This column was originally written for RIETI's Japanese website and uploaded on November 16, 2004. The translation below is based on information available as of November 16, 2004.
The 2004 presidential election in the United States, the tightness of which was broadcast around the world, has ended. At the same time, new members were elected to both houses of Congress (not counting two seats in the House of Representatives that will be filled in runoff votes in Louisiana). Initial policy moves from 2005 onward have already begun on Capitol Hill. From scrutiny of the voting behavior of the American electorate to speculation about Cabinet appointees, there is endless scope for data collection and analysis of the national election. In considering the key political issues facing the U.S. in the coming months, it is also important to pay attention to what is happening in the Congress.
Power relationship between the president and the Congress
Unfortunately for the president, Congress does not necessarily behave the way he wishes. The Congress has its own power mechanisms. The Senate and the House are each required to go through a process of competition and compromise, based on the number of seats held by each party, in making any decision. For instance, with respect to fiscal deficit reduction, comparing the Clinton administration and the Bush administration simply by focusing on the White House does not provide an accurate picture of how U.S. government budgets are formulated. Some people credit former President Bill Clinton with turning fiscal deficits to surpluses during his term of office. But those who do so fail to see the role played by a Congress dominated by Republicans. Likewise, fiscal deficits accumulated under the first Bush administration cannot be fully explained without recognizing that Budget Deficit rose, in part, as a result of this process of competition and compromise in the Republican Congress.
The second Bush administration, which will be inaugurated in January, has already set forth a policy agenda, including reforming the Social Security and medical insurance systems, making the ongoing tax cuts permanent, prosecuting the war against terrorism, and halving the fiscal deficit by 2009. However, none of these policy objectives can be realized without going through the due decision-making process of the Congress. Even the future course of U.S. monetary policy, a major concern for Japan, cannot be separated from the issue of how Congress goes about restoring fiscal discipline. Legislative and budget plans presented by the president are, in essence, the administration's requests to the legislature. In other words, the 109th Congress (2005 - 2006) will have considerable influence over policy management in the new Bush administration. Once the elections are over, each party elects new leadership for each house of Congress. Newly elected legislators begin to assess the shape of congressional committees that play a key role in legislative process. They decide which members serve on which committees and who should chair them. In the case of the Senate, the number of committee seats reserved for each party is usually determined by consensus. Now that the congressional elections are over, attention has shifted to what will happen with respect to this majority-minority ratio.
The Republican Party captured four additional Senate seats in the most recent election, bringing their total to 55 seats in the 100-seat Senate, while the number of Republican seats in the 435-seat House is set to rise from the current 227 to at least 231 (with the remaining two seats in Louisiana slated for runoff elections on December 4). The makeup of committees will be the first thing affected by changes in the power balance in the Congress. In the current 108th Congress, the ratio of Republicans to Democrats on each Senate committee is 10-9, with Republican members accounting for 56.2 percent of committee members. A contest between Republicans and Democrats is expected, for example, over whether to adopt a new ratio of 12-9 or to maintain the current ratio of 10-9 in next year's 109th Congress. Because almost all legislative bills must first be approved by the relevant committee, the composition of these committees has a profound influence on legislative procedure, and thus they will have a significant impact on the way President Bush's requests are handled by Congress.
Remaining tasks for the "lame duck" session
On November 16, 2004, the Congress reconvenes for a so-called lame duck session. The session gets its nickname from the fact that the incumbent lawmakers, including those who will not return for the next session, get together to carry out remaining tasks after new lawmakers have been elected. A number of bills remain outstanding for this session of Congress. If these bills fail to pass in the 2003 - 2004 session, the legislative process will have to return to square one next year. This puts substantial pressure on incumbent legislators convening for the lame duck session.
U.S. lawmakers had said that they were hoping to conclude the current session within one week after resuming the session, and by November 25 at the latest. But whether things will go as planned depends on the degree of progress and compromise made in the congressional debates this week. Given that the preliminary session of 2000 ran until December 5, there are few grounds for optimism this year. Still, because the time is short, it is possible that the session will end with the passage of the so-called "must bills": budget-related bills that must be passed before the 108th Congress adjourns.
Among a number of such must bills is one that calls for raising the statutory debt limit. It is expected that the actual amount of federal borrowing will exceed the legal debt ceiling of $7.38 trillion in mid-November. It is thus hoped that the debt limit will be raised by around $700 - 800 billion during the lame duck session. However, if minority Democrats choose to resist raising the ceiling as a way to draw public attention to the expansion of the fiscal deficit under the Bush administration, it is possible the U.S. government will default on its debts. To avoid this, Republicans seem to be contemplating bundling the debt ceiling bill with nine other discretionary spending bills for fiscal 2005 (October 2004 through the end of September 2005) into a single omnibus bill and passing them simultaneously. Naturally, they have been unable to gain support for this measure from Democrats so far.
Meanwhile, the stopgap spending budget, which allows the government to keep functioning, is set to expire at midnight November 20. In the U.S., a total of 13 spending bills must be drafted by the Congress and signed into laws by the president before funds are provided for government activity. Thus far, only four of the 13 spending bills - those for the Department of Defense, the District of Columbia, the Department of Homeland Security, and Military Construction bills - have managed to clear both houses of Congress. Unless the nine outstanding bills are passed in time, the government may partially shut down on November 21. It is thus imperative for the lame duck session to pass either all the remaining spending bills or additional stopgap budgetary measures to tide the government over until next year.
Fiscal condition of the U.S.
On October 14, the Department of the Treasury and the Office of Management and Budget (OMB) announced that the fiscal deficit for fiscal 2004 (October 2003 through the end of September, 2004) totaled $413 billion. This figure is lower than the OMB's initial projection of $521 billion in February and the revised estimate of $445 billion in July. Higher-than-expected corporate tax revenue of $189 billion (which exceeded the July estimate by $8 billion) has been cited as one reason for the improved numbers. However, the fiscal deficit for fiscal 2004 is still larger than that of fiscal 2003 ($377 billion). Despite the increase in tax revenue, the fiscal deficit posted a year-on-year rise because spending grew faster than tax revenue. The government agencies that saw a substantial increase in expenditures in the past fiscal year include the Department of Housing and Urban Development, with a year-on-year increase of 20% to $45 billion; the Department of Defense, with an increase of 12.4% to $437 billion; and the Department of Education, with an increase of 9.4% to $62.8 billion.
Under these spending pressures, President Bush and Congress must aim to formulate a budget plan that will move toward achieving the administration's goal of halving the deficit in five years. In this regard, the overall spending cap of $821.9 billion for discretionary spending, which will be a focal point of contention in the lame duck session, will be symbolic. A total of $436 billion in expenditures has already been already set for fiscal 2005 under the four spending bills passed so far. In order to keep the overall budget, including the already-decided $436 billion, within the overall spending limit of $821.9 billion, expenditures under the remaining nine spending bills must be kept under a limit of some $385 billion. The House has already passed an omnibus bill that would hold expenditures under this limit. However, a different set of spending bills passed by the Senate exceeds the limit by $8 billion.
The lame duck session and the second Bush administration
This year's lame duck session faces a number of difficult issues. Of these, the $821.9 billion spending ceiling is the most urgent. The White House and the House of Representatives are set to demand that the Senate cut $8 billion from its proposed spending plan in order to rein in lax fiscal management. In doing so, however, they will be dealing with Republican Senator Ted Stevens, chairman of the Senate Appropriations Committee. It should be noted that the committee led by Stevens is a peculiar body. The members of this committee have an overwhelming influence over pork-barrel expenditures (expenditures that benefit certain constituency of each committee member). In a sense, the committee can be defined as a body that enables consensus-building by letting each member feed at the public trough. Furthermore, the Senate has a rule that allows for filibusters. Such debate-delaying tactics could virtually halt deliberations unless they are broken by a formal cloture, which requires a minimum of 60 votes. Because of this, the minority party in the Senate has greater influence over legislative procedures than its counterpart in the House, resulting in the chronic slowness of Senate proceedings. Thus, the problem of the $8 billion spending excess cannot be solved easily.
Furthermore, unlike under the Clinton administration, both the White House and the Congress will be led by Republicans during the Bush administration's second term (as well as his first term). Given the composition of the Congress, taking a confrontational approach or taking a partisan stance in policy-making is not a feasible option. The Republican Congress under the Clinton administration countered the Democratic president by exercising its legislative authority, but it will be difficult to use the same tactics against a Republican president. By the same token, a Republican administration will find it difficult to take hard-line measures against a Republican Congress.
Meanwhile, on the plus side, the Republican administration and Congress may be able to demonstrate strong leadership in policy implementation because, after all, they have successfully fought the elections together and share common policy priorities. But the question is how they will order these policy priorities to their advantage. For instance, in the first term of the Bush administration, the war on terrorism trumped fiscal problems and the Congress fell in line. This aggravated the country's fiscal problems.
How the spending caps on discretionary expenditures are handled in the lame duck session of the Congress will provide hints to which issues will take priority in the second Bush administration. The political skills of the administration to deal with fellow Republican lawmakers will be tested in addressing fiscal problems, an issue subject to a substantial influence by Congress. In the recent elections, Republicans expanded their margin in the Congress. How will President Bush handle the plusses and minuses of this in his second term? Some clues will emerge from how the Congressional debate on the spending caps turns out. Will the president be able to make the Congress see the seriousness the fiscal crisis? How will the U.S. government cut its fiscal deficit in half? The hints to answer these questions may lie in the outcome of the lame duck session.
