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Are you ready for 2007?

As we look at next year and beyond, business leaders will be facing a new horizon. Between a lame duck Republican executive and a newly energized Democrat controlled legislature, politically it seems likely that the middle ground will be underexplored. On social issues there is little middle ground to explore and on economic issues the two sides are as far apart as ever.


Talk of bipartisanship is just that--talk. Expect Congressional inquiries into drug pricing and energy markets. If Massachusetts representative Barney Frank chairs the Financial Services Committee, the hedge fund industry will come under close scrutiny. With Charles Rangel heading Ways and Means, forget about Bush's tax cuts. In fact, when the cuts are set to expire in 2010, Americans will be looking at an almost unprecedented increase in their tax bill. According to U.S. Treasury estimates, 115 million taxpayers would see an average increase of $1,716.

Looking beyond the next two years, it seems likely that the magnified political might of Democrats could have an enormous effect on tax, entitlement and trade policies. Taxes will go up, entitlements will continue to expand, and free trade will gradually give way to "fair" trade.

Expect more regulation rather than less, and as for any chance of mitigating Sarbanes-Oxley, I would sooner expect to see Paris Hilton receiving the Nobel prize for physics.

But the forces of change are not just coming from national elections. The rise in liquidity in global capital markets is challenging New York's grip on the title of "the world's financial capital." Part of the problem is regulatory, as Jim Copland notes in "Capital Market Crackup" (p. 47). Britain has one authority, the FSA, overseeing the corporate sector where the U.S. has as many as 10. Not surprisingly, the regulatory cost for companies is 15 times higher in the U.S.

In this issue, CE queried CEOs on the challenges they face going forward and asked them what priorities they would set for next year and beyond. In addition, leadership strategists David and Mark Nadler identify five key issues CEOs and their boards face over the next several years that business leaders must get right. In his "Uncommon Wisdom" column (p. 26), Dr. Robert Lawrence Kuhn suggests four ways CEOs can mitigate some of globalization's downside for employees and shareholders alike. As markets react to continuing political and social changes, business leaders should fasten their seat belts. It's going to be a bumpy ride.
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Title Annotation:EDITOR'S NOTE
Author:Donlon, J.P.
Publication:Chief Executive (U.S.)
Date:Dec 1, 2006
Previous Article:The long view.
Next Article:Aviation reform redux.

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