Final SOTU Unlikely To Yield Surprises

Before President Bush heads to the Capitol tonight, no one should be surprised if he first doublechecks a pair of crucial Senate votes this afternoon—and the closing Dow.

More than most, this State of the Union address has its changing dynamics, not only because it is the last of the Bush presidency but also because the nation faces such historic uncertainty: wars overseas, falling financial markets and no clear champion yet in either political party to take the helm when Bush leaves.

The president is expected to speak fervently of his trust in Americans, even as he asks voters to trust him with more surveillance authority—now being debated in the Senate—and billions more for the war in Iraq.

But the downturn in the economy has shaken what’s been a pillar of his power, and Bush knows he will have to share the stage more this year even as he tries to hold on to a piece for himself.

Nothing illustrates this better than the new $150 billion economic stimulus package, a major subject tonight but one not even in early drafts of speech a month ago.

The president will single out Speaker Nancy Pelosi and House Republican Leader John Boehner for their work in shaping the bill, which comes before the full House Tuesday.

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And the re-emergence of Boehner as a legislative dealmaker could be hugely important if Congress were to tackle what would be the mega-domestic bargain this year: pairing the president’s legacy education issue—No Child Left Behind—with expanded health insurance for working-class children, a top Democratic priority.

At the same time, it is difficult to overstate the impact of Treasury Secretary Henry Paulson in the stimulus talks. Republicans call him an “energizer bunny”; Democrats are relieved to have someone who listens.

“I was going to call you but I was working my way up,” Paulson told Pelosi, when she telephoned him early on.

“He’s not there to fight us, he’s there to work it out,” said House Ways and Means Committee Chairman Charles Rangel (D-N.Y.).

Looking ahead, the former investment banker and Goldman Sachs CEO is increasingly optimistic he can break through in the Senate this year and complete mortgage reform legislation, including tighter supervision of government-sponsored entities [GSEs] such as Fannie Mae and Freddie Mac, two entrenched Washington interests.

“I don’t want to sound naïve but I think there’s a real chance for action,” the secretary said in a brief interview Sunday. “There’s no excuse and we’ll be embarrassing ourselves if we don’t do it.”

White House aides caution that Bush will temper his own legislative ambitions this evening and the speech will instead be laced with examples of where the president can act administratively to boost his goals.

No Child Left Behind, up for review this year, remains a legislative priority, for example, but Bush will also announce new education initiatives, such as one targeted to high school dropouts, that can be implemented by his order alone.

“The executive branch has a role to play in government, and in the State of the Union it is perfectly appropriate for the president to bring up issues that he plans to get done on behalf of the American people,” said White House press secretary Dana Perino.

“The president will mention policies that can be implemented through executive or administrative action without congressional involvement.”

The core Bush agenda will be evident in the president’s remarks, described as about evenly devoted to foreign and domestic policy.

The administration has a pending request for $108 billion more for military operations in Iraq and Afghanistan as well as the large war against terror, and faced with a Feb. 1 deadline, Bush will also demand a quick end to debate on legislation authorizing warrantless eavesdropping to fight terrorism.

Secretary of State Condoleezza Rice’s trip to Colombia last week will be the backdrop for Bush to press again for ratification of a trade agreement reached in 2006.

Mideast peace efforts and the crisis in Darfur will be topics, and Bush will renew his call for more money to fight not only AIDS but also malaria in poor developing nations.

At home, Bush wants to make his signature tax cuts permanent—something left out of the stimulus package. But the White House is making a conscious effort not to overreach, and Bush aides first studied the success of Ronald Reagan and Bill Clinton in achieving the initiatives set out in their final State of the Union addresses.

Both former presidents ended on a high note, with much higher approval ratings than Bush enjoys. But of the 13 proposals Reagan made in 1988, five proved successful, according to the White House analysis.

Clinton shot even higher with 26 in 2000: he won an historic trade agreement with China but all together only six of the 26 made it through Congress that year.

That said, the White House still talks of a Bush “sprint” to the finish: “He does feel that he’s given his all the first seven years, and that in this eighth year, that 12 months is a long time to be able to get a lot of things done,” said Perino.

Even before Christmas, Boehner warned that a continued stalemate in Congress could hurt Republicans as well as the Democratic majority in November’s elections.

And this seemed to motivate his activist role in the stimulus deal in which he was given unusual license from the White House to drive the bargaining with Pelosi.

The speaker has often been a political risk-taker, willing to jump ahead of her caucus as she did during talks last year on child health care.

But it was striking for Boehner, who must protect his right flank, to also step forward, and it brought back memories of his deal-making days on pensions and No Child Left Behind as chairman of the House Education and Labor Committee.

Paulson is more of a political newcomer, but anyone so successful in bond markets and college football is scarcely a stranger to competition.

“When you’re down in the dirt opening a hole for a running back, it teaches you teamwork and determination,” he says of his days as an offensive tackle at Dartmouth.

And Paulson has forged an unexpectedly close alliance with House Financial Services Chairman Barney Frank (D-Mass.).

“He is a rare example of a guy who came from totally outside the political process who understands how it works, how deals have to be organized,” said Frank, who has vowed to protect the secretary’s back if the mortgage reforms they both want are not enacted by the Senate.

Bowing to bipartisan pressure, especially from states like California, Paulson agreed in the stimulus package to allow Fannie Mae and Freddie Mac to purchase or guarantee loans of as much as 125 percent of an area’s median home price.

That translates into hundreds of thousands of dollars on top of the current $417,000 limit for such GSEs, but Frank says this high-end relief will dry up at the end of this year unless tougher regulations are put in place as well.

“I said to Hank, here is the deal I will make for you,” Frank said. “I think we should raise the GSE limit but I will give you my commitment that it will be for 12 months and if the whole bill hasn’t been dealt with within those 12 months, it becomes a pumpkin.”