Industry upbeat over Republican win; GOP control of Congress could begood news for automakers.

Now that they con trol Congress, analysts expect the Republicans to move quickly on tax-cut and credit measures that could put more money in consumers' pockets, helping to stretch out an auto sales boom that some economists fear could start to waver in 1996.Republicans have pledged to:* Cut the capital gains tax from 28% to 14%. Consumers pay this when they sell stocks and bonds at a profit.* Seek

January 1, 1995

3 Min Read
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Now that they con trol Congress, analysts expect the Republicans to move quickly on tax-cut and credit measures that could put more money in consumers' pockets, helping to stretch out an auto sales boom that some economists fear could start to waver in 1996.

Republicans have pledged to:

* Cut the capital gains tax from 28% to 14%. Consumers pay this when they sell stocks and bonds at a profit.

* Seek a $500 per family child-care credit, and possibly demand a $500 family credit for those who care for aging parents.

* Repeal 1993's tax hike on Social Security checks.

Auto lobbyists are crossing their fingers about the Republicans' tax-cutting enthusiasm. They know the GOP wants to deliver quickly on its "Contract with America" in order to keep the momentum of its big election win. Yet there is a danger in the promises: Consumers could put big purchases like cars and trucks on hold while they wait to see what Congress does. That could hurt first-quarter auto sales.

With the changeover, auto industry lobbyists now must put new cards under "C" in their Rolodexes, listing the names of the new chairmen of the House and Senate Commerce Committees, and a new Commerce secretary.

Leading the Senate panel will be Sen. Larry Pressler (R-SD), who replaces Sen. Ernest Hollings (D-SC). Virginia Republican Rep. Thomas Bliley Jr. is taking over from legendary Michigan Democrat Rep. John Dingell, perhaps the industry's best friend in Congress.

Neither Mr. Pressier nor Mr. Bliley is known for his work on auto issues. Mr. Pressler has been among the leading backers of telecommunications reform, while Mr. Bliley has been a long-time friend of the tobacco lobby in his home state.

Meanwhile, Commerce czar Ron Brown, who met frequently with Big Three leaders and has taken field trips to Detroit, is likely to step down from his job by this spring to run President Clinton's re-election campaign. Mr. Brown has been the most visible Commerce secretary in years, and invited Chrysler Corp. Chairman Robert J. Eaton to accompany him on a whirlwind trip through China in 1994. Any successor undoubtedly will be charged with keeping lines of communication open with the Motor City.

Despite the new faces, the Republican takeover will perhaps mean a willing audience for carmakers' gripes about too much government regulation. The GOP leaders, who've embarked on a congressional office slim-down, aren't likely to look favorably on creating new red tape for vital American industries.

That spells trouble for the long-languishing Congressional effort to revive 5-mph (8 km/h) bumpers. And any bid to raise Corporate Average Fuel Economy (CAFE) standard likely will die quickly, despite White House support for cars that get better gas mileage.

Two top auto industry priorities--health care and trade--might get some attention this year. But Republicans won't pass the sweeping health care reform that President Clinton proposed and carmakers supported. Any health care bill will be incremental and likely aimed at cutting red tape. And the legislation undoubtedly will be the result of much compromise between a beleaguered White House and congressional leaders.

On trade, there is talk that Japan bashing could start to simmer again. The GOP leadership has made no bones about its desire to protect U.S. markets. And Mr. Clinton, who pushed for congressional passage of North American Free Trade Agreement (NAFTA) and General Agreement on Tariffs and Trade (GATT), may be of a like mind. "There is a lot of room for cooperation there," says Clyde Prestowitz, president of the Economic Strategy Institute.

Approval of the GATT treaty in December may have an impact on automakers' operations around the world, after nations sift through its 2,000 pages of new rules. One thing it won't do is wipe out U.S. CAFE regulations. Though some hopeful carmakers spread rumors last fall that the world trade regulations meant an end to fueleconomy standards, that's not the case. Under the regulations, CAFE standards can remain at current levels indefinitely.

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