The House-Senate conferees have now reported a compromise in time to get a bill passed by Friday, when Congress suspends for the elections. Does this mean the bill will pass and be law before the elections? Only maybe. It certainly reflects the fact that a bill had to be brought to the Senate floor today in order to be able to put down a filibuster, should one be launched by either Ted Kennedy [D MA] or Mike DeWine [R OH]. It takes two days before cloture can be invoked and it is assumed Congressional leaders will not keep Congress in session on Saturday in order to clear the tax bill. The White House has weighed in with a statement that it wishes the legislation to pass this week, to clear away the trade penalties being invoked by the World Trade Organization, and Chairman Chuck Grassley of Senate Finance told Bloomberg yesterday that he believed the bill would come out of conference today.
If the presidential election is going to be on a knife-edge again on November 2, it really is to the Presidentís benefit if this bill does get wrapped up now. We do think the rally in the equity market (that has now stalled) was due to the sudden prospect that the tax cuts would be nailed down now and not postponed to a lame-duck session, where uncertain things could happen if the President does not win re-election. Note that Senator DeWine is now an even bigger threat to the bill than Kennedy and DeWine is an Ohio Republican, and Ohio is now a toss-up battleground state, one Mr. Bush almost certainly has to win. Republicans never win the presidency without Ohio. As Iíve noted previously, there is enough supply-side kick in the corporate tax bill, with all its flaws, that it would extend the little rally on Wall Street and give the GOP an upbeat note going into Election Day. How ironic if DeWine is successful in blocking a vote this week because he insists on the additional provision for FDA regulation of the tobacco industry. At the margin, it could tip Ohio and the presidency to Senator Kerry.
We canít predict how this will come out in the next few days, but it may after all slide over into Saturday, if Chairman Bill Thomas of Ways&Means has his way and can persuade the White House to persuade Senate Majority Leader Bill Frist to push this to the limit. (Wouldnít this make a great episode of ďThe West WingĒ?). Iíll only remind you that there are political forces inside the White House who are urging a strategy that involves postponement to a lame-duck session. Why? They worry Senator Kerry would have the edge in debating the President on a tax package that is so laden with Tax Pork, special new loopholes designed to help manufacturers of left-handed monkey wrenches, etc.
Iím sorry I canít help you position yourself one way or another as a result of this missive, but you will at least know my thinking on the possibilities just ahead. Itís still dicey.†