Let The Wild Rumpus Start!

On Jan. 4, when Speaker Newt Gingrich gaveled the first Republican-controlled House of Representatives in 40 years to order, he ushered in a new era for American business. After decades on the defensive, corporate chieftains and Main Street entrepreneurs alike felt liberated from the political imperative of kowtowing to Capitol Hill Democrats.

Executives of companies big and small are chanting the same mantra: Slash spending, cut taxes, eviscerate government regulation. But while they applaud Congress' new direction, business groups differ over how far to push change. While major corporations want to tinker with a status quo they've learned to master, small business owners want to rewrite the rule book. As a result, lobbyists for the two camps are girding for some nasty trench battles. "When it gets down to the nitty-gritty of writing bills, we're going to see some pushing and shoving," predicts Jack Faris, president of the National Federation of Independent Business.

That's because the House is firmly in the grip of populists led by Gingrich and Majority Leader Richard K. Armey (R-Tex.), both small-business champions who have clashed with Establishment executives. Big business is counting on Senate Majority Leader Bob Dole (R-Kan.) to rein in revolutionary excesses. The Senate "will be providing the brakes for some `f the radical proposals from the House Republicans," says Senate Minority Leader Thomas A. Daschle (D-S.D.).

One early test will be the jockeying over tax cuts. Big and small business alike crave capital-gains tax cuts but differ on other items. Small business lines up behind the House Republicans' Contract With America, including provisions to deduct up to $25,000 for equipment and inventory, increase the estate-tax exemption for small business, and repeal small-business tax hikes contained in the 1993 Clinton economic plan. Big Business prefers accelerated depreciation, along with targeted research-and-development credits. And in the end, much of Corporate America is more concerned about reducing the deficit than getting new tax goodies. "The deficit is getting sufficiently out of control, and that's causing a negative business climate," warns Robert C. Kirkwood, a lobbyist for Hewlett-Packard Co.

GOP lawmakers mean to slash the deficit, but Big Business may not be happy with every target. Favorites on the chopping block: farm subsidies and export-marketing programs. Farm-subsidy foes, led by Armey, assail the program as socialism that reeks of "Moscow on the Potomac." Agribusiness, meanwhile, is counting on longtime friends, including Dole and House Agriculture Committee Chairman Pat Roberts (R-Kan.), for protection from an assault by budget-cutting conservatives and urban liberals. "The U.S. is a clear world leader in agriculture, and it is important that we not damage the industry," says Robert E. Fowler, chief executive of Vigoro Corp., a Chicago-based fertilizer maker.

At the same time, multinationals hope to protect Commerce Dept. grants that promote U.S. products abroad. Backers say the grants level the global playing field, but entrepreneurs insist that Big Business pay its own tab. "There is no reason to give tax money to Sunkist and McDonald's to promote their products," says Karen Kerrigan, president of Small Business Survival Committee.

On regulatory reform, small businesses favor radical changes in the GOP Contract. They back efforts to limit overall compliance costs to 5% of gross domestic product by slashing environmental, workplace safety, and other federal rules. Philip Bourgeois, president of Studio Red, a 20-person design firm in Redwood City, Calif., says enough is enough: "If I was any more regulated, I don't know if I could stay alive." Big Business--more willing to acknowledge a need for oversight--will settle for reform. Top execs would keep rules that impede smaller competitors while expanding flexibility to choose cheaper compliance methods.

A similar clash is brewing over affirmative action. Small business wants to overturn federal rules they consider complex, costly, and intrusive. Larger companies, better able to absorb compliance costs, want to retain clear guidelines that can be used to protect them from needless bias claims. "Big Business just wants to be left alone," says Stephen A. Bokat, general counsel for the U.S. Chamber of Commerce.

Despite common complaints about soaring medical costs, small and Big Business differ on solutions. Small companies want reforms to make health insurance cheaper and more accessible by making coverage portable, lifting coverage restrictions on people with preexisting conditions, and helping businesses create insurance-purchasing pools. "You can buy 100 things a lot cheaper than one thing," notes Tom Turner, head of SAS Systems, an Atlanta electronics maker. Corporate America is intent on protecting its existing system, in which nationwide plans are free from varying state regulations. But the two lobbies are more likely to team up on health-care issues than to fight.

TITANIC CLASH? Still, where interests collide, small business can be optimistic. Entrepreneurs often back GOP candidates, while Big Business alienated the Republican minority by siding with Democrats. And small business regularly fought perceived antibusiness initiatives such as Clinton's health plan, while Big Business often cut deals with Democrats to protect individual corporate interests. After the unexpected House takeover, some GOP insurgents say it's payback time. "The knives are out for Big Business because of its willingness to play footsy with Democrats," says Republican pollster Glen Bolger.

What's more, small-business owners dominate the GOP freshman class. And the third-ranking House Republican, Tom DeLay (R-Tex.), owned a small pest-control firm for decades. "We are the party of small business more than Big Business, Main Street more than Wall Street," says Republican National Committee Chairman Haley Barbour.

Already, small business is wielding its newfound clout. Case in point: Gingrich promised to fight efforts to eliminate the Small Business Administration. A GOP leadership aide says Gingrich has told colleagues he has "no interest in taking on small business."

The skirmishes within the business community may be fierce at times, but neither Corporate America nor its smaller rival expects to lose the war on Capitol Hill. Tax cuts of some sort are a virtual certainty, and all businesses likely will win major relief from red tape. Those victories should help salve the occasional intramural wounds suffered on the new GOP playing field.

Before it's here, it's on the Bloomberg Terminal.