With the election looming and the possibility of Congress going from Republican to Democratic control, business is preparing itself for gridlock in Washington. "If [both] houses switch hands, the strategy of the Democrats will be to propose legislation to provoke the President to use the veto [and] sharpen the debate for 2008," says Robert E. Litan, a senior fellow at the Brookings Institution.

"Clearly, there will be an aggressive push to raise the minimum wage. The President's tax cuts will not be extended, and the attempts to repeal the estate tax will be struck down. Sarbanes-Oxley reform is likely to be off the agenda, too," says Brian Darling, the director of U.S. Senate Relations for The Heritage Foundation. "The whole freight train of free-trade agreements will come to a stop."

However, most observers do not believe both houses will fall. A more likely scenario is that the House falls to the Demo-crats, while Republicans retain Senate control, in which case there may be room for compromise, as both parties seek to avoid being tarred as a "do-nothing" Congress. One such issue might be terrorism insurance. "The Treasury has issued a report which basically says that they're not in favor of renewing terrorism insurance when it comes out in 2007. I don't think financial institutions are with them on that and I think that the Democrats would probably vote for that," says Litan. Another issue is health insurance. "There was a lot more silent support for the [John] Kerry health plan in the business community than was [acknowledged]. A lot of old-line businesses would be for a plan that would have the federal government pick up catastrophic costs."

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