Transcripts

It May Be May Day For The GOP Come November

PAUL KANGAS: The calendar says "May," but when it comes to politics, right about now everyone starts thinking about November. Analysts say this fall`s congressional elections may be the toughest for Republicans in more than a decade. As Darren Gersh reports, market watchers are beginning to weigh the consequences of a change in control in Washington.

DARREN GERSH, NIGHTLY BUSINESS REPORT CORRESPONDENT: Ah, Memorial Day, when most Americans begin thinking about vacations and time off the job and politicians start ramping up plans to stay employed. This election year there`s reason for Republicans to worry.

AMY WALTER, POLITICAL ANALYST, COOK POLITICAL REPORT: The overall message right now is one that suggests that what voters are looking for fundamentally is just a change in direction. They don`t like the way that things are headed right now. They`re very open to the message that the status quo isn`t working; let`s vote for change.

GERSH: The Cook political report, an influential election guide, now rates 36 Republican house seats as vulnerable, up from 24 just two weeks ago. Political economist Tom Gallagher is now warning markets there`s a 55 percent chance Democrats will take back either the House or Senate, setting the stage for even bigger battles.

TOM GALLAGHER, POLITICAL ECONOMIST, INTERNATIONAL INVESTMENT & STRATEGY: Almost all the important tax provisions expire in 2010, so there will be an attempt by Bush in his last two years to extend that. And the better Democrats do, the harder it will be to do that.

GERSH: If Congress does change hands in the fall, it could mean big swings for key sectors. Health care is likely to benefit under Democrats. Gallagher also says individual companies supported by Democrats, like mortgage giants Fannie Mae and Freddie Mac, should do well, while those seen as Republican allies, like Halliburton, may suffer as newly installed Democratic committee chairmen launch investigations of contractors working in Iraq. And then there`s Wal-Mart.

GALLAGHER: There`s a bill with a surprisingly high number of co- sponsors in the House and Senate-- almost a majority, just short of a majority in the House and the Senate-- which would make it easier to organize companies, especially Wal-Mart. It`s really targeted at Wal-Mart.

GERSH: But Gallagher adds markets don`t tend to price in these kind of election possibilities until after Labor Day, so enjoy the summer. Darren Gersh, NIGHTLY BUSINESS REPORT, Washington.