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Democrat Gains in Congress Clear Way for Party Agenda (Update1)

By Laura Litvan

Nov. 5 (Bloomberg) -- Democrats in Congress plan to use their election gains to push for an economic stimulus measure, expanded health-care for children and funding for stem-cell research -- and then follow President-elect Barack Obama's lead.

``Clearly Obama will be the principal agenda-setter,'' House Majority Leader Steny Hoyer, a Maryland Democrat, said yesterday.

Even with some races yet to be decided, voters gave Democrats more clout in the Capitol than the party has had in 14 years. Democrats picked up at least five Senate seats, giving them the type of Senate majority they had before Republicans seized control of Congress in 1994. In the House, the party added at least 14 seats to their current 236-seat majority, with about a dozen of the chamber's closest races still undecided.

Democratic leaders in both chambers plan to curb troop levels in Iraq, while making clear that they will first test their increased power on domestic issues.

Democrats will use a lame-duck session of Congress to try to reach agreement with President George W. Bush on at least a down payment on a stimulus plan that will include more spending on unemployment benefits, food stamps, Medicare and Medicaid assistance and infrastructure, Hoyer said in an interview.

If Bush balks, the entire stimulus plan will resurface once the new Congress and Obama, 47, take office in January, Hoyer said.

The party also will move to add 4 million children to a U.S. health-care program and to approve legislation allowing federal funding of embryonic stem-cell research. Both issues failed to muster enough support in the past session to overcome Bush's vetoes.

`Signal the Change'

``In the first few days of the new Congress, we will signal the change that has to happen in making health care more accessible and available and affordable,'' Pelosi said Oct. 30 in an interview with San Francisco radio station KGO. ``Those bills have bipartisan support, and they will be signed by the new president.''

The party will get a chance to alter the current fiscal year's budget priorities early in the year. Democratic leaders, anticipating Obama's victory, this fall delayed until March 6 final budget decisions for the fiscal year that began Oct. 1. They plan to increase spending on renewable energy, roads and other infrastructure, and education.

Tax Cuts

Congressional leaders will act on middle-class and small- business tax cuts, while allowing the Obama administration to take the lead on the timing, Hoyer said.

The size of the Democratic election victory ``may send a message to Republicans'' not to oppose the agenda, Hoyer said. And the so-called Blue Dog Democrats, who are focused on balancing the federal budget, ``in the short term will be supportive'' of spending measures, Hoyer said.

The biggest obstacle for Democrats in the 2007-2008 session of Congress was the ability of Senate Republicans to block legislation they didn't like with endless debate, a tactic known as a filibuster.

Democrats more than 100 times held votes to overcome filibusters during the past two years. Republicans said they actually sought to block measures only about 40 times.

Even as they failed to win enough seats to get the full 60 seats, Democrats are still likely to have a broad impact on policy with the help of just a few moderate Republicans, such as Susan Collins and Olympia Snowe of Maine.

Bracing for Changes

The business community is bracing for changes. Bruce Josten, executive vice president of the U.S. Chamber of Commerce, said the top concern for his group is possible passage of the Employee Free Choice Act, which makes it easier to form unions in workplaces. The measure fell one vote shy of breaking a Senate filibuster in June 2007, and some of its Republican opponents, including Senator Pete Domenici of New Mexico and Senator John Warner of Virginia -- were replaced last night by Democrats who are more likely to support it.

Legislation that would allow the government to negotiate Medicare drug prices with manufacturers also has a better chance of advancing to the president's desk. Long opposed by pharmaceutical makers, such legislation passed the House in 2007, and then fell five votes shy in the Senate of overcoming the delaying tactics of the measure's opponents.

Several Republicans who sided with drug-makers retired, including Warner, Domenici and Wayne Allard of Colorado, and Democrats were elected in their place.

Financial Services

On financial services, Democrats vow a broad rewrite of the rules governing banking and investment firms following the collapse of the mortgage market.

``I think they're going to make a major effort to streamline oversight of the financial services industry -- banks, savings, and loans, credit unions, thrifts, insurance companies,'' said Ethan Siegal, president of the Washington Exchange, which tracks Washington policy for institutional investors.

Meanwhile, analysts said some of the Democrat-backed ideas that failed to make it into this year's $700 billion financial bailout legislation are likely to be revived. That includes a measure that lets judges modify mortgages in bankruptcy court to save homeowners from foreclosure, and ``say on pay'' legislation that would give shareholders a proxy vote on executive pay.

The slowing economy is likely to push some bigger-ticket issues into 2010, according to analysts and congressional aides. An overhaul of health-care policy to curb the number of uninsured is unlikely to occur in 2009, as is climate-change legislation designed to cut so-called ``greenhouse gas'' emissions.

While Democrats may start to hold hearings on a broad rewrite of the tax code, final action is unlikely to occur in just one year, Siegal said. However, as Democrats seek more revenue to pay for some of Obama's election-year promises, they could seek some changes in 2009. A plan to boost taxes on managers of hedge funds and private-equity firms could re-emerge, analysts said.

``It's a $25 billion money-raiser,'' said Anne Mathias, director of policy research at the Stanford Group in Washington.

To contact the reporter on this story: Laura Litvan in Washington at llitvan@bloomberg.net

Last Updated: November 5, 2008 06:43 EST