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President Bush’s inauguration on Jan. 20 offers new hope to a deal community that has suffered a surprising number of legislative defeats since the end of the Clinton administration. Initiatives sought by business leaders, varying from bankruptcy reform to pension reform to stock option expensing, went nowhere in the 107th and 108th sessions of Congress. Even worse, measures adverse to the deal community, such as a hard cap on television station ownership, became law. The Republican party’s across-the-board victory, however, suggests that the 109th Congress could offer a friendlier climate for dealmaking. The GOP picked up four seats in the Senate, one of which came at the expense of Senate Minority Leader Thomas Daschle, who failed to convince his conservative constituents to return a Democrat to Washington. On the House side of Capitol Hill, Republicans now have a 29-vote advantage, up from a 21-vote margin. That gives the GOP a very comfortable working majority. Most of those gains came in Texas. The most pressing legislative issues for dealmakers will be bankruptcy reform — which has been in the works for a decade — stock option expensing, media ownership limits, energy legislation, Sarbanes-Oxley reform, asbestos legislation and pension reform. All of these legislative priorities advanced in the last Congress. Yet none made it to the president’s desk. Experts said Republican leaders are likely to push these issues, using their increased majorities to try to overcome Democratic obstacles to prior efforts. For instance, energy legislation will contain repeal of the Public Utility Holding Company Act, which is something Republicans favor but some Democrats oppose on grounds it would trigger excessive consolidation. Bankruptcy reform also is expected to get a boost as the GOP appears finally able to deliver on this long-sought legislative priority for the business community. In the Senate, Daschle’s defeat could energize efforts to enact asbestos legislation, an issue that cuts down partisan lines. All of the major players who want to repeal the stock option expensing rule return to Capitol Hill, ensuring that the issue will gain attention. George Washington University professor Christopher J. Deering said the overall makeup of the new Congress is conservative and friendly to business interests. That offers hope for progress on the deal community’s priorities. But this block still lacks the 60 votes needed to overcome filibusters in the Senate, which suggests there are limits to how much can be accomplished. “The net advantage is slight,” he said. “But they are certainly pro-business.” Matters of top importance to the president have the best chance of advancing, Deering said. That suggests issues such as social security reform and the tax code are likely to get the bulk of Capitol Hill’s attention. Without White House leadership, the stalemates that held up many of the deal community’s legislative priorities could continue. One Capitol Hill source even cautioned against putting too much stock in the GOP’s ability to deliver. As important as issues such as Sarbanes-Oxley reform or options expensing may be to the business community, they are less important to many Republicans than hot-button issues such as confirming judges or changing the tax code. “They are going to do stuff they really care about,” the source said. “But I’m not sure how that relates to business issues such as asbestos. I don’t get a sense there will be a great deal of movement.” That puts a premium on getting an issue, whether bankruptcy or Sarbanes-Oxley or something else, on the president’s agenda. Barring that, this could become a Congress of lost opportunity for dealmakers. Yet as one Capitol Hill source noted, the situation needs to be kept in perspective. Progress on many of the deal community’s priorities remains possible during the next two years thanks to the GOP victories. Reverse the situation and give control of the White House to Kerry and the Senate to the Democrats, and many in the corporate sector would face a chillier political environment. Asbestos reform, media ownership, bankruptcy and the other key issues might still get attention, but the legislation would be tilted against dealmakers’ interests. So as the Capitol Hill source noted, the political situation is far more favorable than bleak. Copyright �2005 TDD, LLC. All rights reserved.

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