Will it be working families vs. big business?
After a dozen years in the minority, the Democrats are ready to put their stamp on oil, pharma and finance.
(Fortune Magazine) -- Buckle your seatbelt and put your lobbyist on speed dial. The next two years promise a turbulent ride for much of corporate America.
For a dozen years, since Republicans took control of the U.S. House in 1995, the nation's major companies have had a relatively easy run in Washington. But when the curtain goes up on the 110th Congress in January, Democrats will be test-marketing populist story lines for the big prize, the 2008 presidential election.
The main one casts working families as protagonists against the diabolical antics of big business. As voters went to the polls on Election Day, House Speaker-elect Nancy Pelosi, 66, foreshadowed her enemies list when she declared, "In 100 hours, the top five oil companies will take in $4.3 billion in profits and the top ten pharmaceutical companies will gain $2.6 billion in profits and the top CEOs will earn an average of $2 million each."
Look for clashes over education and tax cuts. Democratic leaders may complain that Bush's cuts favor the rich. But those reductions in taxes on dividends, capital gains and individual income don't expire until 2010. And there is a presidential election standing between then and now.
Also standing between the newly empowered Democrats and the enacting of major legislation is the White House's veto power, which means that the Democrats' David vs. Goliath drama will play out in congressional committees.
Here lawmakers will grill oil and drug company executives over high prices and allegedly colluding with the Bush administration. CEOs may be asked to defend their seemingly indefensible compensation packages, and military contractors, especially Vice President Dick Cheney's former employer Halliburton (Charts), will face accusations of wasteful spending in Iraq. Both chambers will consider legislation to make corporate executives personally liable for dangerous or defective products sold - a measure that the White House could feel pressure to sign, since some Republicans, including Senator Arlen Specter, support it.
Democrats can also stop progress on free trade. The President's fast-track authority expires next year, and reauthorizing it will be an uphill battle. Even Democrats who supported NAFTA in the 1990s have turned protectionist as their constituents watch jobs and factories drift overseas. "If we don't have an environment where we can approve trade agreements, we cannot compete," says Business Roundtable president John Castellani. "The world will keep moving whether we like it or not."
But with a team of Democratic leaders eager to prove to voters that they are a responsible governing party - worthy of the White House in 2008 - there's also likely to be bipartisan agreement on a handful of economic issues:
So what does November's power shift mean for the economy? If history is any guide, says Joseph Quinlan, Bank of America's chief market strategist, divided governments are a boon to stocks. "Gridlock is what the markets want," he says. Long term, though, legislative progress is key: Will the Democratic uprising lead to major structural changes - such as spending and entitlement reform - that support economic growth? That's up to Pelosi and her gang.
Reporter associate Joan L. Levinstein contributed to this article.
Mr. Paulson goes to Washington.
From the November 27, 2006 issue