1998 Ad

Nation's Business, Jan, 1998 by David Warner

Politics is often described as "the art of the possible." But politics may make congressional action on legislation nearly impossible in the coming year. Thirty-four Senate seats and all 435 House seats are up for election in 1998. And in election years, congressional debate typically becomes highly politicized, with members of both political parties trying to look their best to voters, say many political observers. Often the result is legislative gridlock.

"I see both parties looking to differentiate themselves" in 1998, says Thomas E. Mann, director of government studies at the Brookings Institution, a public-policy research organization in Washington, D.C. As a result, he says, "I'm looking for fairly modest legislative output."

Mann says the political dynamic that brought together Republicans, moderate Democrats, and the Clinton administration to support the historic five-year balanced-budget agreement in mid-1997 changed by the end of the year and is not likely to reappear in 1998.

"The success of Congress in 1997," Mann says, "was largely the budget agreement, which was wrapped up in the summer. Since that time, both parties' caucuses in Congress have pushed to advance their own ideological interests, making it very hard to build centrist coalitions."

Such coalitions often are needed to move legislation through Congress. With political careers on the line, lawmakers in both parties are unlikely to compromise on many issues during the year ahead.

"While 1998 is an election year, which traditionally means Congress gets less done," says Lonnie Taylor, senior vice president for congressional affairs of the U.S. Chamber of Commerce, "there win be numerous legislative opportunities and challenges for the business community, particularly in the regulatory and tax areas."

Here are some of the key business issues that Taylor and other congressional experts expect legislators to consider during the second session of the 105th Congress, which convenes Jan. 27:

Budget And Taxes

On fiscal issues, debate in Congress is expected to center on what to do with the projected budget surplus.

Lawmakers already are dividing into factions favoring various plans for using the surplus. Because of higher-than-expected tax revenues, some private analysts say, the surplus could materialize during the current fiscal year, which began Oct. 1.

The most recent official estimate -- by the Congressional Budget Office (CBO) in September -- is that under the five-year balanced-budget agreement enacted in August, a surplus of $30 billion will be achieved in fiscal 2002. How, CBO estimates have tended to be conservative. For example, the $124 billion budget deficit projected in January 1997 by the CBO for fiscal 1997 was actually just $22 billion for the fiscal year, which ended Sept. 30.

Some lawmakers want to use surplus revenue to reduce taxes further, while others would like to use it to pay down the $5.4 trillion national debt or to reform financially troubled entitlement programs such as Social Security and Medicare. Still others want to increase spending on various programs, and yet another faction is pushing for a combination of tax cuts, spending increases, and debt reduction.

"We've moved out of the deficit-politics regime that has ruled Washington for the better part of 30 years to a new regime of surplus politics," says Stephen Moore, director of fiscal-policy studies for the Cato Institute, a public-policy research organization in Washington. "The question is whether Republicans can claim that money for cutting taxes and retiring debt before liberal Democrats can use it for spending on new projects."

House Speaker Newt Gingrich, R-Ga., and Senate Majority Leader Trent Lott, R-Miss., have signaled their willingness to consider tax cuts beyond the $100 billion in reductions over five years -- 1998 through 2002 -- that are contained in the balanced-budget agreement. Specific tax-cut proposals under discussion include:

* Indexing capital gains for inflation, which in effect would lower taxes on such gains.

* Reforming or eliminating the alternative minimum tax.

* Reducing the federal tax on gasoline.

* Making across-the-board cuts in marginal tax rates.

The Democratic leadership, on the other hand, is looking at spending any budget surplus on strengthening federal education initiatives; increasing assistance to children, including setting national childcare standards; and overhauling the nation's health-care system.

Health-care proposals likely to be advanced include bills to require health-maintenance organizations (HMOs) to provide minimum levels of coverage for patients and measures that would expand medical-malpractice liability to health-insurance carriers and employers who provide health-care coverage.

President Clinton has said he wants to resurrect his failed 1993-94 effort at healthcare reforms with a series of narrowly focused bills. (See Benefits Update, Page 29.)

Restructuring the Internal Revenue Service and revamping the federal tax code also are expected to be key fiscal issues in 1998.