Bush's Big Sweep

The barnstorming President gets a new mandate. But there's no cakewalk ahead

It was an election with almost no political downside for a President riding high in the polls. If Republicans suffered setbacks in the Nov. 5 elections, the White House was ready to blame the midterm curse that afflicts virtually all rookie Commanders-in-Chief. But George W. Bush decided to roll the dice. He put his prestige and record-breaking job-approval ratings on the line and set out on frantic cross-country visits to key swing states.

The result was a narrow but decisive sweep of Capitol Hill. The Senate will now have a minimum of 51 Republicans, with at least 46 Democrats and 1 Independent. Louisiana Democrat Mary L. Landrieu faces a Dec. 7 runoff with Republican Suzanne Haik Terrell. And as BusinessWeek went to press on Nov. 6, a recount was likely in the race between incumbent Democratic Senator Tim Johnson of South Dakota and challenger John Thune. The GOP, meanwhile, had a 227-203 edge in the House, a gain of at least three seats, with four races still undecided at press time.

The election was a historic victory for Bush, who became only the fourth President since the Civil War to gain House seats at midterm. "This election puts Bush in the driver's seat to accomplish a number of things on the business front that he would never have imagined," says Steve Grossman, a former Democratic National Committee chairman and CEO of MassEnvelopePlus, a Massachusetts graphics company. Among the top priorities on which Bush will have added clout: tax cuts, tort reform, and confirmation of conservative federal judges. But even with a new mandate, he won't have time to gloat. Awaiting him: a possible war with Iraq and a slumbering economy.

The showdown with Saddam Hussein clearly helped Republicans in the closing days of the campaign. Bush, who visited 15 states during a final-week blitz, ended up carrying almost all of his endorsed candidates to victory. Among them: hand-picked Senate challengers in Missouri, Minnesota, and Georgia.

The evening brought a few disappointments, of course. Democrats swept to the governorships of several key Presidential battleground states, including Pennsylvania, Michigan, and Illinois, complicating the White House strategy for Reelection 2004. Still, the statehouse triumphs did little to cheer Dems. Unable to turn the weak economy to their advantage, they are already pointing fingers.

As Democrats try to figure out what went so wrong, Bush has to get back to business. The denouement with Saddam is fast approaching (a U.N. vote was scheduled for Nov. 8), and a teetering economy demands his attention.

In addition, Bush must swiftly hammer out final deals with Congress on terrorism insurance and homeland security. He must find common ground on long-debated energy legislation. And he will at least try to break the partisan gridlock over a prescription drug benefit for seniors and judicial nominations. Finally, the Administration will have to decide whether to tackle two long-term priorities: tax reform and the troubled Social Security system.

That's a hefty to-do list for any President, especially one without a solid majority in either house of Congress. Because 60-votes are necessary to accomplish almost anything in the Senate, passing major legislation will require lawmakers to reach across the aisle. "The Senate was designed by our forefathers to be very slow and difficult to move, and boy have they succeeded," says incoming Senate Majority Leader Trent Lott (R-Miss.).

Hurdle One for the President is that, for a while at least, his top two goals--jump-starting the economy and ending the reign of Saddam--could be incompatible. So far, war jitters are sapping corporate and consumer confidence, prompting Bush advisers to worry that the economy could stall. Consumer confidence cratered in October, plunging to a nine-year low. Auto sales during the month fell to their lowest level in four years despite incentives. And October chain-store sales were "dismal," says Bank of Tokyo-Mitsubishi senior economist Michael P. Niemira.

The drums of war are also giving already risk-averse corporate chieftains another reason to hold back on spending and hiring in a bid to boost paltry profits. Capital-goods orders tumbled more than 4% in October, while private payrolls shrank by 29,000. And the manufacturing sector looks to have fallen back into recession. According to a survey by the Institute for Supply Management, manufacturing contracted in October for the second straight month. Says Allen Sinai, chief global economist for consultants Decision Economics Inc.: "We're going to see a very poor fourth quarter and a bad Christmas. It's very, very dicey." Other economists are also sharply reducing forecasts for fourth-quarter growth. Many now see growth of 1% or less, vs. 3.1% in the third. First-quarter 2003 forecasts are being pared, too, in some cases to as little as 1%.

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By Richard S. Dunham and Howard Gleckman, with Rich Miller and Lorraine Woellert, in Washington; Amy Barrett in Philadelphia; William C. Symonds in Boston

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