax] rate was about 80%. Now tax rates are reasonable. So what if I have to pay 5% more in taxes?"

More Centrist

In last fall's midterm elections, rebellious Republicans and Republican-leaning independents contributed to the Democrats' takeover of Congress and a raft of state and local offices. The Democratic Party had lured many newcomers through shifts of its own since the Reagan era. Particularly under President Clinton, the party became more centrist and fiscally conservative, espousing balanced budgets, targeted tax cuts and free trade. Party liberals and unionists never fully accepted those changes.

Yet the benefits to Democrats were evident in a Wall Street Journal/NBC News poll last July. When Americans were asked which party could better deal with national problems, they gave Democrats an edge of 25 percentage points over Republicans on cutting deficits, 16 points on controlling federal spending, 15 points on dealing with the economy, 9 points on taxes and 3 points on trade. "We have lost our measurable advantage on fiscal conservatism, and we have quite some ways to go to get that back," says Terry Nelson, Mr. Bush's national political director in 2004.

Mr. Clinton said in an interview that he often meets disillusioned Republicans in his travels. "They say, 'You know, I didn't vote for you, and I didn't like the fact that you raised taxes on upper-income people and corporations, but I did better when you were there. You produced a better economy. You guys knew what you were doing.'"

Such comments could be dismissed as self-serving, but Mr. Greenspan offers a similar view in his new autobiography, "The Age of Turbulence: Adventures in a New World." Mr. Greenspan, who was President Ford's chief economic adviser and Mr. Reagan's choice for the Fed, praises Mr. Clinton for fighting for deficit reduction and free trade, over the opposition of fellow Democrats and unions. "A consistent, disciplined focus on long-term economic growth became a hallmark of his presidency," Mr. Greenspan writes. In recent years, his own party's leaders, he writes, "seemed readily inclined to loosen the federal purse strings any time it might help add a few more seats to the Republican majority."

Goldwater Republican

In an interview, Mr. Greenspan noted: "I was brought up in the Republican Party of [Barry] Goldwater. He was for fiscal restraint and for deregulation, for open markets, for trade. Social issues were not a critical factor." Today's Republican party, he added, has "fundamentally been focusing on how to maintain political power, and my question is, for what purpose?"

California Gov. Arnold Schwarzenegger has lost some Republican Party support because of his socially liberal stands and his proposals on global warming and universal health care. But those stands have made him more popular generally in the state, while his party is less so. Last month, at the state Republicans' convention, he sounded an alarm. Noting that California Republicans have lost 370,000 registered voters since 2005, the former actor said, "We are dying at the box office." The voters that Republicans need, Mr. Schwarzenegger argued, "often hold conservative views on fiscal policy and law-and-order issues, while taking more liberal stands on social and environmental issues."

Nationally, support for some Republican causes espoused by social conservatives and hawks has declined in the general population as Americans have grown more concerned about economic matters. Those were the conclusions last spring of the nonpartisan Pew Research Center, based on its latest surveys on Americans' political attitudes.

'Old-Fashioned Values'

Pew found that between 1987 and this year, for example, support for "old-fashioned values about family and marriage" had dropped 11 percentage points. The percentage of those who said gay teachers should be fired dropped 23 points, Pew said. Support for U.S. global engagement and "peace through military strength" also shrank.

But the number of Americans who share some classic Democratic concerns has risen. Three-quarters of the population is worried about growing income inequality, Pew found, while two-thirds favor government-funded health care for all. Support for a government safety net for the poor is at its highest level since 1987, Pew said.

"More striking," Pew concluded, was the change in party identification since 2002. Five years ago, the population was evenly divided -- 43% for each party. This year, Democrats had a 50% to 35% advantage.

Write to Jackie Calmes at jackie.calmes@wsj.com