Great Expectations
Industry leaders hope Bush attends to their special needs
Hunting season is now open on Capitol Hill. With a new president and a new Congress safely installed, Washington business lobbyists are locked and loaded, aiming to bag big favors for the companies they represent. President George W. Bush, whose record campaign war chest and inaugural festivities owed much to corporate contributors, has told business interests not to expect special treatment just because of their backing. But Bush's watchword is bipartisan legislation. And nothing can get two-party juices flowing faster than the prospect of adding business-pleasing tax breaks and benefits to the massive tax-cut and spending bills that are slated for high priority in Congress.
Although the $1.6 trillion 10-year tax cut that Bush campaigned on offered little in direct benefits for business, lobbyists wasted no time in pressuring his transition team to sweeten the measure with such tidy benefits as a more rapid write-off of corporate investments (box, Page 38). Defense and technology companies will be elbowing for their share of stepped-up Pentagon spending. Still others will be seeking regulatory relief or expansion of federal aid. While a broad coalition of industries is seeking access, three sectors--technology, oil and gas, and pharmaceuticals--have special claims on the new administration.
High tech mostly wants to be left alone
At first blush, it doesn't seem the Bush administration is likely to "get" the Internet and its role in the much vaunted new economy. After all, top levels of the new regime are inhabited by gray-haired officials who cut their teeth on Big Oil, Big Metal, Big Pharma, and other more traditional industries.
But technology leaders who huddled with Bush last month in Austin came away upbeat. They got hints of relief from what they regard as the too-aggressive regulation and enforcement of the Clinton era. For instance, the government's antitrust case against Microsoft could be allowed to run out of gas if the U.S. Court of Appeals rules in Microsoft's favor as expected in February or March. And the kind of grueling, yearlong regulatory review that bedeviled America Online's purchase of Time Warner would be much less likely, tech leaders believe. The CEOs also are pressing for second-tier appointments who would function as industry contacts and provide something that's still missing--expertise in trading with Japan and China.
Buttoned-down influence. More important, about 20 technology executives, many with Republican sympathies, are emerging as a kind of kitchen cabinet that will have direct access to the president and be able to shape tech policy. "George W. is a good listener," says John Chambers, chief executive of Cisco Systems, who supported Bush. "Philosophically, Bush will be less intrusive, less micromanaging [than Gore]," says Scott Cleland, chief executive of the Precursor research group in Washington, D.C. Other Austin attendees likely to exert influence in a Bush regime are Craig Barrett of Intel (which faced an antitrust investigation from the Clintonites); Michael Dell of Austin-based Dell Computer; Jim Barksdale, former chief of Netscape; Carly Fiorina of Hewlett-Packard; and Lou Gerstner of IBM and AOL's Steve Case, a significant last-minute addition to the confab. When they met with Bush and his buttoned-down advisers, most even abandoned their dot-com casuals and knotted on neckties.
Where the techies most long for change is in Washington's marble corridors, including those of the Justice Department's antitrust division, the Federal Trade Commission, the Federal Communications Commission, and the Securities and Exchange Commission, which has been pushing new financial reporting and disclosure requirements. Executives see Bush's installation of Michael Powell as FCC chief last week as a good start. "We have too much regulation in everything we do," says Sol Trujillo, former CEO of US West who now heads a La Jolla, Calif., start-up called graviton. "It all requires truckloads of papers and armies of people."
The execs would love to see Bush re-create on a national scale the kind of relationship he had with tech leaders in Texas. One of those Austin power brokers is Steve Papermaster, CEO of software maker Agillion. He argues that Bush, far from being a tech Neanderthal, knows how to go to bat for these companies. He notes that Bush blocked an effort by state legislators to tax Internet E-commerce sales. "He used his bully pulpit as governor," says Papermaster.
Education is also shaping up as a tech sector top priority. To fill nearly 850,000 job openings, the industry has fought to raise the number of trained immigrants brought into the United States on H-1B visas. But every executive worth his Palm knows that the best solution lies in giving America's youngsters a high-tech boost, and the sooner the better. Traditionally, corporate interest has focused on universities, but now executives are seeking changes in earlier years. "The education system in this country is, candidly, broken in K through 12," says Chambers.
High-tech leaders do have some policy concerns. For example, some worry that conservatives in Congress might seek to block sales of advanced computer and communications gear to China. Elsewhere, a crucial debate over federal standards for Internet privacy is shaping up. But if the new president replicates the Austin model at the national level, the Bush Era Take 2 should be good news for tech. - William J. Holstein
Oil and gas execs see friends, and friction
It's hard to imagine an industry with brighter prospects at the Washington well than oil and gas. With friends in the highest places and California's energy crisis grabbing headlines, why then are there still frowns in the Oil Patch?
The industry, just emerging from a devastating late 1990s downturn, knows that a major change in U.S. energy policy is more easily promised than delivered. Bruising political battles lie ahead in the effort to open up federal land to drilling or roll back environmental regulations. Even then, it could take a decade to ramp up domestic production. "The last bust wiped out our labor force, no one wants to invest in equipment, and it's hard to find outside investors," says John Bell, president of Bell Energy of Kermit, Texas.
The lag time is long enough that some observers believe Bush may be forced to add a new word to his energy vocabulary: conservation. Until now, the Bush watchword has been production: "We must work in concert to increase the amount of supply available for American consumers." While U.S. reserves are far more costly to tap than Persian Gulf oil, exploiting them fully could reduce vulnerability to OPEC, which announced production cuts to bolster sagging oil prices days before Bush's inauguration.
Stonewalling. The centerpiece of Bush's pump-up-production plan is a coastal stretch of the Arctic National Wildlife Refuge containing an estimated reserve of 16 billion barrels of oil. The U.S. Geological Survey estimates that only about 3.2 billion barrels could be extracted economically--enough to meet U.S. demand for about six months--although industry analysts say new techniques could extract far more. But the president would have to persuade Congress to breach the pristine area, and it has rebuffed every effort for 20 years. Bush's choice for interior secretary, Gale Norton, worked on such a failed drive in the Reagan administration. Bush's choice to head the Energy Department, Spencer Abraham, supported a bill that never made it to the Senate floor last year. Even in the wake of Gulf War oil supply concerns, a filibuster killed Bush's father's ANWR drilling plan. Energy interests, whose campaign contributions favored Republicans by nearly 4 to 1, will need some fast new Senate friends to corral 60 votes.
There may be more political will behind drilling for natural gas. With prices soaring, "obviously, natural-gas supply is now at the forefront of energy policy considerations," says Daniel Yergin, chairman of Cambridge Energy Research Associates. Still, Yergin predicts friction. For example, Chevron Corp. has a rich find 25 miles off the coast of Pensacola, Fla. Things should look bright for the so-called Destin Dome project since the crucial decision will be made by Commerce Secretary Don Evans--an oil and gas millionaire. But environmentalists and the tourism industry portray Destin Dome as the first step toward transforming the state's coastline into a copy of Louisiana's rig-lined waters. The project's most important foe: Florida Gov. Jeb Bush.
The energy industry may fare better in the Rocky Mountains, where vast areas of federally managed land could be opened to drilling. "It's the area with the greatest potential for fast recovery" of natural gas, says Jerry Jordan, chairman of the Independent Petroleum Association of America. But even that would not quickly resolve problems like California's. Oil expert Philip Verleger of the Brattle Group argues that the "energy constraint on economic growth" will soon be apparent nationwide. "The critical step to getting the economy back in motion again is a policy of massive, deep energy conservation," Verleger says. David Nemtzow of the Alliance to Save Energy, which includes both environmental groups and utilities, muses that Bush might look to the example of his father, who got major energy legislation through Congress by jettisoning the Arctic drilling plan and backing a package of tax and other incentives for conservation. "President Bush Senior learned the hard way that the politics aren't there to do supply-side-only energy policy," Nemtzow says. -Marianne Lavelle with Dan McGraw in Texas
For drug makers, Bush spells relief
That whooshing sound emanating from the drug industry is a huge sigh of relief. If Al Gore had won the presidency and Democrats taken the House, pharmaceutical companies would have faced hostile hearings and legislative proposals on everything from drug pricing to consumer advertising.
The House stayed Republican, of course, thanks in part to drug makers' pouring record sums into GOP campaigns. Clout? The drug industry has emerged from the election with more than ever, says Robert Hazlett, an analyst with Robertson Stephens. Two members of George W. Bush's cabinet are industry veterans: Mitch Daniels, a top executive at Prozac maker Eli Lilly, now heads the Office of Management and Budget, while back at the Pentagon is Donald Rumsfeld, who ran drug maker Searle (now Pharmacia) from 1977 to 1985.
But the drug industry can hardly rest contented. In the campaign, Gore tapped early on into a politically potent issue: the plight of seniors struggling to afford expensive medicines. Bush tried to neutralize Gore's call for adding a drug benefit to Medicare by coming up with his own more industry-friendly plan. Now Bush would like a quick deal on a drug plan to show that bipartisan cooperation is possible under his leadership--before the run-up to the 2002 congressional election.
Drug dilemma. Any plan affecting seniors is hugely important to the drug industry. About 40 percent of all U.S. spending on drugs is done by those over age 65. Yet only about two thirds of seniors have help with those costs, even as the industry continues to introduce innovative, expensive medicines to treat diseases that afflict the elderly.
A prescription drug benefit in Medicare poses a particular dilemma for drug makers, notes John Iglehart, editor of the journal Health Affairs. It would surely expand sales, a plus for the industry. But it would also invite much closer government scrutiny of drug prices. Every other Medicare component, from hospital fees to medical equipment, operates under government-administered pricing. "Over the long term, can drug makers be the only ones with carte blanche to make up their prices and have the government pay?" asks Stuart Altman, a health policy professor at Brandeis University. "Probably not."
It's uncertain, of course, that Bush will succeed in pushing through any kind of drug benefit. His campaign plan, low on details, involved giving block grants to states to help low-income seniors pay drug bills, to be followed by a more inclusive benefit relying heavily on private insurers and linked to broader reform. One fly in the ointment: Last year all 50 governors said that they didn't want states to do the job. Democrats oppose a narrowly targeted benefit as compromising Medicare's status as a social insurance program for all.
But even the prospect of having taxpayers foot the seniors' drug bill increases chances of government action to rein in drug costs. Consider the issue of patent protection. In recent years, drug companies have aggressively attempted to "evergreen" their patents, making it harder for lower-priced generics to be marketed. Promoting generics "would both help consumers and make it less expensive for the government to pay for a drug benefit," says Democratic Sen. Charles Schumer of New York. He and Arizona GOP Sen. John McCain reintroduced a pro-generics bill last month.
Even Gail Wilensky, a conservative healthcare adviser to Bush, is talking about things the government can do to "up competitive pressure on the drug industry." The government could research and publicize which newly approved therapeutics really make a difference to patients, for instance, helping doctors resist one-sided drug company marketing.
The trick for legislators will be to rein in costs without harming the industry's ability to invest in new cures. In the end, after all, the drug makers' ability to reduce human suffering is worth much more to them in Washington than any number of friendly administration officials. -Pamela Sherrid
With Dan McGraw and Pamela Sherrid
This story appears in the February 5, 2001 print edition of U.S. News & World Report.