The 108th congress: a task list. (Washington Insights).

This year's historic election outcome represents the first time in history that the sitting president's party gained seats in both chambers of the U.S. Congress during a mid-term election. President Bush is currently riding a wave of success--success politically, with the election wins; success legislatively, in the creation of the Department of Homeland Security; and success internationally, with the United Nations and Iraq--and it appears that he will have success with his legislative priorities in the 108th Congress.

When it convenes in January, the 108th Congress will begin to tackle a Bush agenda that contains several major tax priorities. While operating under tight fiscal constraints, because of the state of the economy and the almost certain military action against Iraq, Congress will likely consider the following legislative items:

* Make permanent the Economic Growth and Tax Relief Reconciliation Act of 2001. The $1.35 trillion tax cut that was signed into law in the summer of 2001--which, due to budget rules, will expire in 2011-contained gradual individual tax rate reductions, gradual increases in maximum contributions to qualified retirement accounts and a phase-out of the estate tax. The president has made it clear to Congressional leaders that he believes making those tax cuts permanent will add stability to the U.S. economy and reverse the current economic trends.

* Pension reform legislation. In the last Congress, there was great focus on some high-profile corporate insolvencies, where some employees lost much of their retirement assets due to heavy concentrations in company stock. Congress will again consider legislation aimed at protecting workers from large losses to their retirement accounts as a result of a corporate insolvency. In the last Congress, the House passed a version of such pension reform, but similar efforts stalled in the Senate.

* Corporate tax shelters. Congress will likely pass legislation similar to 107th Congress bill, S. 2498, that would impose new curbs on abusive tax avoidance transactions. The bill would allow the Secretary of the Treasury to impose new penalties under the Internal Revenue Code on companies that report transactions that the Secretary determines have the potential for tax avoidance or evasion.

* Corporate Inversion legislation. During the 107th Congress, Sen. Charles Grassley (R-Iowa.) introduced legislation that would penalize and discourage companies from moving corporate headquarters offshore and re-incorporating as foreign corporate entities in order to reduce their tax burden. Sen. Grassley, who will be the new chairman of the Senate Finance Committee, has said that he will reintroduce some form of this legislation in the 108th Congress.

* Medicare Reform. The Congress has the best opportunity in recent memory to pass Medicare reform during the upcoming Congress. Last Congress, the House passed a Medicare reform bill that included a prescription drug benefit for low-income seniors, but the Senate did not pass similar legislation. Politically, it would be damaging for the Republicans if they were unable to add a prescription drug benefit to the Medicare program before the next election. Furthermore, the president has highlighted this as one of his priority items for the upcoming Congress.

There is much at stake for Congressional Republicans. The historic pickups in this year's election show, once again, an almost evenly divided electorate and underscore the need for Republicans to prove that they can be effective leaders in Washington. Of course, in a nearly evenly divided Congress, this will be difficult.

House rules and procedures should allow House Republicans to pass their agenda over the objections of the minority; however, a slim majority in the Senate will once again cause Republican heartburn. Senate rules actually favor the party in the minority over the majority party and make it far easier to grind the legislative process to a standstill. Furthermore, many procedural Senate voles require 60 votes for passage, which means that compromise will be the order of the day in the Senate. If Democrats are successful in stalling or significantly changing the president's legislative priorities, they will be in a good position for the presidential and Congressional elections of 2004.

Though Democrats may be conciliatory during the beginning of the 108th Congress because of the recent elections, I wouldn't count on too much bipartisanship. While President Bush may have an op-portunity to pass priority agenda items, it is a constant in Washington that--like death and taxes--there will always be partisan wrangling in Congress.

Bob Shepler is Director, Government Relations, in FEI's Washington, D.C. office. He can be reached at [e-mail].