While a variety of leaks and previews have sketched some of the outlines of economic stimulus proposals from the Administration and congressional Democrats, the details will finally emerge on Monday, January 6 (Democrats) and Tuesday, January 7 (Administration).

The two approaches are expected to be different in many respects. The President's biggest ticket item will be a complete repeal of taxes on stock dividends. Other items in his package may include, so-called "bonus depreciation" or partial expensing of investment in equipment, some form of fiscal aid to states (possibly through changes in Medicaid reimbursement) and a retroactive extension in unemployment benefits. The total budgetary cost of the President's package over 10 years will be $600 billion, he said over the weekend. The full details of his plan will come out on the 7th in a speech in Chicago.

The House Democrats' plan, due out on Monday afternoon, will also include the unemployment compensation provisions and some form of fiscal aid to the states. However, the tax breaks proposed by Democrats will focus more on small business and middle income taxpayers. One idea which appears to have been rejected is a payroll tax holiday. Other forms of tax relief will be substituted. The plan, to be announced by incoming Minority Leader Rep. Nancy Pelosi (D-CA), may also include spending for infrastructure as part of a job creation program.

We will report to our clients and friends on the details of these two plans on the 7th after they are both available.

As expected, outgoing House Minority Leader Richard Gephardt (D-MO) will file papers to form a presidential exploratory committee as early as this weekend.

Congressman Gephardt is the second Democrat this week to announce his intention to form such a committee. Yesterday, Senator John Edwards made his entry into the race, following former Governor Howard Dean of Vermont and Senator John Kerry of Massachusetts who both formed committees last month.

This is the congressman's second run for the presidency. Gephardt is expected to do well in Iowa, which he won in 1988. His base consists of blue-collar, union Democrats who will be invaluable in Iowa and in the first primary state of New Hampshire.

Gephardt stepped down as the Democratic leader in November, as he failed to lead the Democrats back into the majority in the House for the fourth time.

Republicans:

• Grassley
• Hatch
• Nickles
• Lott
• Snowe
• Kyl
• Thomas
• Frist
• Santorum
• Bunning
• G. Smith

Democrats & Independent:

• Baucus
• Rockefeller
• Daschle
• Breaux
• Conrad
• Graham
• Jeffords
• Bingaman
• Kerry
• Lincoln

Today, Senator John Edwards (D-NC) announced that he was setting up an exploratory committee with the goal of getting into the 2004 Presidential race. He joins Vermont Governor Howard Dean and Massachusetts Senator John Kerry who have already announced that they are running for the democratic nomination. Other Democrats close to announcing their decisions on a White House run are Senate Democratic leader Tom Daschle, Missouri Representative Dick Gephardt and Connecticut Senator Joseph Lieberman. Senator Bob Graham of Florida has indicated he will decide this month whether to run.

The primary advantage that Senator Edwards has is that thus far he is the only Southerner in the race. No Democrat has won the presidency without winning at least a few southern states. The Democratic ticket has never won the White House without a Southerner or a man associated with the South on it. Edward's regional advantage would be muted if Senator Graham of Florida joins the race.

It's not known yet whether Edwards will defer to run for his Senate seat in 2004. Under North Carolina law, he's allowed to run for both positions simultaneously, but the conventional wisdom is that such a race would be extremely competitive, given the current political makeup of the state and the outcome of the Dole/Bowles race.

In one of his final acts before Governor Granholm took office, outgoing Governor Engler vetoed a bill to create a public transit authority in the Detroit area and surrounding suburbs. The bill had already received at least half a million dollars in federal earmarks from the U.S. House and Senate, and Engler had pledged in May to sign the bill if it reached his desk, angering supporters of the measure. The outgoing governor appeared to kill the bill because of the failure earlier to enact a plan to expland his education plan for the area. From the piece:

In his veto message, Engler said that because southeast Michigan couldn't get its act together on education, it served no purpose to put resources into a regional public transportation system.

On Monday, Engler suffered one of his few legislative defeats when the Senate did not approve a plan for 15 new charter high schools in the city of Detroit. He's been trying for four years to expand the number of charter schools in the state.

"I knew when he didn't get charters on Monday that he would take it out on DARTA," said Karen Kendrick-Hands, president of Transportation Riders United, a Detroit-based group that advocates for bus users in metro Detroit. "His heavy-handed doctrinaire disdain for southeast Michigan makes me grateful for term limits."

Those of us ancient enough to remember the General Revenue Sharing Program (born 1972 - died 1986) are watching with interest the growing interest in a fiscal relief program which would send unrestricted grant funds from Washington to states and cities. Such a program may well slip into an economic stimulus package Congress and the Administration will work on early in the 108th Congress.

We reported recently on the proposal from incoming Senate Finance Committee Ranking Member Sen. Max Baucus (D-MT) proposing a one-time $75 billion relief program for the states. In the Washington Post of December 31, columnist E.J. Dionne pours more fuel on the fire with a thoughtful op-ed piece containing some of the arguments for such a program. The article mentions that incoming Governors such as Ed. Rendell (D-PA) and Jennifer Granholm (D-MI) might be expected to lead the charge for such legislation.

For a detailed economic analysis of the old General Revenue Sharing Program and the implications of a new program check out this policy paper from the Economic Policy Institute, written before September 11th, yet still applicable in the current economic environment. Many of the same problems exist today, and the revenue-sharing solutions are more likely to be implemented now that state and local budgets are being increasingly pinched for funds.

This could emerge as the key issue of 2003 for states and cities and we will stay on top of it.

On December 28, 800,000 Americans ran out of benefits in the Unemployment Compensation program. According to the AFL-CIO, an additional 95,000 workers will lose benefits each week unless action is taken. Recent statements by congressional leaders and the White House have made it clear that a proposal to extend benefits will be considered as the first order of substantive business when Congress reconvenes on January 6.

In recent weeks, fingers have been pointing all around Washington as the Administration and key Members of Congress seek to place blame for the current problem. This much can be stated as fact: before departing in December, both the House and Senate had passed bills to extend unemployment benefits. The Senate bill would have maintained current benefits for unemployed people for another three months. The House version would have cut the amount each family received and extended benefits for five weeks. Each side has blamed the other for the failure to enact a final version.

After Congress left town, President Bush weighed in with a statement that he thinks benefits should be broadly extended and the extension should be retroactive to December 28. Assuming this position is adopted by the GOP leadership on Capitol Hill, it would appear a solution can be worked out quickly.

Our guess is that this legislation will reach the President's desk by the end of the first week of the 108th Congress. Stay tuned.

With Al Gore forgoing another run at the Presidency in 2004, there is now a wide open field of Democratic contenders for the position. Gore, the expected front runner in the crowded Democratic primary, indicated in a 60 Minutes interview with Leslie Stahl on December 15, that he has chosen to bypass the 2004 presidential election. This leads to the most wide open race since 1976 for the Democrat hopefuls.

Gore's departure immediately frees up Connecticut Senator Joe Lieberman, who pledged not to enter the race if his former 2000 running mate decided to run again for the Presidency. With Gore out, Senator Lieberman is mulling over a run and has indicated that he will make an announcement in January. Lieberman is currently in the middle of a 10-day tour of the Middle East which could showcase his stature on foreign policy.

The two already announced candidates, Vermont Governor Howard Dean and Massachusetts Senator John Kerry also gain from Gore's departure. Prior to his decision, former Vice President Gore had signaled a move to the left with his views on Iraq and health care eclipsing Governor Dean's similar policy stances. Now, Dean is the only current contender to embrace a universal health care position. Meanwhile, Senator Kerry has been stressing his military and foreign policy experience. With Gore out of the race, Kerry now stands near the top in foreign policy stature - an important issue in the 2004 race.

Senate Democratic Leader Tom Daschle (now the Minority Leader after the mid-term elections) and former Minority Leader Congressman Dick Gephardt are both looking at the 2004 race and are in a position to pick up votes from the Democratic establishment. Gephardt will certainly be one of the favorites to win the Iowa caucuses after his caucus win there during his run for President in 1988. He'll also pick up strong support from unions. Daschle is also considering joining the race, traveling to Iowa recently and meeting with political and financial backers.

North Carolina Senator John Edwards has been spending a lot of time in Iowa and New Hampshire over the last year. He is certainly a "fresh face" and hails from the South - a tremendous benefit to a party whose last two presidents have both hailed from southern states. His attractiveness as the lone southerner in the race may be eclipsed by Senator Bob Graham of Florida, who indicated today that he is also looking at joining the 2004 race.

Gore's departure could also impact Reverend Al Sharpton. The current field of candidates and potential candidates don't have the solid track record of Gore in the African American community. This may give Reverend Sharpton more leverage among a constituency who will have a large influence on the final nominee's chances of victory.

Another name floating is ex-NATO supreme commander Wesley Clark. General Clark, who already has made a trip to New Hampshire, is setting up meetings with key activists in Iowa. He is also a fresh face from the South - Arkansas, blunting the edge of Edwards. Clark also has a credible voice on the issues of war and terrorism, both which will be key in 2004.

With the former Vice President out of the race, the starting gun has gone off for the 2004 elections and a number of Democrats are jockeying for the lead. It is unclear who will actually join the race from the existing field, and what unknowns are yet to sign up.