By John S. McClenahen Three days after the midterm U.S. elections the political high-fives are just about over and people are starting to take a hard look at the legislative prospects for the 108th Congress, which takes office on Jan. 3, 2003. Jerry J. Jasinowski, president of the Washington, D.C.-based National Association of Manufacturers (NAM), says his group foresees 2003 as "an opportunity for progress on a variety of important business and economic issues." For the NAM, those issues include taxes, trade, transportation, terrorism insurance, homeland security and energy policy. But the results may be less than the NAM and other business groups expect. "The biggest change will likely be the acceleration of tax cuts that were likely to take effect in 2004-05, and the possibility that all the tax cuts which are set to expire in 2010 will be made permanent," says Gerald D. Cohen, a senior economist at Merrill Lynch & Co., New York. Also possibilities: more money for defense, creation of a cabinet department of homeland security, and some minor tax cuts designed to spur individual and business investment. "But none of them would be implemented fast enough to help the economy when it needs it most, in the next few [calendar] quarters," says Cohen. U.S. Treasury Secretary Paul H. O'Neill, who may or may not have his job much longer, is working on broad tax reform, notes Maury Harris, chief U.S. economist at UBS Warburg LLC, New York. "These efforts will be constrained by the return of [federal budget] deficits, however," predicts Harris. But Harris, unlike some Washington political observers, does not foresee the deficit deepening to the point where business borrowers are crowded out of financial markets, the recovery from recession is prolonged and President Bush is in serious political trouble going into a presumed 2004 re-election campaign. "Republicans have pledged to hold the line on spending. Consequently, we do not expect the deficit to balloon as it did under Ronald Reagan, who did not even control both houses [of Congress]," says Harris.