Congress Targets Spending

By PATRICK O'CONNOR And JANET HOOK

(See Corrections and Amplifications item below.)

The Republican majority that takes over the House this week plans an ambitious drive to slash government spending by tens of billions of dollars in the next few months, a strategy that ensures that the capital soon will be consumed by intense debate over how and where to reduce the size of government.

The new House Republican majority plans an ambitious drive to slash government spending by tens of billions of dollars. Janet Hook discusses. Also, Mark Hulbert says the outlook for stocks in 2011 is positive, in part because it is a 3rd year of a presidential election cycle, a year that has historically produced strong returns.

The incoming House majority will start by offering two measures this week that carry more symbolism than substance. One will be a motion to repeal the health bill that President Barack Obama signed last year, and the second will be a measure to trim the cost of running the House itself. The health-care repeal isn't expected to go anywhere in the Senate, where Democrats retain the majority, and the package of cuts to the House budget will only save about $25 million from a federal budget that exceeds $3 trillion.

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Rep. John Boehner (R., Ohio), the new House speaker, has an interest in education dating to his co-authorship of the 2001 No Child Left Behind Act that is up for renewal.

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Rep. Fred Upton (R., Mich.), the next chairman of the House Energy and Commerce Committee, threatened a congressional repeal of potential new emissions limits on refineries and coal- and gas-fired power plants.

After that, however, Republicans in the House say they plan to move on to offer a far more sweeping package of "recissions," or elimination of spending previously approved, that will aim to bring domestic spending back to where it was before Mr. Obama became president. The skirmish over that proposal for spending cuts, coupled with related fights over government regulation and health care, will set the battle lines for the next two years, as Washington returns to divided government.

Unlike its predecessors in the Republican Revolution of 1994, or among the Democrats who took charge of the House after the 2006 election, the new Republican majority doesn't return to power with a long to-do list of legislative priorities. Instead, party members say they were elected with one big mandate: Cut spending. The details of that push will unfold in the weeks leading up to the March 4 deadline for Congress to fund the federal government and play out against a backdrop of mounting federal deficits.

House Republicans have also set their sights on scaling back environmental regulations and tightening border security. But spending cuts are their primary focus, with a pledge to cut about 21% from the $477 billion lawmakers have approved for domestic discretionary spending this year.

"Getting a grip on this year's spending is only the first step in addressing our long term budget challenges—but it's a step we must take, and we must take it now," said incoming Budget Committee Chairman Paul Ryan (R., Wis.) in a statement.

Cutting spending in the middle of a fiscal year "is a total end-run around the budget process," said Maryland Rep. Chris Van Hollen, the top Democrat on the budget committee.

Republicans will be treading a fine and politically risky line in trying to carry out a perceived election mandate. While Republican voters voiced their opposition to high deficits and spending, polls show that the programs that account for much of that growth—Medicare and Social Security, which benefit elderly Americans—are popular.

In another early move, Republicans are requiring the reading of the U.S. Constitution on Thursday—a nod to the tea-party activists who were so important to GOP victories in the fall and the movement's complaints that Congress has reached beyond its constitutional powers under the Obama administration.

First up among the proposed spending cuts is one that will be offered later this week to shave 5% from the operating budgets for individual members' offices, committees and leadership staff. Republicans estimate the package will save $25 million.

The bigger recission bill—which will essentially take back money that is already appropriated—will take shape over the next month or two. One target is part of the president's $814 billion stimulus that hasn't been promised to existing programs, which Republicans estimate would save $12 billion. The bulk of it includes funds for high-speed rail projects. Also included is money provided for food stamps under a formula that presumed food prices would rise more than they actually did.

Even if the House passes the bill, there's no guarantee the Senate would send it to Mr. Obama, and the president isn't expected to sign any legislation that would gut his programs. White House economic adviser Austan Goolsbee suggested Sunday that Mr. Obama will try to beat the Republicans to the punch with cuts he's likely to spell out in his State of the Union address late this month. Mr. Goolsbee, in an appearance on ABC's "This Week," said: "We are going to have to make, in the medium run, a series of tough choices, and the president's not afraid to do that, and I think you will see in his budget that he's willing to."

Republicans aren't proposing an across-the-board cut on the government, so some departments could see deeper cuts than others. The top targets could be programs whose budgets saw a jump under Democrats, like foreign aid and Pell Grants for middle-income college students.

The Republican majority finds itself on a collision course with a number of federal agencies over regulatory policy, including the Justice Department and the Environmental Protection Agency. The House GOP could use the threat of spending cuts to pressure these and other agencies, like denying money to the Department of Health and Human Services for implementing the health-care bill or to the Securities and Exchange Commission to carry out new rules for the financial markets.

Rep. Fred Upton (R., Mich.), the incoming chairman of the Energy and Commerce Committee, said Sunday that his panel would hold "early" hearings on an EPA rule-making process already under way to set emissions limits on refineries and coal- and gas-fired power plants. He also threatened a congressional repeal of those regulations once they're announced.

The incoming majority has proposed changes to the rules governing the House that will make it easier for them to cut spending and repeal the health-care bill. Foremost is a change that would let Mr. Ryan, the incoming budget committee chairman, set spending levels for the rest of the year without approval from other members of his panel or the broader House. Mr. Ryan said if the change passes, he will wait until the Congressional Budget Office releases its baseline budget projections later this month before setting the limits "that would take non-security spending back to its pre-bailout, pre-stimulus spending levels."

Corrections & Amplifications

Rep. Chris Van Hollen of Maryland, the House Budget Committee's ranking Democrat in the new Congress, was referring to a Republican proposal for a rules change that would let the House approve spending cuts without going through the Budget Committee when he said it is "a total end-run around the budget process." This article misquoted him as referring to cutting spending in the middle of the fiscal year.