Bush also is likely to wage a guerrilla war with his most powerful political enemies, the trial lawyers who spent tens of millions of dollars trying to elect a Democratic Congress. The Administration is readying a series of proposals to limit legal claims against businesses. While some House GOP leaders, such as Representative Tom DeLay (R-Texas), long for a broad tort-reform bill, White House and business strategists want to enact narrowly targeted limits on lawsuits. Their reasoning: Business does not have the 60 votes needed to stop a Senate filibuster of a comprehensive lawsuit-reform bill, but it could roll back jury awards piecemeal.
The first step came last year when Congress shielded teachers who use corporal punishment from lawsuits. Next up: Proposals to limit pay-outs in medical malpractice suits and curb asbestos litigation. "Questionable lawsuits are threatening up to 90% of our economy," says Conoco Phillips Chairman Archie Dunham, chairman of the National Association of Manufacturers.
Business is less likely to see progress on two other major issues--tax reform and an overhaul of the Social Security system. While Bush is expected to lay out a series of principles to overhaul federal taxes, aides say he won't push for their adoption until a second term.
Bush's economic team has been discussing tax-reform options for months. No decision has been made on whether the President should tilt in the direction of a simpler income tax or go all-out for a consumption-based system.
Full-metal-jacket reform carries enormous risks. For instance, a true, low-rate flat tax would eliminate hugely popular tax breaks for homeowners and for workers who get employee health insurance. And repealing the corporate income tax, as O'Neill prefers, would be political dynamite so soon after the nation was rocked by business scandals. "Bush's tendency, left to his own devices, would be to throw deep and go for tax reform," says one White House adviser. "But the political people want to put it off until the second term."
As a result, Bush may take some tiny steps towards reform. He is likely to propose a series of initiatives to simplify provisions of the existing tax code. For instance, he is expected to call for a uniform set of rules to govern contributions and withdrawals from the dozen-plus retirement plans that now clutter the IRS rulebook.
While tax reform still has political life, the idea of restructuring Social Security is on life support. Dozens of Republican candidates repudiated the President's proposal to create individual investment accounts. And the return of deficits means that there is no money to cover the estimated $1 billion cost of a transition to partial privatization.
If the President wins a second term, though, Social Security reform and tax simplification could again be part of his domestic program, which started so promisingly with tax cuts and school reform and then stalled.
The Bush agenda now has a new opportunity--but it won't come cheap. While Republicans will control Washington, they'll also be under the gun to deliver an economic turnaround. If they pull it off, they can look forward to an even giddier Election Night 2004. If not, there won't be much room for excuses.
By Richard S. Dunham and Howard Gleckman, with Rich Miller and Lorraine Woellert, in Washington; Amy Barrett in Philadelphia; William C. Symonds in Boston
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