Tone May Be Key to Obama's Agenda

As useful as GOP support could prove, Obama also is trying to become the first Democratic president since the mid-1960s to forge an effective working relationship with a big congressional majority of the same party. The last two Democratic presidents, Jimmy Carter and Bill Clinton, saw their party leaders on Capitol Hill turn against them, leading to electoral disasters for the party in 1980 and in 1994. An energy crisis helped to do in Carter, while a failed health-care proposal contributed to a Republican congressional landslide two years into Clinton's first term.

Obama will try to address both those issues while managing the largest global financial crisis since the Great Depression, along with the beginning of a U.S. troop withdrawal from Iraq.

But the economic downturn will represent the first test of Obama's relationship with congressional Democrats, potentially pitting him against the party's formidable wing of fiscal conservatives.

Leaders from both chambers sat down to work out details in meetings at the Capitol beginning in mid-December. With House Speaker Nancy Pelosi (D-Calif.) staking an early position in favor of a $500 billion stimulus, Obama's advisers spread the word that their plan would probably approach $850 billion.

Those numbers sent sticker shock through the Blue Dog caucus, which has crusaded for federal deficit reduction and which represents a large enough force to block just about anything, particularly if Republicans hang together in opposition.

After discussions with Emanuel and other top Obama advisers, Hill said, the caucus's leaders decided to "set aside our strong feelings about deficit reduction" to support the plan, but with some conditions. The group wants to insert statutory language in federal law instituting pay-as-you-go rules, which require spending cuts or tax increases to offset new federal programs.

When Democrats took control of Congress after the 2006 elections, Pelosi instituted House rules that required a "pay-go" principle to be considered. But they were routinely flouted over the past two years as the Bush White House objected to tight fiscal constrictions. In meetings after the November election, Obama advisers raised the idea of making pay-go a federal law, suggesting that Blue Dog demands would probably be met. But the president-elect's team has not specified how, and more importantly when, such a rule would take effect.

With no answers yet, Hill said he has been tasked by congressional leaders with crafting language defining emergency situations in which pay-go rules could be ignored. Despite the economic crisis, many Blue Dogs are seeking early imposition of pay-go rules, even if it creates problems for funding initiatives such as health-care reform that Obama has argued are key to the nation's recovery.

Overhauling health care, to make it more efficient while extending coverage to more people, may represent Obama's biggest policy challenge. But he may have advantages that Democratic presidents lacked in the past.

Obama allies are pushing the idea that a federal health-care solution is not a threat to the nation's fiscal stability but part of the solution because of its potential to unlock business growth, create jobs and ultimately provide cheaper care for more Americans.

"I really am optimistic, although pragmatically optimistic," said Chris Jennings, who represents health-care clients and was a longtime adviser in the Clinton White House. "There's a greater receptivity than there ever was, because people feel extraordinarily insecure right now."

Senate health committee Chairman Edward M. Kennedy (D-Mass.) started to lay the groundwork for a comprehensive bill in the summer, and Republican and Democratic leaders have met for months as they begin to hash out a collective approach.

Some preliminary health-care measures are likely to end up in the stimulus bill, including a down payment on converting all medical records to an electronic format. Other immediate priorities for the short term include an expansion of the Children's Health Insurance Program and reauthorization of Medicare physician payment rates.

"I'm going to be working on health-care reform from the get-go," Senate Finance Chairman Max Baucus (D-Mont.) said in an interview. "We can't lose momentum here."

By Obama's estimate, his proposal to move toward universal coverage would cost almost $65 billion a year, and his original plan was to finance it by raising taxes on the top 5 percent of income earners. But in recent weeks, the president-elect has raised the possibility of waiting for the Bush tax cuts to expire, rather than repealing them, which would drain some funding for his health-care initiative.

That could sour some deficit hawks on the idea. "It's going to be very problematic to me unless they can tell me how it's going to be paid for," said Sen. Ben Nelson (Neb.), a leading centrist Democrat.

Energy and environmental issues represent areas in which Democrats have high public approval but many competing ideas. In a mid-December Washington Post-ABC News poll, 84 percent of voters said Obama should push a federal program to rein in emissions from electric companies while funding more renewable energy resources. After the economy, the issue rated as the highest in priority when voters were asked what they wanted Obama and Congress to tackle.

As a candidate, Obama advocated a 10-year, $150 billion plan to fund private efforts to find cleaner-burning renewable resources, in the hope of reducing reliance on foreign oil.

But he is almost certain to face resistance to another proposal, to reduce emissions, particularly from coal-burning power plants in the Rust Belt. He supports a "cap-and-trade" policy that sets emission standards for all companies but allows those with larger emissions to buy credits from companies that burn less. Similar legislation has met with failure in the Senate, where it received 48 votes in June, a dozen shy of the 60 needed to clear a filibuster by lawmakers who say the policy would result in higher short-term energy costs for consumers.

The good news for Obama is that some potential foes are willing to approach old debates with a fresh eye. Sen. Judd Gregg, the ranking Republican on the Budget Committee, is one GOP agitator who said he is encouraged by the burgeoning bipartisanship.

"The opportunity is there, but it's going to take a real diplomatic effort and effective procedure and leadership to pull it off," Gregg said. "You don't have to get too far into the waters of these issues to start aggravating the sharks."

Staff writer Ceci Connolly contributed to this report.