High Stakes on Capitol Hill

After a year of relatively light lifting, Congress returns to work on Tuesday to face a busy domestic agenda that could signal major changes in the way Americans pay taxes and plan for their retirements.

President Bush plans to focus on two big-ticket items in the 109th Congress: He wants workers to be able to invest part of their Social Security payments in private accounts, and he wants to simplify the federal tax code.

Both plans are ambitious, and their success or failure could go a long way toward shaping the president’s legacy in his second term. Republicans, who are more confident than at any time since the 1994 “Republican Revolution,” are eager to start tinkering with Bush’s high-stakes ideas.

“This session of Congress will be the most interesting session since 1995,” said Rep. Gil Gutknecht, R-Minn., part of the freshman class that helped sweep former House Speaker Newt Gingrich to power in 1994. “This year there are going to be a lot of big issues discussed. It’s going to be a fascinating session.”

Two of the boldest plans being discussed in Washington involve creating a national sales tax or a flat tax to replace the current multi-tiered income tax. Details of the president’s tax proposals won’t be announced until a panel of experts makes recommendations later this year. And details of his Social Security plan are equally sketchy, which is frustrating many Democrats.

“Right now, we’re fighting a phantom piece of legislation,” said Rep. Bob Matsui, D-Calif., top Democrat on the House Ways and Means Social Security Subcommittee. “There is just nothing there except, kind of, rhetoric.”

With Social Security system facing a “crisis,” Bush said, quick changes are needed to keep it solvent. But he doesn’t want to disclose details of his plan until later, saying he doesn’t want “to negotiate with myself in public.” At a press conference before Christmas, he said: “I will propose a solution at the appropriate time, but the law will be written in the halls of Congress.”

With the nation facing a projected $348 billion budget gap in the current fiscal year, some of the president’s Democratic critics say Bush should be putting his main emphasis on budgetary discipline.

“We really need to take on the elephant in the room,” said Rep. John Spratt, D-S.C., senior Democrat on the House Budget Committee. He said that the deficit is “the most pressing problem” facing Congress and that the Social Security system is not in a crisis situation: “It’s nowhere close to collapsing now.”

Matsui described Social Security as “a manageable problem” and said Bush is “trying to create a crisis” so that he can pursue his pet plan to privatize the system.

Bush, who will be sworn in for a second term on Jan. 20, is promising to cut the national deficit in half in five years. As war costs mount, that could mean big cuts in most domestic programs when the president presents his new budget to Congress on Feb. 7.

“It’s going to be a tough budget, no question about it,” Bush said. “And it’s a budget that I think will send the right signal to the financial markets and to those concerned about our short-term deficits.”

Despite his re-election, Bush is expected to have a short honeymoon with the new Congress. His approval rating has again dropped below 50 percent, and Democrats are bracing for a bruising fight over the president’s judicial nominations. The biggest battle will come when Bush gets a chance to nominate a Supreme Court justice. Eighty-year-old Chief Justice William Rehnquist, who is being treated for thyroid cancer, is expected to retire, which would create the first opening on the high court since 1994.

With the dust settled from a grueling election year, Republicans will return to Washington this week with larger majorities in both the House and the Senate. Some say the time is ripe to cash in on the political capital provided by the elections.

“The American people expect us to be bold, and we have the votes to do it, and we should go about being bold,” Sen. Norm Coleman, R-Minn., said shortly after the election.

The Senate will be noticeably more conservative, bolstered by seven new Republican senators, including South Dakota’s John Thune, who knocked off Sen. Tom Daschle, the Democratic minority leader, in November.

In a recent television interview, Thune expressed hopes for bipartisanship in the new Congress, but he said that solutions to the nation’s problems “are going to be found in the center-right side of the political spectrum.”

Many moderate Republicans are calling for consensus.

Bush said that the election provided him with plenty of political capital, and he said he’s eager to spend it. The big question is whether the White House agenda is too much of a stretch, and whether many Democrats _ with still enough votes to stymie the Republicans in the Senate _ can be persuaded to go along with any of it.

Taxes and Social Security won’t be the only big-ticket items awaiting Congress.

Republican leaders have promised a vote on proposals to stiffen U.S. immigration controls, including a plan to deny U.S. driver’s licenses to illegal aliens.

Another divisive issue is the long-awaited showdown over the proposed Central American Free Trade Agreement (CAFTA), which the Bush administration signed last May. The treaty would create a free trade zone between the U.S. and six Central American countries, much like the North American Free Trade Agreement (NAFTA) among the U.S., Canada and Mexico.