GOP Win Would Open Door to Deals on Device Tax, Keystone

Oct. 10 (Bloomberg) -- Boston Scientific Corp. and the medical-device industry have been fighting for four years to repeal a tax tucked into Obamacare. Now, they have a chance to win -- if Republicans take over the U.S. Senate.

Should the party win a majority in the chamber in next month’s election, device makers and their bipartisan backers would have the allies they need to put pressure on President Barack Obama to strike a deal on eliminating the excise tax.

Ending the levy on pacemakers and defibrillators is among the issues important to U.S. corporations. Republicans would have an incentive to push for progress on that, the Keystone XL pipeline and free trade, among other areas, early in 2015 as bigger battles loom over the budget and the debt ceiling.

“They’re going to want to show that they’re a party of governing,” said Sean West, deputy chief executive officer at the Eurasia Group, a consulting firm. “Suddenly, things that couldn’t happen can happen. And that has winners, where today it’s frozen.”

Republican control of both chambers of Congress would hardly usher in an era of bipartisan comity and end the disputes over fiscal policy, immigration and health care that have dominated the past four years. And the few exceptions to gridlock would likely be overshadowed by even more intense partisan clashes leading up to the 2016 presidential election.

Keystone Pipeline

In some areas, though, movement is possible. Beyond the medical-device tax, Republicans want a vote to approve TransCanada Corp.’s Keystone pipeline project, which has been awaiting approval for six years. A shift to Republican control also could allow fast-track authority, West said, which would make it easier for the president to reach trade agreements, helping exporters such as Boeing Co. and Deere & Co.

At the same time, some initiatives now championed by Democrats could fall by the wayside if they lose the Senate because the issues divide the Republicans. They include an attempt to let states impose sales taxes on out-of-state Internet and catalog sellers, according to a Senate Republican leadership aide who requested anonymity to discuss legislative strategy. That bill’s death would be a victory for EBay Inc.

Republicans need a net gain of six seats to take over the Senate. They already control the U.S. House of Representatives.

The party’s candidates are favored to win three open Senate seats -- in Montana, South Dakota and West Virginia. They’re trying to defeat incumbents in four states that Obama lost in 2012: Mark Begich of Alaska, Mark Pryor of Arkansas, Kay Hagan of North Carolina and Mary Landrieu of Louisiana.

Georgia, Kentucky

Democrats are seeking to pick up Republican seats in Georgia and Kentucky and are in tight races in states including Iowa, Michigan and Colorado.

Even if Republicans win control of the Senate, Democrats could tie the chamber in knots because 60 votes are needed to overcome procedural hurdles on most issues. Overriding a presidential veto would require 67 votes.

That would make it hard for Republicans to repeal the 2010 health-care law -- their No. 1 target -- as well as to lower individual tax rates or require that all major federal regulations receive congressional approval.

What a Republican majority in the Senate would do is move the fulcrum of U.S. policy making in their direction. A unified party seeking to get 60 Senate votes would look for support from Democrats in states Obama lost twice, such as Joe Manchin of West Virginia, Claire McCaskill of Missouri, Heidi Heitkamp of North Dakota and Jon Tester of Montana.

Environmental Restrictions

Senate Republicans, frustrated at their inability to vote on House-passed bills that ease environmental restrictions and make some business tax breaks permanent, would get a chance to highlight those issues and control the Senate agenda.

The campaign website of John Cornyn of Texas, the second-ranking Republican in the Senate, features a “Countdown to Fire Harry Reid,” the Nevada Democrat who has been Senate majority leader since 2007.

And when it’s time for Congress to handle must-pass legislation -- funding the government, addressing the across-the-board spending cuts known as sequestration, raising the U.S. debt ceiling -- it’s Republicans who would be able to attach conditions and set the terms of debate.

Republicans are looking for areas where they can split Democrats and work with Obama or confront him.

A bipartisan group of lawmakers has been trying to force a vote by the Senate to approve the Keystone pipeline. Reid, who sets the chamber’s agenda under Democratic control, won’t bypass the Obama administration, which is deciding whether to allow the project to move forward.

Deal Room

There’s room for deals on the pipeline and the device tax if Republicans take over, said Jim Manley, a former Reid aide. Success would hinge on Republicans not “overreaching” and being willing to compromise, Manley said.

Earlier this year, pipeline supporters said they had backing from 56 senators, four shy of the 60 needed to prevent it from being blocked. They included all 45 Senate Republicans. The House has passed similar measures by broad majorities.

Mark Cooper, a TransCanada spokesman, said public opinion favors building the pipeline and that some Democrats want it as well. “People of all political stripes and colors support building the Keystone XL pipeline,” Cooper said.

The medical-device tax, enacted to help pay for Obama’s Affordable Care Act, also splits Democrats. Lawmakers from states with device-industry companies -- including Indiana, Pennsylvania, Minnesota and Massachusetts -- back repeal.

PAC Donations

Companies including Becton Dickinson and Co. and Medtronic Inc. are lobbying for repeal of the 2.3 percent excise tax on devices that aren’t sold directly to consumers.

Boston Scientific’s political action committee is sending 77 percent of its money to Republicans in this election cycle, up from 63 percent in 2012 and 48 percent in 2010, according to data compiled by the Center for Responsive Politics.

Boston Scientific spokesman Kelly Leadem yesterday declined to comment.

The Obama administration hasn’t supported repeal; given the potential for veto-proof majorities, it may not have a choice.

Trade policy presents a different alignment. Obama wants the ability to negotiate agreements, including the proposed 12-country Trans-Pacific Partnership, and get up-or-down votes in Congress, without amendments.

Senator Hatch

Republicans such as Utah Senator Orrin Hatch, who is expected to take over the Finance Committee if Republicans win, agree with the president.

The issue fractures Democrats, and Reid has stymied it. With Republicans in charge, it’s more likely the president would get fast track and that any subsequent trade agreements would get approved.

“That’s going to be probably the single easiest and most tangible win for the business community,” West said.

Companies such as Oracle Corp., Kraft Foods Group Inc. and Dow Chemical Co. are part of a group pushing for the Pacific deal.

Democrats’ inability to control the Senate agenda would reduce even further the chances of legislation that would hurt companies in the student-loan and for-profit-education industries, Michael Tarkan and Isaac Boltansky of Compass Point LLC wrote in a Sept. 30 note to clients.

They wrote, “a Republican Senate will produce less headline risk” for education-services companies such as Navient Corp. and Higher One Holdings Inc.

Obama will be looking to cement his legacy, and that may open up opportunities for Congress to act, even on issues such as a corporate tax revamp that are now seen as intractable, said Terry Haines, a policy analyst with ISI Group.

“The conventional wisdom,” he said, is “that very little’s likely to happen. We think that’s largely wrong.”

To contact the reporters on this story: Richard Rubin in Washington at rrubin12@bloomberg.net; Kathleen Hunter in Washington at khunter9@bloomberg.net

To contact the editors responsible for this story: Jodi Schneider at jschneider50@bloomberg.net Mark McQuillan

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