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Wednesday, 6 November, 2002, 18:12 GMT
Business welcomes Bush victory
Oil derrick in California
Oil companies could gain more drilling rights

President George W Bush's roots are in the business community - he was a former Texas oilman.

US companies are hoping that now he has won control of Congress he will be able to implement the pro-business agenda he promised when he was first elected in 2000, but was subsequently blocked when he lost control of the Senate in June 2001.

Especially happy are executives in the oil and gas industry, who are hoping for permission to drill in the Alaska nature reserve, and the bosses of the pharmaceutical industry, who have been fighting proposals for a prescription drug benefit to be included in Medicare, the US government health insurance scheme for elderly people.

Boeing plant, Seattle
Defence production will be boosted

Lawyers, on the other hand, are likely to be disappointed.

One of Mr Bush's key corporate pledges was "tort reform" - making it harder for individuals to sue companies for civil damages in so-called "class action" suits.

This should especially help the tobacco industry, which has been facing a series of multi-billion dollar lawsuits despite its $269bn settlement with the states in 2000.

Another industry that will gain strongly is the defence sector, which is set to benefit from Mr Bush's plans for a possible war in Iraq.

Defence procurement, especially of unmanned aircraft, is set to grow sharply as the US defence budget rises by nearly $50bn this year - benefiting firms like Lockheed, Boeing, and Northrop Grumman.

Tax cuts for business

However, all businesses will benefit from a big tax cut that the Treasury Secretary, Paul O'Neill, has long desired.

Mr O'Neill, and most of the Bush economic team, believe that by abolishing the taxation of corporate earnings, they will stimulate the economy so much that government tax revenue will actually rise.

Schwab office, Bethesda, Maryland
More private investors through social security privatisation
This "supply side" theory, first tried out during the Presidency of Ronald Reagan, could backfire if it leads to higher Budget deficits in the future.

But after his $1.2 trillion personal income tax cut in April 2001, Mr Bush is determined to reward his corporate friends with a similar tax cut.

The cuts will especially be aimed at benefiting small businesses, who also now can pass on all their property to their heirs without having to pay any inheritance tax at all.

Corporate reform

Mr Bush has been in the firing line over a series of corporate scandals, such as Enron and WorldCom, where chief executives deceived their shareholders while receiving huge salary bonuses and share options.

Mr Bush has promised to crack down on corporate fraud, saying that the only place for fraudsters is jail.

But his actions so far have not matched his words.

Now the boss of the chief regulator, the SEC, has been forced to resign. He was formerly the chief lobbyist for the accountancy industry that he was in charge of regulating.

The resignation now provides a test of Mr Bush's real desire for cleaning up corporate corruption.

A tough appointment would prove he was serious, but if he appoints another figure close to the accountancy industry it will raise questions about his real commitment to reform.

Drug companies and investment firms

In the longer term, US pharmaceutical companies are likely to win the Medicare battle over who should pay for prescription costs.

After Mr Bush's victory it is looking likely that Mr Bush's plan to encourage private insurance companies to provide coverage of expensive prescription medicines will go through.

Mr Bush is likely to get his way, defeating a Democratic proposal to extend US government health benefits for the elderly to cover drugs, which drug companies feared would lead to a cap on prices.

And looking ahead, investment firms could benefit if Mr Bush succeeds in his plan to partly privatise the state pension system, known as Social Security.

He wants individuals to be given the right to put some of their contributions in private stock market funds instead, which could add billions to the funds handled by banks and mutual funds.

All in all the mid-term elections were not only a triumph for President Bush, his victory could be fruitful for companies too.

Key races




See also:

31 Jul 02 | Business
18 Oct 02 | Business
15 Oct 02 | Business
14 Oct 02 | Americas
17 Oct 02 | Americas
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