Beware the sleeping giant.

• Author: Kaitz, James A.
• Position: Impact of 1996 elections on business finance

Many pundits interpreted the 1996 elections as a call for bipartisanship and a victory for divided government. In other words, Americans consciously voted on election day to ensure that a Republican-controlled Congress would keep a watchful eye on Bill Clinton, or vice versa. But the last time I checked, we didn't have a parliamentary system of government, and I don't buy the conventional wisdom.

Last year was the year of the incumbent. The American people were generally happy with their station in life and uninclined to throw anyone out as they did in 1994. So it's easy to explain Bill Clinton's victory: peace and prosperity. It's a winning combination. Why rock the boat when the fishing is good?

What can we expect in Washington in the next couple of years? I've been around Washington too long to make predictions beyond a couple of weeks. But I do believe the overriding message Americans delivered last November was: We're most comfortable with slow, incremental change. We like a bite-sized political agenda. It's more comforting. A little health care reform, a little educational reform and maybe a little targeted tax cut would be just fine. But, please, no colossal changes!

Should financial executives lean back, put their feet up and doze off until 1998? I don't think so. Politicians still have to deliver on their campaign promises - no matter how far-fetched. Few politicians get re-elected by telling their constituents they spent two years maintaining the status quo. The "paycheck" issues both political parties talked about last year - secure and portable pensions, healthcare reform, educational initiatives and targeted tax cuts - are all on the table in the 105th Congress.

If you combine President Clinton's desire to secure a place in history with the Republicans' fervor to solidify their base for the 1998 mid-term elections, you have all the ingredients for a rabble-rousing session of Congress. This dynamic will force both the White House and Congress to cautiously circle one another, each waiting to see who will blink first. It will be a delicate balancing act for both, and I expect the conciliatory overtures each side is making to quickly dissolve into sharp, partisan disagreements.

So what will all this mean for financial executives and their companies? First, bear...