Congress reasserts itself as economy falters

As a flood of corporate bad news shows no signs of receding, the Bush White House is facing a surge of criticism from Congress – on many fronts and from both sides of the aisle.

These range from disputes over the blueprint for a new Department of Homeland Security to soaring budget deficits and battles over appropriations. A new bill on corporate fraud appeared poised to pass the Senate yesterday with strong bipartisan support, setting up a clash with the Bush administration over how much Washington should attempt to rein in Wall Street.

The looming divide between the White House and Congress represents more than just a return to politics as usual before a big election. It also marks a growing conviction on both sides of the aisle: that the Bush administration is failing to restore confidence in the markets and to protect ordinary Americans, that more can be done, and that Congress can do it.

After the Sept. 11 attacks, Congress gave whole areas of foreign policy and national defense a wide berth. New threats to the nation demanded the initiative of a wartime commander in chief, and those few critics on Capitol Hill who questioned the president's capacity to direct that war quickly recanted.

Now the erosion of confidence in corporate America is opening new opportunities for Congress to assert itself. While the president's post-9/11 popularity remains high, questions about his own past business dealings and those of others in his administration could erode that edge.

Nor does the presidential bully pulpit seem to be making a dent in the slide on Wall Street. A big speech last week intended to boost confidence in the US economy failed to rally the stock market. And Congress noticed.

"This administration blows into town like a tornado and is going to change the tone in Washington. The tone has been changed. It is worse," said Sen. Robert Byrd (D) of West Virginia in a fiery speech from the floor of the Senate on Friday.

What set off Senator Byrd and others was a last-minute decision by the Bush administration to demand deeper cuts in the $30.4 billion that lawmakers had agreed would be the target for a supplemental spending bill for defense and homeland security in fiscal 2002.

For weeks, the White House has been lambasting Congress for delaying approval of the supplemental spending bill. Delay means that critical activities such as the installation of bomb detection systems at airports will be suspended, President Bush repeated in his weekly radio address this past Saturday.

But late Thursday, as the final conference committee was preparing to meet to wrap up the bill, the administration called for more than $1.5 billion in cuts, including $400 million in defense spending. Appropriators in both parties cried foul and canceled the meeting. Sen. Ted Stevens (R) of Alaska, the GOP ranking member on the Senate Appropriations committee, charged that the White House was "ill served" by Office of Management and Budget (OMB) director Mitch Daniels, who delivered the ultimatum. "It's time for us to have it out," he added. On the House side, GOP appropriators said that additional cuts, especially in defense, were not acceptable.

"I've never seen the appropriations process so meddled in and delayed by any OMB director," added Senator Byrd, in an unusually personal attack on the Senate floor.

New administration estimates that this year's budget deficit will be $165 billion – some $60 billion higher than expected – also set off a new round of criticism on Capitol Hill.

Mr. Daniels addressed the situation Friday, blaming the deficit spike on drops in the stock market. Democrats argue that deficits are a result of GOP tax cuts, and still understate the extent of the fiscal woes to come.

"They have now adopted the practices of part of corporate America in hiding deficits and debt," says Sen. Kent Conrad (D) of North Dakota, chairman of the Senate Budget Committee. He notes that Senate GOP staff predict a deficit of $194.4 billion in fiscal year 2003, nearly double the OMB projections.

Senators also expect a clash with the administration over their own version of a law on corporate fraud, following a final vote expected yesterday. The Senate version takes a tougher line than that proposed by the GOP-controlled House or the administration. It includes an independent oversight board, new restrictions on conflicts of interest, and tough requirements on disclosure. It also makes it easier for shareholders to take corporations to court for securities fraud – a possibility Congress virtually shut down in 1995 legislation.

Democrats face their own credibility problems on such issues. Twelve Senate Democrats voted for the $2.6 trillion tax cut, including some who face tough races this fall. And others in the Democratic Caucus have lobbied hard for the accounting industry on issues like shutting down stockholder lawsuits in 1995. These votes may come back to haunt them if Democrats play the blame card too aggressively.

In the current climate of bipartisan criticism, even homeland defense is coming under fire. This week, a House select comittee is grappling with objections from GOP chairmen to the Bush plan for a new Department of Homeland Defense. Last week, three House panels voted to block transfer of the Secret Service, the Federal Emergency Management Agency, the Coast Guard, and others, to the new department.