(FORTUNE Magazine) – With Washington nearing a war footing, with domestic issues in retreat, with Bill Clinton's sway over the capital fading, and with Republicans continuing to hold power in Congress, big administration initiatives like Medicare restructuring and campaign-finance reform are beginning to fall apart. But there is one startling survivor of the Democratic agenda: an increase in the minimum wage.

It's the darling of liberals, labor, and large groups of lower-paid workers, none of whom hold the whip hand on Capitol Hill. And despite opposition by Republican leaders and from some of Washington's biggest business groups, Congress is likely to increase the minimum wage by 50 cents, to $5.65 an hour, just before Labor Day; another jump of 50 cents could come just as the presidential race reaches a crescendo in the fall of 2000.

GOP lawmakers usually go to Washington hard-wired to argue that increasing the minimum wage discourages businesses from hiring new sales clerks, fast-food workers, etc. Why raise it now, in a period of low inflation and just two years after the last increase? Because the Republicans' hold on the Hill is so fragile. Because the GOP, having watched Clinton's success with Republican issues, figures that it might profit by embracing a Democratic issue. And because denying a wage increase to the poorest workers while the economy roars ahead seems, to use a quaint word, stingy. "In an $8.5 trillion economy, we can afford to pay workers $6.15 an hour," says Jared Bernstein, an economist at the Economic Policy Institute, a liberal-oriented think tank. "We're touting the value of work, so we should make sure work pays."

Business groups see it another way, of course, and a jury-rigged group called the Coalition for Job Opportunities has shrewdly tweaked the old argument against an increase: Boosting the minimum wage, in the new argot, would endanger welfare reform by making it too expensive to hire entry-level former welfare recipients. But Republicans know the power of a popular idea--and they know how little power there is in a six-seat majority. In fact, some GOP lawmakers believe as many as 50 Republicans will vote for the measure when it comes to the floor. "Let's recognize that this will pass," says Representative Jack Quinn of Buffalo, "and let's let Republicans get some credit for it." Among the Republicans who find the Quinn argument moderately persuasive: House Speaker Dennis Hastert.

If Republicans won't stand in the way of a wage rise, they may extract a price. Watch for them to give small businesses some prizes they've sought for years: swift increases in the health-insurance deduction for the self-employed, a repeal of an unemployment-insurance tax, and a boost in the amount of expenses small businesses can deduct.

DAVID SHRIBMAN is the Washington bureau chief of the Boston Globe and a Pulitzer Prize-winning political reporter.