Congress returns to Washington Tuesday to take up a packed agenda and deal with pressure from the White House to pass President Bush's economic stimulus package.
The incoming Congress will look similar to the one that kicked off 2001, with both chambers led by the GOP. But the start of the 108th is very different from two years ago, as the president faces a continuing drag on the economy that is sure to test his mettle.
Bush is scheduled to announce the details of his economic stimulus package on the same day Congress convenes. Aides say it could total $600 billion over a decade.
Bush would not go into all the details of his plan, but said that he would propose eliminating the tax on corporate dividends, which companies hand out as profits to shareholders. That could take up about half the projected cost of the president's stimulus.
"It'll encourage investment, and that's what we want," Bush said at the end of a Cabinet meeting Monday. "Investment means jobs."
Bush also argued that eliminating the dividends tax would correct an injustice in the tax code. Dividends are taxed once at the corporate level, when companies report profits, and again as dividend income to shareholders.
"It's unfair to tax money twice. There's a principle involved," Bush said. "That doesn't make any sense, that's unfair, that's bad public policy."
Moreover, Bush said, more than half of American senior citizens receive dividends.
Asked if the plan would be geared more toward short-term stimulus or long-term growth, White House spokesman Ari Fleischer responded, "It's both. It's designed to seek both. The president thinks the economy is in recovery, it's just not recovering as fast as he would like."
The package is expected to include acceleration of tax cuts first approved by Congress in 2001, tax incentives to prompt more spending by businesses, aid to financially strapped states and extended unemployment benefits.
Both parties have agreed that extending unemployment benefits is a first priority. Sen. Rick Santorum of Pennsylvania, the third-ranking Republican in the Senate, said that a package that extends benefits until May could be introduced on the Senate floor as early as Tuesday.
According to the White House, the president's plan will mean 46 million married couples will receive average tax cuts of $1,716. Thirty-four million families with children will benefit from an average tax cut of $1,473, and 13 million elderly taxpayers will receive an average tax cut of $1,384. All told, the White House says 93 million Americans will benefit on average by $1,083 each.
Democrats announced their economic stimulus proposals on Monday afternoon, a program that would inject $136 billion into the economy through a mix of tax rebates, aid to states and unemployment benefits.
"This package that we're unveiling today is a stimulus package ... it's aim is to get the economy moving and to get people back to work and it's true to its mission," said incoming Assistant Minority Leader John Spratt of North Carolina. "It's frontloaded and fast acting … we believe our proposal will have more impact in the year 2003, when the economy needs it."
House Democratic leader Nancy Pelosi, D-Calif., who succeeded Rep. Dick Gephardt of Missouri as minority leader, gave Bush's economic plan a slap in the face Monday, calling it something that's "careening off the road" and will not provide the country's economy with a much-needed boost.
The Bush administration uses the word "stimulus" as "a Trojan horse to wheel in some of their pet projects for his friends," she said.
Bush rejected charges by Democrats that the plan is skewed to the rich. "This is a plan that provides tax relief to the working citizen, it's a plan that is a very fair plan, it's a plan that recognizes that when somebody has more of their own money, they're likely to spend it."
As lawmakers debate rival stimulus plans, Congress must also deal with the federal government's budget. The 107th Congress adjourned without passing 11 of the 13 spending bills that keep operations moving. Congress has until Jan. 11 to pass each bill, an omnibus spending bill or to extend government operations at last year's levels for a few more weeks.
Bush was meeting Monday with the new GOP leadership, led by incoming Senate Majority Leader Bill Frist. Taking the place of scandalized Sen. Trent Lott of Mississippi, Frist of Tennessee was handed the reins on the Monday before Christmas and has said that unemployment insurance, health care and support for the military would be among the GOP's top priorities.
The House remains under Republican control, having expanded its margin by about six seats. Rep. Tom DeLay of Texas has taken over the No. 2 spot in the GOP as House majority leader in place of retired Rep. Dick Armey, also of Texas. Rep. Steny Hoyer, D-Md., is taking over the Democratic Whip post.
But with the slimmest of margins managing Congress — Republicans control the Senate with a 51-seat majority — the GOP is sure to find its priorities, including the president's economic stimulus plan, harder to pass than they would like.
Aside from that, lawmakers are also standing by waiting to see how the president manages a possible war with Iraq and growing tensions with North Korea, which announced last month that it was tossing out U.N. monitors and restarting its weapons program.
Pelosi urged the administration to continue on the diplomatic route it has taken with North Korea and urged China "to use its considerable influence to halt North Korea's nuclearization and the proliferation of its weapons of mass destruction."
The president has decided to wait until the Jan. 27 deadline for weapons inspectors to file their first official report to the United Nations on Iraq's weapons regime before deciding whether to use force against Saddam Hussein. He told troops at Ft. Hood on Friday that military force is a last option, but one that he is prepared to take.
The president, who is back in Washington after two weeks of vacation in Camp David, Md., and at his Crawford, Texas, ranch, is also likely to state other priorities for Congress, which passed several Bush policies last session, but left open gaping problems for the next session.
On Wednesday, Bush marks the one-year anniversary of his No Child Left Behind Act, a sweeping education reform, with a White House speech. He said in his weekly radio address Saturday that he wants to increase education funding for underprivileged children by $1 billion.
The president is also expected to lay out other priorities in his Jan. 28 State of the Union address and 2004 budget proposal due in February.
Fox News' James Rosen and the Associated Press contributed to this report.