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Shift to Democrats in Congress would transform policy debates

Section: Daily Dispatches

By Brad Foss
Associated Press
Friday, November 3, 2006;_ylt=A...

Policy debates affecting every corner of the economy are likely to shift in major ways if Tuesday's election, as expected, gives Democrats more power in Congress.

Hearings focused on boosting domestic petroleum supplies could morph into talks about raising energy efficiency.

Republican efforts to partially privatize Social Security and shield industry from liability lawsuits should lose steam as Democratic efforts to raise the minimum wage and reduce drug prices gain momentum.

And ambitious Pentagon requests for military hardware may be whittled down as Iraq war funding priorities shift.

Whether Democrat-led initiatives radically transform corporate America, or even make it past President Bush's veto pen, is another matter. Neither party is anticipated to walk away with anything more than a slim majority in either the House or Senate, and that augurs the kind of legislative gridlock that Wall Street favors.

Consider: even as Democrats' election hopes soared following a sex-scandal cover up embroiling Florida Rep. Mark Foley (news, bio, voting record) and some Republican leaders, the Dow Jones Industrial average climbed to a new record above the 12,000 mark. That suggests one of two things, according to Prudential Equity Group LLC: "either investors don't believe a shift is afoot, or more likely that they don't think it matters."

"Control of one house of Congress when the president is of another party is not particularly helpful," said James Glassman, a fellow at the American Enterprise Institute. "That is even true if the Democrats take control of both houses."

Glassman said there are two key areas where Democrats may assert themselves most effectively: trade and taxes.

Democrats could play a critical role in helping President Bush revive global trade talks that collapsed over the summer, he said, though they will be tempted for political reasons to withhold support.

On taxes, many Democrats strongly oppose the cuts Bush enacted in 2001 and 2003, but Glassman said the party might use its newfound power to force a "grand compromise" with Republicans that extends the cuts, which are set to expire in 2010, but with major revisions aimed at helping working families.

Because the Democratic party's election success partly depends on victories by some conservative candidates, or "blue dogs," in districts that traditionally elect Republicans, the ramifications on fiscal policy are not clear cut, lobbyists said.

"The easy criticism of the Democrats of an earlier era is not so easy to make anymore," said David Resler, chief economist at Nomura Securities. "The Democrats are splintered politically."

Still, traditionally left-leaning interest groups ranging from trial lawyers to environmentalists to labor unions are optimistic about the consequences of Democrats gaining more influence in Congress, while industries such as energy, pharmaceuticals and defense are girding for greater scrutiny and a less friendly atmosphere in Washington.

"What will occur that will be most striking will be a reassertion of the congressional oversight function," said Linda Lipsen, head of public policy for the Association of Trial Lawyers of America. "It's going to affect every single committee."

Rep. Barney Frank of Massachusetts, who is line to become chairman of the Financial Services Committee if Democrats win the House, said in a telephone interview that issues topping his agenda include: creating more affordable housing and forcing public companies to disclose more information on executive pay packages.

Bill Samuel, the legislative director for the AFL-CIO, said the increased attention Democrats promise to pay to affordable housing, the cost of health care and minimum wages reflect the party's concern for "the real economy." For Republicans, Samuel said, "the economy is gross domestic product, stock markets and maybe monthly unemployment data."

Organized labor has its sights set on bankruptcy law, which companies such as Delta Air Lines Inc. and auto parts supplier Delphi Corp. have used to their advantage to impose contract concessions from their employees. If the Democrats were to take back the Senate and House "they might have enough heft to stop companies from using bankruptcy laws to negate their labor contracts," said former Clinton administration labor secretary Robert Reich, who now teaches at Brandeis University.

Even if Democrats gain control of just one house of Congress, protecting the environment will "no doubt" gain status in Washington, said Tiernan Sittenfeld, legislative director of the nonpartisan League of Conservation Voters. "The current committee chairs," she added, "are beholden to and in lockstep with the oil industry."

Greater protection of petroleum-rich lands in the Rockies could make life more difficult for independent oil and gas producers such as Anadarko Petroleum Corp. and Pioneer Natural Resources. And some Democrats have threatened to try and revoke tax breaks given to the oil and gas industry at a time of record profits -- a punitive measure that energy executives say could backfire.

"It would certainly be negative to us and to the country if Congress were to start to enact more regressive fiscal measures," said John Richelf, president of Devon Energy Corp. "There's been talk of a windfall profits tax, which in the long run will just reduce our ability to reinvest."

In an unlikely twist, a bill that would give energy producers greater access to the Gulf of Mexico stands a better chance of becoming law if Democrats oust Republican opponents in the House who are pressing for more far-reaching legislation that would lift coastal drilling moratoria altogether, according to Prudential. Devon is a big player in the Gulf of Mexico.

After energy, the pharmaceutical industry tops the list of industries that would surely be in Democrats' sights.

Rep. Nancy Pelosi, D-Calif., who is in line to become speaker of the House, has vowed to hold a vote within the first 100 hours of a Democrat-controlled House to allow the government to negotiate directly with drug companies to purchase medicines for the Medicare program. And in the eyes of drug industry executives, that is tantamount to price controls.

Still, it is unlikely Democrats would have enough of a majority to override a presidential veto of such a measure.

Wall Street is similarly anxious about the prospects for defense contractors, who have posted record profits thanks to a boom in spending on homeland security and the wars in Iraq and Afghanistan. But Democrats opposed to the Bush administration's handling of the wars might be less generous, a possibility that has recently weighed on defense stocks.

"What the analysts may be fearing is that the Democrats could shift money to spending on troops and logistics support (and) away from big-ticket items," said William Hartung, senior fellow at the World Policy Institute.

Republicans maintaining control of the Senate may also not insulate the industry from changes. Arizona Sen. John McCain, a frequent critic of free-spending defense programs, would be in line to take over as chairman of the Senate Armed Services Committee.

In the telecommunications industry, the most pressing post-election issue will be the Federal Communications Commission's deliberations over AT&T Inc.'s proposed acquisition of BellSouth Corp. for roughly $80 billion -- and what consumer-friendly concessions from the companies might be required to win the agency's approval.

A Republican loss in one or both Houses of Congress could put more clout behind the two Democratic commissioners on the five-member FCC.


Associated Press Writers Theresa Agovino, Paul Elias, Elizabeth Gillespie, Marcy Gordon, Jeremy Herron, Chris Kahn, Stephen Manning, Bruce Meyerson, Eileen Powell, Ellen Simon, and Alex Veiga contributed to this report.

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