The Democrats' Playbook for Business

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But energy-state Democrats in the House and Senate may not go along, and Bush would likely veto any rollback of drilling incentives, which he considers a corporate tax increase. So this could be an early defeat for the Democratic leadership.

There also could be a battle over higher auto fuel economy standards, something that Michigan Democrats such as incoming House Energy & Commerce Committee Chairman John Dingell might resist. More likely is a possible national standard mandating that a certain amount of electricity come from renewable energy sources.

Taxes. Sparks could fly here. Democrats are talking about repealing the 2001 income tax rate reductions for the highest-income Americans, probably those families earning $200,000 or more. Democrats want to use the money to give parents a tax credit for college tuition costs or other middle-class tax relief. This is a nonstarter with the White House, but it could be the beginning of protracted negotiations.

The President has the ultimate weapon: the veto. Democrats have a hammer, however: Bush's tax cuts are set to expire by 2011. He may want to cut a deal to save some of the tax cuts while he's still in office rather than risk a complete loss down the road.

Research and development. Almost everyone wants to reinstate the R&D tax credit, which the Republican Congress let expire last year. Business loves the R&D credit. Many Democrats want to show they are pro-business. This is an easy way to do it.

Deficit reduction. Democrats promise to rein in the record deficits of the Bush years. They want to reinstitute a pay-as-you-go system for federal spending and tax cuts. They should have the votes to do that. However, there will be some hot debates over Democratic leadership attempts to reduce the number of pork projects officially known as "earmarks." Most likely, the new Congress will force lawmakers to make earmarks more transparent, but it won't curtail them.

Spending. Expect a heated fight over budget priorities, with Democrats trying to transfer defense spending from Pentagon control to Homeland Security, particularly ports and urban transportation systems. Democrats also will want to spend significantly more on education and alternative-energy research, both high priorities of the business community. The battle will come when they choose to pay for it by reducing spending on some of President Bush's pet projects such as missile defense or a future moon shot.

Sarbanes-Oxley reform. Companies are likely to get some relief from the paperwork burdens imposed by the 2002 corporate-governance law. The Senate Banking Committee, the House Financial Services Committee, and the Securities & Exchange Commission are likely to undo some of the unintended consequences of the law that was passed hurriedly in response to the Enron, WorldCom, and other corporate scandals. The main point of discussion may be how many of the changes can be done at the SEC through regulatory actions and what, if anything, Congress needs to fix.

Tort reform. Business is sure to suffer a setback on legal reform. The Democratic Congress is unlikely to further limit lawsuits, a top priority of small business and the Bush White House. The medical establishment might offer a compromise to give doctors some protections in malpractice cases, but the Republicans have maintained an all-or-nothing attitude in recent years. Unless that changes, the result will be nothing.

Richard S. Dunham is a senior writer for BusinessWeek.