GOP Domestic Dispute Is On

The fighting is over in Iraq. Congress is returning from a two-week break. And it’s make-or-break time for President Bush’s domestic policy agenda.

As Washington’s attention snaps back to the home front, lawmakers are heading into a period of intensive work on economic, health and other domestic issues expected to be central to Bush’s pitch for reelection in 2004.

“He’s got to have a couple of good domestic victories,” said Ralph Hellman, a business lobbyist who is supporting Bush’s effort to cut taxes. “He’s got to focus on two or three things ... that he wants to be able to point to as accomplishments.”

That’s why Republicans in Congress have spent the last few war-dominated months trying to keep Bush’s domestic policies moving along.

Still, it’s already clear that Bush’s enhanced prestige as a wartime president will not turn Congress into a rubber stamp. The Senate Finance Committee is heading toward drafting a tax cut less than half the size Bush wants -- and will probably drop his cornerstone proposal to eliminate taxes on dividend income. The Senate will take up an energy bill shorn of Bush’s plan to expand oil drilling in Alaska’s wilderness. The House is expected to clear a bill to encourage charitable giving that is a shadow of Bush’s much-touted “faith-based initiative” to promote aid to religious charities.

And despite Bush’s popularity, his party in Congress is badly split, embittered by a brawl over how big a tax cut to enact. Advocates of the larger cuts are running attack ads implying that Republican dissidents are as anti-American as the French. One Republican who supports smaller cuts has compared his critics to toddlers having a tantrum.

GOP leaders are welcoming Bush’s return to this briar patch of a domestic scene. Rep. Deborah Pryce of Ohio, a member of the party’s congressional leadership, said Bush’s speech in Ohio late last week to promote his tax cut was a signal he’s ready to play a more prominent role in the debate at a crucial time.

“The working assumption is that most of the agenda items we’re going to pass that are large in nature are going to have to pass before the fall of 2003,” said Stuart Roy, spokesman for House Majority Leader Tom DeLay (R-Texas). “At some point after that, the legislative agenda gets consumed with the political agenda.”

On Saturday, Bush made the economy the subject of his weekly radio address -- urging Congress to approve his tax cut plan, saying it would create jobs and stimulate economic growth.

Democrats welcome the renewed focus on domestic issues, and may now drop any reservations they had about criticizing Bush during the war.

“You will see us lay out a case against the president’s economic policy and how it has failed,” said House Minority Leader Nancy Pelosi (D-San Francisco). “The more he insists on these tax cuts, the more disconnect there is between him and the American people.”

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Bush’s Wish List

Although the president’s proposed tax cut is the single biggest issue before Congress, the coming months are packed with other issues on his wish list. This week, the House plans to vote on Bush’s global initiative to combat AIDS. The Senate is expected soon to take up an energy bill, albeit one more modest than Bush had sought.

The House may act before Memorial Day on legislation to overhaul Medicare and add a prescription drug benefit for senior citizens -- a major initiative that is a top Bush priority. House Majority Whip Roy Blunt (R-Mo.) said passing the bill is especially important because Republicans believe Senate inaction on the measure last year contributed to Democrats’ losing control of the chamber in the 2002 elections.

“This is a very important issue, both substantively and politically,” said Blunt. But navigating the issue’s delicate politics will not be easy. And Pryce warned that the bitter division between House and Senate Republicans over the tax cut makes it worse.

“We’re going to give it our very best, but this incident with the Senate doesn’t help that,” said Pryce.

Bush had initially pressed for an 11-year, $725-billion tax cut, but it soon became apparent that with congressional concern about the federal budget deficit, that measure could not pass.

Just before Congress left for its spring recess, the House and Senate passed a budget compromise worked out by GOP leaders. It would have authorized the House to pass a $550-billion tax cut while the Senate would limit it to $350 billion. The hope was that Bush and others could later persuade moderate GOP senators to vote for a higher figure.

But in an eleventh-hour surprise, Senate Finance Chairman Charles E. Grassley (R-Iowa) announced that Sens. Olympia J. Snowe (R-Maine) and George Voinovich (R-Ohio) -- whose votes were needed to pass the compromise -- supported it only because he promised to prevent any final tax cut from exceeding $350 billion.

That blindsided and infuriated House GOP leaders; they angrily denounced Grassley and other Senate Republicans and warned that the surprise deal endangered intraparty relations.

The fur has continued to fly even while lawmakers have been home over the last two weeks. The Club for Growth, a political group that promotes tax cuts, ran ads attacking Snowe and Voinovich in their home states. Grassley, in a column written for his constituents, said House leaders’ fury at him “proved tantrums aren’t restricted to the two years and younger crowd.”

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An Election on the Line

Bush has much at stake in getting Republicans to bury the hatchet and act quickly on his economic plan -- and ensure that any benefits from it emerge before the 2004 elections.

“Bush is going to win or lose [in 2004] based on how he’s perceived on the economy,” said Grover Norquist, a tax cut advocate who is president of Americans for Tax Reform.

White House and congressional staff have been meeting to discuss how to resolve the House-Senate dispute.

A senior Senate GOP aide said a leading option is to write a bill that cuts taxes by more than $350 billion -- but would offset the additional tax cuts with revenue increases, such as closing corporate tax loopholes.

Another option is to move more than one tax bill. One would include one of Bush’s most controversial provisions -- eliminating the personal tax on dividends -- and would be passed under special budget procedures that allow the Senate to move it with a simple majority rather 60 votes. A second bill would include popular tax cut items, such as tax breaks for married couples, which would be more likely to garner 60 votes.

A key question for Bush is how hard to push for the dividend tax cut, which at a cost of $396 billion is the single biggest piece of the package. He has made it the centerpiece, but many members of Congress -- including some Republicans -- are lukewarm to it because they do not think it would give the economy a quick shot in the arm.

Grassley has said the Senate’s $350-billion tax cut bill is not likely to include it.

Democrats say that is the clearest sign that Bush’s popularity as a result of the war will not translate into big domestic policy victories.

“The Republicans control the House, the Senate and the White House and his signature item [the dividend tax cut] may very well not make it into the [final] tax bill,” said a senior House Democratic leadership aide.

Republicans are acutely aware that a bill with no dividend tax relief would be a blow to Bush.

“The administration is putting an inordinate amount of emphasis on the dividends component,” said a senior House GOP leadership aide. “So, many will look to that as a barometer of success, right or wrong.”

But in the end, Bush is likely to trumpet whatever tax bill gets sent to the White House.

“Whether it’s $350 billion, $550 billion or $750 billion -- any tax cut we pass is going to be a Bush tax cut,” said former GOP Rep. Vin Weber of Minnesota, who is now a lobbyist. “He’ll get credit, and he’ll deserve it.”