Capitol Hill's New Reality

As power shifts in Washington, businesses have little choice but to adapt

by Richard S. Dunham and Eamon Javers

By historical standards, the Democratic landslide of 2006 was well within the norm: In the sixth year of an Administration, the average loss for a President’s party in midterm elections is about 29 House seats, and 6 Senate seats. But for a shell-shocked White House and a business community that bet heavily on the Republicans, the GOP reversal of fortune on Nov. 7 was anything but normal.

Having forged close ties with Republicans on Capitol Hill and funneled about two-thirds of corporate campaign contributions to the GOP, business faces a rude awakening after Democrats swept to victory in the House of Representatives and drew within striking distance in the Senate. As of late night on Nov. 8, Democrats had captured at least 27 Republican House seats, far more than the 15 they needed to regain control for the first time in 12 years and make liberal Representative Nancy Pelosi of California the first female Speaker of the House. (Five were still too close to call, and two appeared headed to runoffs.) Democrats also took back the Senate by the narrowest of margins, 51 to 49, as challenger Jim Webb eked out a razor-thin victory in Virginia over Republican Senator George Allen, once talked of as a possible Presidential candidate.

The anti-Bush tide swept away several close allies of business. Among them: Representative Jim Leach of Iowa, former chairman of the panel then known as the House Banking Committee; 12-term House Ways & Means Committee stalwart Nancy Johnson of Connecticut; and House Resources Committee Chairman Richard Pombo of California, the scourge of the environmental movement. In the Senate, moderate Lincoln Chafee of Rhode Island, who prevailed in a bitterly contested GOP primary with strong business support, was toppled by Democrat Sheldon Whitehouse, the state’s former Attorney General.

Business has little choice but to adapt to a reshaped Washington. "If I were the ultimate decision-maker for American industry," says Democratic business lobbyist Ben Barnes, "I would call Nancy Pelosi and say, 'I want to help you be a good Speaker.’ Business leaders would be shocked at how much influence they could have by talking to Democrats about jobs in their districts and the Little League teams they are sponsoring."

Back to the Center

There’s no doubt that the party’s over for business. But it’s not simply because the days of corporate lobbyists writing Republican legislative proposals have come to an end with the ascendancy of such left-leaning committee chairs as Charles Rangel of New York (Ways & Means), Barney Frank of Massachusetts (Financial Services), and John Dingell of Michigan (Energy & Commerce). Partisan affiliation itself will matter less in a Washington where the chambers of Congress are narrowly divided between the parties and President George Bush maintains veto power over anything he considers runaway liberalism on Capitol Hill. Senator Hillary Clinton (D-N.Y.) declared in her Nov. 7 victory speech that the election would propel policy "back to the vital, dynamic center."

Centrist players from both parties who are likely to build coalitions that supersede partisan agendas could emerge as new power brokers—and targets for business lobbying. Among the newly empowered centrists are Senator Tom Carper (D-Del.) and Senators Olympia Snowe and Susan Collins, both Republicans from Maine; Representative Christopher Shays (R-Conn.); and Representative Ellen Tauscher (D-Calif.), chair of the moderate New Democrat Coalition, who worked on Wall Street for 14 years and was one of the first women to hold a seat on the New York Stock Exchange. While several Republican moderates went down to defeat, the ranks of bipartisan centrists expanded with victories by about a dozen business-backed Democrats, including Representative-elect Gabrielle Giffords (D-Ariz.), the managing partner of a property management firm, and Tim Mahoney (D-Fla.), co-founder and chairman of vFinance, a venture-capital firm.