Second Agenda

Lawmakers approach president's bold stance on tough issues, including Social Security and Iraq, with caution.

The 109th Congress opens with Republicans occupying a commanding position. President George W. Bush begins his second term confident enough to claim a mandate, the GOP House majority has expanded and the Senate majority, fresh off a four-seat Republican gain, is now just five votes short of the 60 needed to break filibusters.

Yet even with these imposing advantages, the remarkably ambitious second-term domestic policy agenda laid out in the president's Feb. 2 State of the Union address faces so many challenges as to cast considerable doubt on the outcome.

The stakes for both parties could hardly be higher. The White House is tackling the most politically perilous issue imaginable-fixing Social Security-against the backdrop of sustained and costly military involvement in Iraq and a staggering budget deficit. That prospect is deeply worrisome to congressional Republicans who are mindful of the 2006 midterm elections.

1. Social Security

President Bush says nearly every option is open for consideration in his attempt to solve the impending Social Security shortfall-except raising payroll taxes, that is. Under the proposal he laid out in his State of the Union speech, workers born in 1950 or later could divert up to 4 percent of their Social Security taxes into private investment accounts. The accounts would be phased in between 2009 and 2011. Congressional Republicans, however, are wary of staking out a position. In the House, some prefer to see the Senate take the lead, fearful of casting a controversial vote made meaningless by Senate inaction. Senate Finance Committee Chairman Charles Grassley, R-Iowa, agrees, arguing that it will be more difficult to move a package through the Senate than the House. Grassley favors the administration's approach-a broad blueprint that offers greater flexibility to negotiate a deal.

2. Iraq/Defense

The war in Iraq continues to color nearly every policy debate on Capitol Hill. Republicans, buoyed by the Jan. 30 elections in Iraq, remain united on the president's approach. Yet small fissures are beginning to appear; some Republicans are questioning whether there are enough troops to meet needs in the Iraq campaign and elsewhere. The president's fiscal 2006 budget proposal gave the Defense Department a 5 percent increase, but many members of Congress were scrambling to stop proposed funding cuts in major weapons systems in their home states. Among the targets: The Air Force's F/A-22 fighter and C-130J transport plane, and several Navy shipbuilding programs.

3. Tax reform

While overhauling and simplifying the federal tax code ranks high on the Republican agenda, it is doubtful that far-reaching changes will be enacted this year. A more immediate tax relief scenario involves action on a less ambitious scale-making the 2001 and 2003 tax cuts for married couples and families permanent; repealing the estate tax; and lowering taxes on dividends and long-term capital gains.

4. Judicial nominations

A little-used parliamentary maneuver could change Senate rules to limit floor debate over judicial nominees. It appears that a majority of the Senate favors barring judicial filibusters. But before Senate Majority Leader Bill Frist, R-Tenn., acts, he'll have to weigh the consequences. Senate Democrats, who used the filibuster to block 10 Bush appellate court nominees during the 108th Congress, have indicated that they will regard such action as a declaration of war. Frist will have to consider the implications of the rule change on his 2008 presidential ambitions-and the fact that eight Supreme Court justices are older than 65.

5. Litigation reform

Two high-profile measures dominate the Republican drive to reform the civil justice system: One would move many class action lawsuits from state courts to federal courts and the other would cap medical malpractice awards. Class action legislation is the better bet for passage. The prospects for a medical malpractice bill are dimmer, despite an all-out effort by President Bush. A House-passed 2003 bill included legal protections for the drug and medical device industries-controversial in light of recent safety concerns about prescription pain medication. The Senate, however, is the main stumbling block, even with the addition of four new Republicans.

6. Illegal immigration

A conservative House faction is determined to toughen immigration policies, which puts them at odds with the Senate and the president. Senate Republicans are more focused on the Bush administration's temporary guest worker plan. Most favor more liberalized immigration policies, a stance that puts them closer to the Democratic position than to their House colleagues.

7. Highway bill reauthorization

Deficit reduction imperatives will again play a role in reauthorization talks, but the ongoing battle over the rate of return on federal transportation aid received from fuel taxes-the "donor state" issue-also is an obstacle. Much still needs to be hammered out, including the price tag. Either way, House Transportation and Infrastructure Chairman Don Young, R-Alaska, has set a June 1 goal for completing a House-Senate conference committee agreement.

8. Medicaid

The good news for the nation's governors is the Bush administration would like to give states greater flexibility to reshape Medicaid and control costs. The bad news is this is likely to prove a costly trade-off. The Bush budget calls for a net reduction of $45 billion; the savings are to be achieved by, among other things, cracking down on state techniques that increase the federal spending share, and provisions designed to make it more difficult for middle-income seniors to dispose of assets so they can qualify for Medicaid-financed nursing home care.

9. Arctic National Wildlife Refuge/Energy

An expanded Senate Republican majority increases the odds of winning congressional approval for oil exploration in the Arctic National Wildlife Refuge. An energy bill that would offer incentives for new domestic oil and gas production also is on the Republican agenda, but similar legislation stalled in the Senate last year over the still-unresolved issue of protecting gasoline-additive makers from lawsuits.

10. Budget deficit/federal spending

With a $427 billion deficit projected for fiscal 2005, the administration's lean fiscal 2006 budget request freezes most discretionary spending and slashes spending for scores of other federal programs. Defense and Homeland Security departments will see increases, but entitlement spending will be under the knife in Congress, where House conservatives have identified deficit reduction as a top priority. One great unknown looms large: The framework of the Social Security plan and the transition costs necessary to set up new private accounts. Neither Bush nor Congress has suffered adverse political consequences for the size of the deficit. Without those pressures to rein in spending, deficit reduction might take a back seat.