Yes, They Can

Article excerpt

Byline: Daniel Stone, Eleanor Clift, and Andrew Romano

In 2008 Barack Obama soared to victory on the promise of change, and experts declared that a new era of Democratic dominance had begun. Now, only two years later, it looks as though voters want change again. On Nov. 2, Republicans are likely to regain control of the House and come close to winning back the Senate. But while conservatives are already trumpeting the 2010 midterms as a historic validation of their agenda, the truth, as in 2008, is considerably more nuanced. An in-depth report on what a resurgent Republican Party will--and won't--be able to accomplish over the next two years.

Taxes

The first issue Republicans will face after November's midterms: the Bush tax cuts. So far, the parties have refused to budge, with the GOP aiming to maintain the status quo and Democrats seeking to limit any extension to incomes under $250,000 a year. The problem is that if nothing happens by Dec. 31, the cuts will simply expire--a risky outcome for both sides in the midst of a recession.

As a result, look for Congress to strike a deal during the upcoming lame-duck session. While partisan passions will run high, there are signs that a compromise might be in the offing. Obama has argued that extending tax cuts designed to be temporary will severely add to the deficit, but when pressed last month on whether he'd veto an across-the-board extension, he demurred.

That's the GOP's opening. The sooner the tax issue is solved, Republican thinking goes, the sooner the party can tackle its own agenda. One option involves redefining what "high income" means. Extending the cap upward to $500,000 or even $1 million--a move that would preserve the current rates for 99 percent of taxpayers--might appease GOP leaders, especially if it's combined with a patch for the alternative minimum tax and a freeze on current capital-gains and dividends rates. "If they were looking for a way to compromise that would last one or two years, this would not be complicated," says Alice Rivlin, a fellow at the Brookings Institution and former head of the Congressional Budget Office.

Health Care

Ever since Obama's health-insurance law passed Congress in March, Republicans have been swearing that they'll "repeal and replace" it with their own legislation after the midterms. They won't. Even if the GOP regains control of the House and the Senate, it's unlikely the party will hold enough seats to override Obama's veto.

Instead of obsessing over repeal, Republicans will focus on gumming up the works. The House Appropriations Committee, which greenlights all federal spending, could withhold money from the IRS and the Department of Health and Human Services. That would undercut the government's ability to implement the least popular part of the law: the individual mandate. The GOP could also slash health-care funding by attaching a stealth sidecar amendment to an otherwise agreeable bill, like defense appropriations, that Obama could feel pressured to sign.

Still, a White House official assures NEWSWEEK that the president won't approve legislation that undermines his signature policy achievement. In the end, Republicans may simply have to settle for the political satisfaction of calling a futile vote on repeal and forcing Democrats to spend a few (more) days defending the controversial package to a skeptical public. As one senior GOP staffer acknowledges, "Most of our efforts will be symbolic."

Climate/energy

When Democrats failed this year to pass legislation limiting greenhouse gases, Republicans claimed victory. But the Dems still have the upper hand. Unless a bill passes soon, Obama's Environmental Protection Agency will start phasing in stricter regulations on power plants, the country's top polluters.

In response, Republicans plan to go on offense--even if only for show. First, say two senior members who did not want to be named discussing strategy, they'll call a vote to strip authority from the EPA, a measure sure to provoke a presidential veto. …