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 Wednesday, 29 January, 2003, 06:28 GMT
Bush's domestic boldness
Dennis Hastert and Robert Byrd listen to President Bush's address
The president will mobilise his conservative supporters


In his State of the Union address, President George W Bush has boldly tried to tackle some of the biggest and most difficult issues on the domestic political agenda.

The reform of health care has been a political graveyard of many politicians, and almost brought the Clinton presidency to an early close.

And the president's plan to expand the economy through tax cuts during a period of rising deficits and recession will raise fears on Wall Street about the size of the deficit - and fears among Democrats about pressure for spending cuts in many domestic programmes.

Elderly Americans
Elderly Americans have to pay for their medicines
But Mr Bush clearly feels that, with the Democrats off-balance after their unexpected mid-term election defeat in November, now is the time to press forward with his stalled agenda.

And he is hoping that by demonstrating to the American people that he understands their main worries, and is prepared to do something about them, he will lay the groundwork for his 2004 election campaign.

Mr Bush was also striking a balance, in his brand of "compassionate conservatism", between the responsibilities of the government, for example for more health care, and the responsibilities of individuals, in working to help transform the lives of people suffering from addiction or loneliness.

Risky strategy

Mr Bush's economic proposals - for acceleration of his earlier tax cuts, and the abolition of taxes on dividends - are highly partisan proposals which got little applause from the Democrats listening to his speech.

And his own treasury secretary admitted that they are not designed to act so much as an immediate stimulus but as part of a plan for a long-term transformation of the tax system.

Some Republicans as well as Democrats are arguing for a postponement of the dividend tax cut, in favour of more immediate measures.

And in embracing both tax cuts and health care reforms, the president has signalled that he is prepared to allow the budget deficit to grow sharply.

Next week the president will release details of his budget plans for next year, which will show a deficit of nearly $300bn, close to the record deficit of $290bn in 1992, and almost double last year's deficit of $159bn.

Budget director Mitch Daniels has said that the priorities will be increased spending on the new department of homeland security, which is expected to get an 8% budget increase, and further money for the defence department, whose funding will rise by around 5% - and perhaps more if there is a protracted war in Iraq.

That will leave other domestic programmes with increases of less than 4%, and government employees will have pay increases of only 2%.

And those cutbacks will make it more difficult for the president to sell his tax package, with Democrats sure to point out the disparity between tax cuts for the rich and budget cuts for the poor.

Health care crisis

The budget crisis has also limited the president's options in regard to the reform of health care.

Like President Clinton, George W Bush has admitted that "for many people, health are costs too much - and many have no coverage at all".

But his health care reform proposals are a careful balancing act between the need to provide new benefits - notably for prescription drugs for senior citizens, at a cost of $400bn over 10 years - and the need to contain costs.

Mr Bush is taking a risk in requiring senior citizens to choice health maintenance organisations if they are get the new drug benefit.

Many rural states which are strong supporters of Mr Bush do not offer such plans, and previous attempts to tempt the elderly to join such plans have ended in failure.

And he has little to offer those who are uninsured, other than reductions in medical malpractice lawsuits by reforming the law.

And as he moved to expand Medicare, many of the budget-strapped states have moved to reduce eligibility for Medicaid, the government programme that provides health care for the poor.

Faith-based initiative

Mr Bush also gave support, much of it indirect, for the other wing of his party, the Christian conservatives.

His hope to expand his faith-based initiatives in welfare reform, drug treatment, and job creation, would give federal help to churches.

And his pledge to try and block partial-birth abortions and human cloning will also appeal to that audience.

But, with opinion sharply divided on these and other issues like affirmative action, the president has to move more cautiously - and probably through the courts - to achieve his objectives.

Delicate balance

Despite his November mid-term electoral victory in Congress, Mr Bush still faces difficulty in getting many of his proposals through the Senate, which includes many moderates and many more opportunities for obstruction.

But that might not worry Mr Bush too much.

He would be able to satisfy his conservative supporters without offending the moderates he will need for re-election in 2004.

But it still could be the economy that proves George W Bush's Achilles heel if his tax-cutting plan does not deliver the growth he is hoping for.


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