There still is a chance that the Foreign Sales Corporation (FSC) tax legislation can be brought up and passed in the House before Thanksgiving, but only Chairman Bill Thomas of House Ways and Means thinks so. I am told by several sources that nobody in the Bush Administration believes that the legislation could be wrapped up until February or March. House Democrats who are following the legislation closely tell me only if Thomas can get the Medicare bill disposed of in the next several business days will there be a small window of opportunity for the tax legislation. There is great pressure to wrap up the session by Thanksgiving, but there now seems to be a fair chance, perhaps 40%, that they will have to come back in December, in which case we could see the tax cuts sooner rather than later. This does make us a bit nervous, because there is always a chance that some unforeseen event would intervene over the holidays, causing the process to unravel.
The Republicans still do not have the votes in the House to be sure of passage because roughly 20 GOP mavericks led by Rep. Donald Mazullo of Illinois are holding out for more benefits to domestic manufacturers and fewer tax breaks to U.S. multinationals. It looks like House Majority Leader Tom DeLay is telling the White House he will need more time to whip the votes needed for the Thomas bill, which would carry us into 2004. An added complication is the steel tariff, which is probably part of the negotiations on the Hill on the FSC, as both have run into the complaints of the World Trade Organization and the European Union. The betting is that the White House will acknowledge the steel tariff has caused more economic and political problems than it solved and let it go. Threats from the Europeans that they will definitely impose $4 billion in penalties unless there is action on the FSC by year`s end are taken with a grain of salt, in the sense few believe that kind of action would be taken as long as the Eurocrats can see the legislation moving along in the Congressional queue. If it has to wait to January, clearly there would be ample time to finish before penalties would be imposed in March.
Remember we did figure it would take this legislation to get the Dow Jones Industrials to 10,000 by year`s end. These complications are almost certainly the reason why Wall Street has been hesitating this week and why it may be treading water until it sees how things develop.
As to the Medicare legislation, there does not seem to be much hope that negotiations can produce a bill in the House that could win the necessary 60 votes in the Senate to avoid a Democratic filibuster. In other words, you can`t get there from here by any road map. Unless a decision is made by the Ted Kennedy liberals to take what they can get from the House instead of having both sides try to make a campaign issue out of who was to blame for inaction.
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