Democrats Win Big in Congressional Races but Face Spending Constraints

By KELLY FIELD

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Democrats expanded their majorities in Congress yesterday, with poll results available as of early Wednesday indicating the party was likely to pick up several seats in the U.S. House of Representatives and at least five in the Senate, but fall shy of the 60-vote majority they would need in that chamber to block Republican filibusters.

Most members of both chambers' education committees were expected to be re-elected, as was Rep. Paul E. Kanjorski, Democrat of Pennsylvania, a vocal ally of the guaranteed-loan program. One exception was Ric Keller, Republican of Florida, the chairman of the Congressional Pell Grant Caucus. In his concession speech, Mr. Keller blamed his loss to his Democratic rival, Alan Grayson, on a "Democratic tidal wave."

The Democrats' gains, coupled with the election of Barack Obama, give the party more power than it has had since Bill Clinton took office in the early 90s. In theory, that should make it easier for Democrats to push through their science and education agenda, which includes repealing President Bush's restrictions on human embryonic stem-cell research and increased spending for student aid and research.

But the faltering economy and a costly bailout of the mortgage and banking industries could put a damper on Democrats' plans, forcing them to scale back their spending ambitions. While education is likely to remain a focus for Democrats—in the second of the presidential debates, Mr. Obama put it among his top three priorities, along with energy and health care—the president-elect has also acknowledged his party won't be able to accomplish everything it wants to at once. "We're going to have to prioritize, just like a family has to prioritize," he said in the debate.

Practically speaking, that means "things that cost money are going to take longer to accomplish," said Becky Timmons, assistant vice president for government relations at the American Council on Education.

One proposal that might have to wait is Mr. Obama's plan to provide a $4,000 tuition tax credit to students who perform 100 hours of community service. The credit would be refundable, meaning people who don't pay taxes could benefit. Though that proposal would be popular with middle-class voters, its cost, estimated in the billions, could make it a tough sell to lawmakers in the current economy.

Mr. Obama has also promised to ensure that the Pell Grant keeps pace with the rising cost of a college education. But the Pell Grant program faces a multi-billion-dollar shortfall that is likely to grow even larger as more families turn to the program for help, and some lobbyists say it will be a challenge just to maintain the current maximum award of $4,731—never mind securing an increase. Spending on research could also suffer, despite Mr. Obama's pledge to double federal funds for basic science research and invest in energy research and health-care technologies.

A Death Knell for FFEL?

Budget constraints also increase the chances that Democratic leaders will look to the student-loan programs for savings, perhaps by eliminating the federal bank-based program altogether, as Mr. Obama has suggested. While that's hardly a new proposal—former President Clinton first tried to dismantle the program in the early 1990s, when he and a Democratically controlled Congress created direct lending—the climate has never been as favorable to direct lending as it is now, lobbyists say.

Not only do Democrats now control Congress and the White House, but the lending industry is weak, its profits squeezed by the credit crunch and subsidy cuts. Many lenders have scaled back borrower benefits or pulled out of the federal program altogether, prompting hundreds of colleges to switch to direct lending, in which the Education Department lends directly to students. With the bank-based program losing market share already, "the only question is do [Democrats] want to push it further" in the direction of direct lending, says Sarah A. Flanagan, vice president for government relations and policy at the National Association of Independent Colleges and Universities.

In part, that could be determined by who Mr. Obama appoints to serve in the Education Department (see a related article).

If he staffs the agency with former appointees of the Clinton administration who promoted the push to 100-percent direct lending, the idea is more likely to gain traction than if he doesn't, she said.

Lobbyists for the lending industry say they're worried but not panicking yet. They take some comfort in the fact that many lawmakers, including a number of Democrats, remain skeptical of the Education Department's ability to manage the entire student-loan portfolio. And they point out that the savings that could come from abolishing the bank-based program, known as the Federal Family Education Loan program, will be less than it would have been before Congress slashed student-loan subsidies, making the program a potentially less attractive place to seek savings.

"I don't see a strong Democratic majority as meaning the death knell of FFELP," said John Dean, special counsel to the Consumer Bankers Association, which represents many of the nation's largest student-loan companies. "However, right now the probability is that this administration will want to go to all direct lending."

Hot-Button Bills

The outlook for other higher-education legislation is murkier. Both Mr. Obama and Congressional Democrats strongly support passage of immigration legislation often referred to as the Dream Act, which would make some undocumented immigrants eligible for certain federal-aid programs and create a path to permanent residency. But the bill would be expensive, and could get bogged down in the broader debate over immigration reform, as it did last year. Democrats may also be wary of tackling such a hot-button issue early in an Obama presidency, for fear of going too far too fast and alienating voters. Many Democrats are eager to avoid the mistakes Mr. Clinton made early in his presidency, when he pushed universal health care and a plan to allow gay people to serve in the military. The new president was accused of overreaching, and Republicans recaptured Congress in the middle of Clinton's first term.

Similar concerns could complicate efforts to relax President Bush's restrictions on stem-cell research, despite broad support among Democrats for the idea. Both chambers have passed bills that would allow scientists to use federal money to conduct research on embryos from in vitro fertilization clinics that would otherwise be destroyed, and Mr. Obama has promised to lift the Bush administration rule, which has limited research to human embryonic stem-cell lines created before 2001. Even if Mr. Obama doesn't follow through, he at least wouldn't veto legislation loosening the restrictions, as Mr. Bush twice did.

"We are definitely going to see a change in stem-cell policy," said Jennifer T. Poulakidas, vice president of legislative affairs for the Coalition for the Advancement of Medical Research. "Our hope is that it happens quickly."

Still, most researchers would prefer a complete repeal of the restrictions, and some supporters of such a change privately worry that Mr. Obama might decide not to waste his political capital on stem cells, at least not early in his administration.

Democrats have also promised to renew the Work force Investment Act, which governs job-training grants to colleges. Rising unemployment rates could help create momentum for the bill, which has languished for years. But labor unions, a powerful Democratic constituency, remain opposed to portions of the measure unrelated to higher education and could continue to block it if their demands aren't met.

Labor unions are more enthusiastic about another bill likely to come up for a vote this year: the Employee Free Choice Act. The measure, which would make it easier for unions—including those representing college employees and faculty members—to sign up new members, cleared the House last year but was blocked in the Senate by a Republican filibuster. With their expanded majority, Democrats are expected to try again in 2009.

Democrats may also revisit a proposal to make private student loans dischargeable in bankruptcy, perhaps as part of a broader bill focused on distressed homeowners. Such an effort would face stiff resistance from banks and other lenders, however. A vote on the issue in the House last February failed by a large margin, 179 to 236.

Musical Chairs

One wild card is the makeup of the education committees. If Sen. Edward M. Kennedy, Democrat of Massachusetts, who has been undergoing treatment for a brain tumor, doesn't return to Congress this winter, another senator will have to fill in for him as chairman of the Senate Committee on Health, Education, Labor, and Pensions. The most obvious choice is Sen. Barbara A. Mikulski of Maryland, who led negotiations over the legislation to renew the Higher Education Act last spring during Mr. Kennedy's absence. The two more-senior Democrats on the panel, Christopher J. Dodd of Connecticut and Tom Harkin of Iowa, already lead other committees.

There are rumors that Sen. Hillary Rodham Clinton of New York was offered the post as part of a deal struck with Mr. Obama after the Democratic primary. While that doesn't sound far-fetched in theory—Clinton is passionate about health care, and as chairman of the committee could lead efforts to reform the system—it would be highly unusual for a junior senator to leapfrog over so many more senior senators, or for them to step aside willingly.

Whoever is in charge will have some new colleagues to work with. Mr. Obama is obviously off the committee, and Sen. Wayne Allard, Republican of Colorado, is retiring. Sen. Jack Reed, Democrat of Rhode Island, is considered a contender for defense secretary.

There will also be some new faces on the House education committee, as retiring and defeated members leave and junior members ascend to more-prestigious committees. The most notable absence will be Mr. Keller, a champion of the Pell Grant program. While the Pell program has many proponents, Mr. Keller, a former Pell Grant recipient himself, brought a personal angle to his advocacy, said Tom E. Netting, a lobbyist with Jefferson Government Relations who represents for-profit colleges.

Lenders, meanwhile, are celebrating the survival of Mr. Kanjorski, who helped bring a Sallie Mae processing center to his district in the late 1980s and has received more than $50,000 in campaign contributions from the lender's political action committee over the last decade. In recent months, Mr. Kanjorksi has been one of the chief proponents of an expanded bailout for lenders, urging his colleagues to take more steps than they already have to shore up the system. Though his proposals haven't been enacted, his prodding may have motivated Democrats to intervene in the credit crunch.

Mr. Kanjorski, a 12-term lawmaker, had faced criticism for steering millions in earmarks to an energy company owned by his relatives and was considered one of the most vulnerable non-freshman House Democrats.