Dec. 21, 2004
In the U.S. and elsewhere, looming elections create a clash between politics and legislation. It may not be pretty.

Making laws, it has been said, is like making sausage: It's disgustingly unappealing. So is watching it, as the U.S. was reminded last year in the first session of the 106th Congress. Unusually politicized as the result of the razor-thin Republican majority and early maneuvering for the 2000 elections, the session was short on perceived legislative production -- but long on hostile partisanship, ill-feeling, and public revulsion. If Americans were sickened by last year's Congressional sausage-making, they'll likely be even more disgusted this year -- the year of the actual elections. And they may have company abroad, because elections loom in several other of the world's democracies. Just as in the U.S., the election-year undercurrent promises to sharpen controversy and heighten legislative contention. Outside the U.S., key national elections are slated this year, notably in Japan and Mexico. But balloting in two German states also could have national implications. Meanwhile, political positioning already is under way in the United Kingdom for the next round of general elections in 2001. Parliamentary elections also are likely in Canada in 2001. And in Argentina, senatorial elections in 2001 will serve to ratify -- or perhaps undo -- results of a bitter presidential election held last fall. It is in the U.S., however, that the collision of legislation and politics is expected to be the most violent. One reason is the residual partisan rancor from President Clinton's impeachment deliberations. But an even larger factor is the thirst of the Democratic party to regain the House, where the GOP clings to only a four-seat edge. "Democrats are looking for a jackpot election," observes Bruce Josten, executive vice president of the U.S. Chamber of Commerce, Washington. "They hope to regain both Congress and the White House. They were able last year to maintain party discipline in holding back legislation -- preventing bills from getting to President Clinton's desk for signature -- for political purposes. And that will continue." "The climate is not conducive to a lot of legislative output," agrees Michael Baroody, senior vice president of the National Assn. of Manufacturers (NAM), Washington. "All the factors that led to few bills being signed into law in the first session will be writ even larger in the second session because it is a campaign year." Contrary to common perception, however, the 1999 Congressional session wasn't a complete washout -- at least for business. Major bills signed into law include measures protecting companies from liability for Y2K-related computer failures, reforming the financial-services industry, and giving states more flexibility in spending federal school aid. Several pieces of industry-sought technology legislation also became law in the late days of the session. Among them were a five-year extension of the R&D tax credit, patent reform, and a bill -- critical in promoting e-commerce -- that legalizes electronic signatures. Still, in the first session of the 106th Congress, considerably more was left undone than done. When legislators return to Capitol Hill late this month, three major issues of interest to business will be back on their plates. Each promises to be influenced by campaign politics.

  • Health care. This probably will be the year's dominant political issue. The House late last year passed a Democratic-sponsored bill, stridently opposed by industry, that would expand individuals' ability to sue their group health plans. A milder version cleared the Senate. A House-Senate conference committee is due to begin meeting soon to resolve differences between the two measures. Many analysts suggest Democrats have no interest in seeing final legislation, preferring to blame Republicans for opposing it. As the committee deliberates, business groups will continue to fight the right-to-sue language, but will seek retention of tax breaks passed by each chamber that would make insurance more affordable to small companies. Meanwhile, business will press for separate legislation to increase access to health care. Entering into the debate will be President Clinton's proposal for prescription-drug benefits; it's popular, and a version of it could pass this year.
  • Tax relief. A 10-year tax cut of nearly $800 billion passed both houses last year, but President Clinton vetoed it and Republicans didn't have the votes to override. Although a priority of business, the issue isn't one that resonates with an American public basking in a record-setting economy. "But the issue could come back," believes NAM's Baroody. A widely forecast slowdown in economic growth in the first quarter, he reasons, would coincide with the political primary season; voter clamor for a tax cut might result.
  • Minimum-wage increase. The Senate has approved a bill that would boost the hourly minimum by $1 to $6.15 over three years. But disputes over the phase-in timing of the increase and a parallel provision for a business tax cut has stymied action in the House. On this issue too, analysts say, Democrats may want the "issue" rather than actual passage.
Two other mega-issues promise to stir debate. One is the politically charged dilemma of campaign-finance reform; business lobbyists worry that legislation could emerge that endangers corporate political action committees. The other: the continuing question of education reform -- a priority of business. An array of less-sweeping issues -- but of no less importance to business -- will be on the Congressional agenda. Among them are business-backed bills that would: block OSHA's recently proposed ergonomics rule until completion of a National Academy of Sciences study; grant normal trade-relations status to China (a precursor for China's admission to the World Trade Organization); reform the Superfund hazardous-waste cleanup statute; cut federal paperwork requirements and product-liability exposure for small businesses; limit class-action lawsuits against companies; bar the Clinton Administration from issuing a "blacklisting" rule that would disallow firms with perceived poor employment policies from receiving federal contracts; ease corporate requirements for notifying the government of proposed mergers; require all states to deregulate their electricity markets; modify a law requiring removal of asbestos from buildings; and move more than 70,000 tons of spent nuclear fuel to a permanent storage area in Nevada. Several of these measures "are teed up, ready to move toward passage," comments the U.S. Chamber's Josten. Contrary to the general perception that little can happen in Congress in an election year, he says, "This could be a pretty active year for Congress." He reminds that one of the most far-reaching laws of recent years -- a measure reforming the welfare system -- was enacted in 1996, a Presidential-election year. Yet, it's difficult to predict how productive Congress actually will be. A key uncertainty is how the race for the Presidential nominations in the two political parties and the subsequent election campaign will play out -- and the resultant impact on Congress. For example, in the suddenly hot contest for the Democratic nomination, both Vice President Al Gore and former New Jersey Sen. Bill Bradley are courting the votes of organized labor. That could spill over to labor issues in Congress. Similarly, if Sen. John McCain (R, Ariz.) makes a serious run at front-running Texas Gov. George W. Bush, campaign-finance reform -- McCain's top issue -- could vault into the Congressional spotlight. "We're in uncharted political waters," observes the NAM's Baroody, noting that the Presidential primaries will be held earlier than ever this year. "By no later than the middle of March," he says, "we will know the putative nominees. It's never happened that early before. Who knows what the impact will be on Congress?" Issues abroad The clash of politics and policymaking, however, is not exclusive to the U.S. In Japan, for instance, the shaky new coalition government of Prime Minister Keizo Obuchi is obligated to call a parliamentary election by October. Betting is that the election will take place following the economic summit of leading industrialized nations scheduled in Okinawa in July, although it could occur earlier. Obuchi's coalition was forged last October around an agreement on a wide range of government-policy actions to revitalize Japan's struggling economy. Since then, however, the coalition's approval rating has plummeted, jeopardizing legislative implementation of the policies. Key fights are expected in the Japanese Diet over measures that would ban corporate donations to politicians, deregulate telecommunications, divert part of consumption-tax revenues to fund a national nursing-care system, create pension schemes similar to the 401(k) plans in the U.S., reform bankruptcy laws, and toughen regulation of chemical substances. In Mexico, voters will elect a new president on July 2 to succeed outgoing Ernesto Zedillo. Whoever wins -- it likely will be Institutional Revolutionary Party candidate Francisco Labastida Ochoa -- faces daunting challenges that figure to generate legislative battling over a variety of issues. Among them: implementation of fiscal reforms, overhaul of the banking system, and attraction of foreign investment. In Germany, Chancellor Gerhard Schrder has watched his popularity reach record lows after pushing through an economic austerity plan meant to bring Germany into compliance with European Monetary Union rules and spur private-sector growth. Equally controversial is the government's decision to sell arms to Turkey. Schrder's Social Democratic Party recently has suffered six defeats in state elections. If the string of humiliations continues in two more elections slated in May (in the states of Schleswig-Holstein and North Rhine-Westphalia) and Germany's economy remains stagnant, Schrder and his government could be history. In the United Kingdom, the next general elections aren't until 2001. But they'll surely be on the minds of members of parliament as they tackle a busy legislative agenda topped by the thorny issue of whether Britain should abandon its currency, the pound sterling, and enter into economic and monetary union with the rest of "Euroland." Parliament also will debate 28 proposals laid out by Prime Minister Tony Blair, including measures that would privatize part of the UK's air traffic-control system, ban mink farming, limit the right to trial by jury, and increase the powers of local government. Of particular interest to business: a proposal to relax rules governing e-commerce. In Canada, an election isn't mandated until 2002. But recent precedent has been to hold them every four years, which likely will prompt Prime Minister Jean Chrtien to call an election next year. Hanging over the voting, as well as the Canadian parliament this year, could be legislation that was expected to be proposed by Chrtien in December setting rules for a national referendum on the issue of Quebec separatism. Two other controversial issues face Canadian legislators. One is ratification of a precedent-setting treaty granting much self-governance to the Nisga'a Indian tribe in British Columbia. The other: a measure to reform Canada's election law that among other things would limit campaign spending by interest groups. Also scheduled in 2001, but certain to color legislative deliberations this year, are Argentina's senatorial elections. They'll be preceded this year by polling for mayor in the capital city of Buenos Aires. These elections are seen as important in solidifying the new government of President Fernando de la Ra, elected in October 1999 in opposition to incumbent Carlos Menem. De la Ra, who assumed his post last month, has announced a program of cutting costs, offering incentives to small- and medium-sized companies, and boosting Argentina's economic competitiveness. To achieve all this, he may have to propose some unpopular measures, including a tax increase. That would stir legislative controversy. Elsewhere in Latin America, Chile held a presidential election in December that created a runoff January 16. Hovering over the balloting: mounting criticism of the nation's shift to a free-market economy, social inequities, and a weakening economy. In Venezuela, voters last month were asked to approve a new constitution; they will return to the polls later this year in a surprise general election called by President Hugo Chvez . Peru, too, is scheduled to elect a new president in April. Colombia will follow in October. Other possible elections loom in Europe. In Denmark, Prime Minister Poul Nyrup Rasmussen is insisting on a referendum on the country's adoption of the euro, the European single currency. In Austria, the surprising rise of a heretofore minor party, the Freedom Party, in last October's elections has created political turmoil. A tenuous coalition government is ruling, but new elections could be necessary soon. In still other nations, elections aren't in the immediate offing, but legislative battles will swirl. Some examples: Ireland's parliament will debate not only how to spend the booming country's record revenues, but also solutions to such negative effects of the prosperity as spiraling housing prices, inadequate roads, and workers' demand for inflationary pay hikes. Legislators in France will meet in a political climate influenced by the presidential aspirations of Premier Lionel Jospin, a Socialist who has been fulminating against the importation of British beef. He also has been attacking French companies, especially in the wake of Cie Generale des Etablissements Michelin's recent announcement that it would pink-slip some 7,000 workers. (The announcement came on the same day the firm reported strong earnings for the first half of 1999.) In Indonesia, debate will focus on expected economic-reform proposals from the government of new President Abdurrahman Wahid. They've been slow in coming, as Wahid has been caught up in controversy over some of his cabinet appointments. In China, significant legislation will be introduced aimed at lowering tariffs and easing restrictions on foreign investment. Both actions are necessary for Chinese compliance with the recent bilateral trade agreement with the U.S. Contributing to this article were Tanya Clark, Tokyo; Tom Mudd, Dublin; and Edvaldo Pereira Lima, So Paulo.

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