On January 29 George W. Bush will deliver a rare wartime State of the Union address. But the most critical words from the President–in his prime-time speech and related high-profile statements leading up to the February 4 unveiling of his budget plan–will not be the latest repetition of his now-familiar call for patriots to storm the ramparts of Afghanistan and defend the home front. Rather, the meaningful sections of the various Bush speeches will be those that identify how and where he will choose to engage with an all-but-forgotten Congress in the coming months. As he began preparing to shape the domestic debate, Bush telegraphed his determination to renew the push for an economic stimulus plan that is big on corporate tax breaks and weak on aid for displaced workers. As such, he drew the battle lines for a political face-off that has the potential to be significantly more dramatic than the lackluster squabbling that characterized the Congressional session that closed on December 20. The key word is “potential,” however, as Congressional Democrats remain disturbingly uncertain about the extent to which they will challenge a still popular President in a critical election year.

“The question that the Democrats in the House and the Senate have to face down is this: Can you be against terrorism, defend the interests of working families and chew gum at the same time?” says Representative Bernie Sanders, the Vermont Independent who caucuses with the Democrats but bristles at their caution. Noting that Bush took advantage last fall of the Democrats’ uncertainty as to how and where to take the Administration on, Sanders adds, “The question now is whether we are going to make the case against Bush’s economic policies. And the fight, initially at least, is within the Democratic caucus.”

On most issues, Congress went AWOL after September 11. Aside from votes au-thorizing the use of force in response to the terrorist attacks, federalizing airport security and granting the Attorney General constitutionally dubious investigatory and enforcement powers, Congress did little in the way of legislating. When members finally straggled out of Washington just before Christmas, they left unresolved debates over a plan to stimulate the sagging economy, a rewrite of federal farm policy, campaign finance reform, election law reform, a minimum-wage increase, renewal of presidential fast-track authority for trade negotiations, an overhaul of bankruptcy rules, patients’-bill-of-rights legislation, prescription drug reform, deregulation of Internet broadband services, authorization of oil drilling in the Arctic National Wildlife Refuge and establishment of standards for the distribution of federal funds to faith-based groups. Add to that list the duty to review executive and judicial appointments, as well as oversight of an expanding war and antiterrorism initiatives that pose dramatic new threats to civil liberties, and you’re looking at a big agenda for an anthrax-addled Congress that only in late January returned to its regular offices from temporary quarters.

But the greatest challenge as Congress returns boils down to the issue of Democratic direction: Will Democrats, who backed Bush on international and domestic issues in the immediate aftermath of September 11 and took him on only cautiously in the months that followed, make a clear break with the President in the new year? Or will they gamble that running parallel to Bush on most issues is the safer route–counting on a weak economy and the burgeoning Enron scandal to provide a narrow advantage in the November 5 elections, which will decide the partisan balance in the House and Senate?

In the weeks before Congress returned, the divisions within the Democratic Party became increasingly clear. Senate majority leader Tom Daschle had the photo of him hugging Bush removed from his website and began blaming the tax cuts Bush pushed through Congress last year for the nation’s economic woes. Rejecting arguments that the September 11 attacks undermined the economy, Daschle declared, “The biggest reason is the tax cut.” Daschle, who is looking increasingly like a 2004 presidential prospect, told a Center for National Policy forum in Washington, “Not only did the tax cut fail to prevent a recession, as its supporters said it would; it probably made the recession worse.”

Daschle’s comments set off alarm bells in the constant campaign war room of Bush adviser Karl Rove–who was busy telling Republicans that the big issue of the 2002 elections needed to be the war rather than the economy. Conscious that the recession could be the political Achilles’ heel for a President who maintains an overall approval rating of 83 percent but only a 59 percent approval rating for his management of the economy, Rove armed Bush with a script that had the President denouncing Daschle’s criticism of the tax-cut plan as something it was not: a call for a tax hike. “Not over my dead body will they raise your taxes,” the President declared.

The irony of the Daschle-Bush dispute is that Daschle’s tepid remarks did not even include the suggestion that the tax cut be postponed–a position advanced since last fall by Representative David Obey, the ranking Democrat on the House Ways and Means Committee, and members of the Congressional Progressive Caucus. Though Daschle took the hits, it was Senator Edward Kennedy who finally outlined a plan to delay $300 billion in tax cuts for wealthy Americans. “These future tax cuts for those at the top are not part of the fight against the recession,” the man who (with due deference to Jim Jeffords, who personally shuffled Senate control by exiting the GOP last year) is often identified as the most influential member of the Senate told the National Press Club. “Future additional tax breaks for the wealthy do not deserve higher priority than strengthening education–or covering prescription drugs under Medicare–or protecting Social Security–or meeting other urgent national priorities.”

The Kennedy proposal differed from those advanced by Obey, Sanders and Representative Jan Schakowsky, an Illinois Democrat whose First Things First Act would return the top marginal tax rate to 39.6 percent and freeze other tax rates for the wealthiest Americans to free up $340 billion for displaced workers and other needs. But it served as a signal that at least some Democrats are ready, in the words of Senator Russ Feingold, “to get back to the issues of domestic justice and domestic reform that should distinguish our party from the Republicans.”

How many Democrats agree with him remains to be seen. There is no guarantee Daschle will embrace the Kennedy formula. House minority leader Richard Gephardt distanced himself from Daschle, and several conservative Democratic senators joined Republicans to criticize their majority leader for “overemphasizing” the damage done by Bush’s tax policies. “There’s not yet a clear Democratic agenda on economic issues,” says Progressive Caucus chair Dennis Kucinich. “We’re going to have to be in there, week after week, relentlessly working to raise the awareness within the Democratic Caucus of the need to address economic issues in a way that makes sense to working people.”

The Progressive Caucus has proven it can win these intraparty fights. Last fall, its members battled the House Democratic leadership to include extended unemployment benefits in the weak Democratic alternative to the Administration’s stimulus package. One member who joined meetings with the leadership recalls, “They fought us every way they could. We had to force their hand.” Sanders believes it is vital that progressives convince the Democratic leadership in the House and Senate that pushing to postpone tax cuts for wealthy Americans is not just good economics but good politics. “We just say: It’s a choice between bailing out billionaires at Enron or providing unemployment benefits for laid-off workers,” says Sanders, adding, “If Democrats want to do anything this session, they have to have the guts to take on the tax cut.”

Arguing against that view are Democratic strategists who claim the party would be wiser to avoid the tax issue, focusing instead on advancing limited stimulus proposals, investigating links between Enron executives and the Bush Administration, and opposing the worst excesses of the Republican stimulus package. (The GOP plan would provide billions in tax rebates for corporations, including Enron, which could receive $240 million.) There are plenty of Democratic insiders who quietly point to their party’s redistricting successes and upcoming Republican retirements to say Democrats can win the House and Senate in the fall without picking a fight over Bush’s tax policies. Even as Kennedy was preparing his call for a postponement of upper-level tax cuts, Democratic National Committee chair Terry McAuliffe pointed to the President’s promise to veto any tax-policy tinkers and said the issue was “off the table.”

“The positioning for election time is so blatant on the part of both parties that it is just crippling,” says Feingold. “There is such pressure to just do fundraising and go to the election, rather than to deal with anything. It really is a problem, and I think only pressure from the people prevents it from happening.”

While Democratic leaders can be moved on tax issues, it will be harder to move them on questions of war and peace. A few House Democrats continue, however, to push for such a debate. Representative Tammy Baldwin wrote a letter on December 6 to President Bush expressing concern about civilian casualties in Afghanistan, calling for the military component of the current war on terrorism to be defined as narrowly as possible and suggesting that any potential expansion of military activity should be carefully evaluated. The letter, signed also by Representatives Kucinich, Sam Farr, Lynn Woolsey, Lynn Rivers, Cynthia McKinney and Jim McDermott, adds, “We are concerned by those in your administration and among our own ranks in the Congress who appear to be making the case for broad expansion of this military campaign beyond Afghanistan. Without presenting clear and compelling evidence that other nations were involved in the September 11 attacks, it is inappropriate to expand the conflict.”

Baldwin, who is still waiting for a response from the White House, says that she and her allies will use their positions on key committees to try to expand the debate. She herself is a member of the House Judiciary Committee. “I’m going to be very keen on having oversight hearings on the application of the new powers that have been given to the Attorney General,” she says of a move backed by Representative John Conyers, the ranking Democrat on the committee. Whether Conyers can convince committee chair James Sensenbrenner, a quirky Republican who was angered by the Administration’s pressure tactics on behalf of the antiterrorism bill, remains one of the bigger “ifs” of this Congress.

Beyond questions of economics and war, Congress will deal with dozens of issues that at any other time would take center stage. The Enron scandal, particularly the role that corporate campaign contributions played in shielding the company from adequate government regulation, has provided new impetus for campaign finance reform. “Enron sums up everything that is wrong with soft money in politics,” says Feingold, co-sponsor of the McCain-Feingold legislation to ban soft-money contributions. Noting that only four more signatures are needed on a discharge position to force Republican leaders to permit a House vote on reform legislation, the Wisconsin Democrat says, “Having this scandal break just as we come back into session puts us in a superb position to argue that these issues cannot be avoided any longer.”

That optimism does not extend to other key issues for progressives. Senators Paul Wellstone, John Kerry and a few others will seek to amend House-passed legislation granting the President fast-track trade negotiating authority, but it will be difficult to beat in the free-trade-friendly Senate. And there is broad frustration with the compromises that have already undermined hopes for a farm bill that would significantly tip the federal-policy balance in favor of family farmers. Activists are more hopeful about blocking the nomination of Iowan Tom Dorr to serve as Assistant Secretary of Agriculture. Dorr, an ally of corporate agribusiness, is in trouble not just with farm groups but also with civil rights organizations angered over racially insensitive statements he has made.

Hearings on the Dorr nomination, which are planned for late January or early February, could become a flashpoint for Democratic anger over Bush’s overriding of the Senate confirmation process to make recess appointments of two controversial nominees, Solicitor General Eugene Scalia and Assistant Secretary of State Otto Reich. The Dorr fight would then set the stage for wrangles over Bush’s judicial nominees.

Ultimately, however, the big battles of this Congress will have less to do with high-profile clashes over presidential nominees than the debate over the economy that will be framed by the Bush budget. That budget is expected to include a few bipartisan nods–perhaps an endorsement of election reform, his aides say–but it will at core be a bold reassertion of the Reagan approach to creative bookkeeping. With its outlays for corporate welfare, new tax cuts for the rich and deficit spending to finance a major military and “homeland defense” buildup, it will leave little room for the sort of domestic initiatives that might patch a few holes in an already tattered safety net. There is a logical Democratic response–an alternative agenda that protects the victims of recession and redirects federal spending to initiatives that actually create jobs–but it remains to be seen whether the Democrats will advance it.

How Democrats respond to the Bush budget will define the politics of 2002. If they opt for an assault that is at once fiscally and morally responsible–scaling back the Bush tax cuts of last year and halting new tax cuts for corporations–they could set the stage for a populist revolt against the new Reaganomics. They might even score the sort of success that aggressive progressives did in the recession election of 1982, when a push for a $1 billion jobs bill and warnings from Kennedy about threats to Social Security helped Democrats pick up twenty-six seats in the House–four times what is needed to shift control this year. If, on the other hand, Congressional Democrats choose the route of least resistance, they could well find themselves losing another political war to an amiable Republican President with a talent for spinning patriotic platitudes, tax cuts for the rich and deficit spending into political gold.