January 3, 2007
Washington, DC
Vol. 42, No. 1a

To: Our Readers

• Pelosi will not go anywhere near real lobbying reform
• Johnson's absence could determine fate of stem-cell bill in the Senate
• Democrats finally decide to seat Buchanan after disputed Florida race
• Louisiana population decline increases Republican odds against Landrieu
• GOP 2006 failures in New Hampshire make Sununu vulnerable for 2008

Outlook

1. No event in Washington is totally non-political, and so the death of Gerald R. Ford became political, as liberal commentators seized on the former President's death to attack the modern Republican Party. The line has been that the Reagan Republican Party (though, of course, Ronald Reagan -- now an icon -- is never mentioned by name) is an aberration from Ford's true path of moderation. It is no secret that Ford much disliked the shape of the GOP that followed him, especially social conservatives. But Ford's Republican Party was a loser, while Reagan's was a winner.
2. The lionization of Ford, including praise by those who were severe critics when he was President, has resonance in today's political climate. Many social conservatives, complaining they have been abandoned by both the Bush White House and congressional Republicans, stayed out of the disastrous '06 election. They are even unhappier about prospects for '08, fearing they will have no Republican presidential hopeful who excites them.
3. Washington insiders completely rule out former New York Mayor Rudy Giuliani for the presidential nomination because of his liberal position on social questions, even though he leads Sen. John McCain (R-Ariz.) and all other possible candidates among Republicans nationally. But we think ruling him out is too hasty. Giuliani's hope against McCain rests with the liberal voters in New Hampshire who won the state for McCain against George W. Bush in 2000.
4. President Bush prepares what is expected to be a call for a "surge" of 30,000 additional troops in Iraq with a majority of Republican senators against him, though support surely will grow as the President comes under attack from Democrats. It will be difficult for Congress to block additional troops from being dispatched, but Bush will be uncomfortable if he acts against the wishes of Congress and the nation.
5. Sen. Harry Reid (D-Nev.), a master obstructer during two years as Senate minority leader, is about to get a taste of obstruction himself. Passage this year of embryonic stem-cell research legislation that was vetoed by Bush last year is a prime Democratic priority. But Sen. Sam Brownback (R-Kan.), a leader of the social conservatives, plans a mini-filibuster that will delay passage at least three weeks.

Congress

First 100 Hours: Democrats have made big promises about their first 100 legislative hours in the House of Representatives, and so we look at what they're planning for when Congress returns and begins its work January 4.

The exiting Republican Congress failed to pass 10 of the 12 required spending bills for the 2007 fiscal year, leaving the new Congress with a continuing resolution that lasts only until February 15. This complicates all of the Democrats' plans to legislate immediately, although it should not stop them.

Part of Democrats' complaints for the duration of the Republican majority in Congress was that the GOP leaders used "closed rules," preventing all or most amendments from being presented. Democrats promised to change this when they took control, but they are backing away from this pledge already. Democrats have announced that during the first burst of legislation Republican alternative proposals will not receive a vote on the floor. Republicans had hoped to propose tougher measures on a number of their agenda items and to sway conservative Democrats to join them.

We offer a very brief look at what the Democrats will do.

Ethics Reform: Democrats are promising to "break the link between lobbyists and legislation." Included in this is a promise to "end the K-Street Project," which is seen as absurd by anyone in Washington who knows that the K-Street Project is a lobbying jobs website run by a 20-something staffer. In fact, Democrats will not go anywhere near real lobbying reform, which would have to include bans on lobbying firms' hiring spouses of congressmen and senators -- a common practice that legally lets special interests put millions of dollars into members' bank accounts when their interests are pending before Congress. Both parties have too much to lose from meaningful reforms. The reforms enacted will be mostly symbolic. Some of the proposals being discussed would have unintended results on the behavior of lobbyists, fundraisers, Capitol Hill staffers and congressmen.

Pay-Go: The Democratic version of "pay-as-you-go budgeting," which allows no new deficit spending, is to allow tax hikes to make up for higher spending. This will not be easy, because even though President Bush appears malleable when it comes to raising taxes as part of a Social Security reform compromise, he has no incentive whatsoever to give in to Democratic demands for a general tax hike. Moreover, pay-go likely will not apply to so-called "emergency" spending bills, which will therefore become the vehicle of choice for all kinds of non-emergency spending.

Student Loans: Democrats have promised to cut the interest rate in half on federally subsidized student loans. This will be challenging if they also keep their promise of returning to Pay-Go budgeting, since they somehow will have to pay for the extra subsidy.

On a related note, Democrats will wisely stress the proposal to make college tuition deductible. This appeals to the middle class. In some sense, it is a sensible proposal, considering that the student loan program has caused such massive hyperinflation of college costs, well beyond any reasonable market value, since the program was created.

9/11 Commission Recommendations: Democrats' promise to implement all of the 9/11 Commission's recommendations has already fallen by the wayside as they admit basically what the Republicans already knew: They're not all practical. This sounded good enough that it did help during the campaign, though.

Drug Price Negotiation: Democrats will try to amend the President's prescription-drug program by allowing the government to set the price it pays for prescription drugs. If this significantly reduces government prices for the large market Medicare serves -- which is the intent -- then this measure will have effects far beyond what is currently expected. It may create a major new segmentation in the market, beyond the current segmentation between American consumers -- who pay full price -- and foreign consumers, who often get an artificially low price by threatening to violate drug patents.

The price difference between Medicare patients and others may broaden dramatically as drug companies lose profits on government sales and therefore seek to make up the difference with private buyers. It could mean higher prices for most Americans, which could lead to clamoring for still more government control over health care and the end of the American pharmaceutical industry as we know it. Conservatives and Big Pharma are concerned by this prospect, but others will likely follow suit. The U.S. drug industry is by far the most productive such industry in the world.

Minimum Wage: This is a no-brainer for Democrats in more than one way. It is a populist provision that makes people feel good, even if it has little or no beneficial effect. The Democrats' plan would raise the federal minimum wage gradually to $7.25 an hour. It will require unprecedented competency on the part of President Bush to force inclusion of key business-friendly provisions that would make the measure more palatable for the nation's job-creating small enterprises. This could become an excellent test case for President Bush's ability to negotiate using a threatened veto.

Oil Tax Breaks: Democrats will vote to rescind special tax breaks for the oil industry. This is something Bush and most conservatives would not oppose too strongly in principle. Others may resist at the behest of Big Oil, but no one is feeling sorry for companies that are making good money and need no extra government incentive to drill as long as oil is in the $60 to $70 range.

Embryonic Research Funding: This is an issue where the vote will be very close on overturning President Bush's veto in both Houses. House passage over Bush's veto will be difficult, since 12 of the Republicans who lost voted for federal funding of embryo-destroying research. It is unclear how some of the new Democrats in the House will vote as well. With Sen. Tim Johnson (D-S.D.) currently on the sidelines, the Senate overriding vote could come down to Sen. Bob Casey (D-Pa.). Casey told at least one news outlet during the campaign that he supports Bush's policy and would not back the current bill, which would overturn Bush's policy.

Congressional Schedule: This looks like the most absurd proposal of all. Majority Leader Steny Hoyer (D-Md.) and Pelosi have promised a five-day work week for Congress. This sounds good, except that Congress has always worked five days a week, legislating on only three of those days.

Absent Items: Notably, there is nothing in the Democrats' pledge about immigration or Hurricane Katrina.

Disputed Seat: Democrats put one early controversy behind them by deciding to seat Rep. Vern Buchanan (R-Fla.) of Florida's 13th District. Buchanan's victory was being challenged by Democrat and banker Christine Jennings after it was revealed that several thousand voters in Sarasota County left their ballots blank in the Congressional race. Jennings is still pursuing the matter in court, but she is not considered likely to win.

Senate 2008

Louisiana: Sen. Mary Landrieu (D) was widely acknowledged as having done well by her constituents when Hurricane Katrina hit New Orleans. Still, her position in this seat has always been somewhat precarious, and the severe decline in New Orleans' population -- particularly among its poorest residents -- could make a close race even closer for her.

New Orleans Mayor Ray Nagin (D), in the first such pessimistic statement since the hurricane, admitted that people simply aren't returning to the Big Easy. The state has now lost 200,000 people, and New Orleans and its environs have lost as much as half of their population. The state is now in serious danger of losing a congressional seat after the next reapportionment. Some believe that the most likely districts to be drawn together, simply due to sheer loss of population, are those of Representatives Charles Melancon (D) and William Jefferson (D). This is bad news for Republicans, since Melancon's district has always been winnable for them and under such a scenario that would no longer be the case.

Word in Republican circles is that the National Republican Senatorial Committee is trying to recruit Rep. Charles Boustany (R), of Southwest Louisiana, to take on Landrieu. Boustany won in and represents a conservative Democratic area of Louisiana that is proven to vote for Republicans. Not only did it support President Bush strongly in 2000 and 2004, but it also helped Sen. David Vitter (R) get elected when it failed to deliver votes for its hometown son, former Rep. Chris John (D). Boustany, the thinking goes, could take away from Landrieu's support there.

Rep. Richard Baker (R), having lost his bid to become ranking member of the Financial Services committee, is not expected at this point to make a leap at the Senate race. Still, he probably gets among the highest marks of anyone in the Louisiana delegation for his work after the Hurricane.

Mississippi: After this year's election for governor, Mississippians will face the prospect of losing their junior senator, Thad Cochran (R). As Appropriations Committee chairman, Cochran wielded much might for two years, but he is on the fence about retirement now that Republicans are in the minority in the Senate. Some of his closest associates say that he has started to lean in the direction of running again. This comes as terrific news for the GOP, since it would mean one less vulnerable seat.

Cochran lost an eleventh-hour struggle against the Senate's conservative reformers this month when they forced passage of a continuing resolution for appropriations that excluded members' pork-barrel projects.

Democrats are gearing up in the hopes that there will be an open seat up for grabs. The Democrat most discussed as a candidate is state Atty. Gen. Mike Moore (D), a moderate to conservative Democrat of the sort still electable statewide in Mississippi. Republicans fear that Moore's expected opponent, Rep. Chip Pickering (R), does not have what it takes to win a tough race statewide. But Pickering showed he was no slouch in 2002, when he defeated Rep. Ronnie Shows (D) after redistricting placed them in the same district.

If Cochran does run again, he is not expected to draw a serious challenge.

New Hampshire: Sen. John Sununu (R) would be in fine shape for re-election, if not for his party's total self-immolation in the 2006 general election. Republicans were crushed after their legislative leaders miscalculated and tried to make peace with Democratic Gov. John Lynch (D). Lynch proceeded to crush the unsupported GOP candidate on the ballot, and straight-ticket voting pummeled down-ticket Republicans, resulting in the loss of both GOP House seats, the entire executive council, and both houses of the state legislature.

With a 74 percent re-election under his belt, Lynch now poses a real threat to Sununu, if he becomes interested in the race.

Sincerely,

Robert D. Novak

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