By Edward Epstein, CQ Staff

President Bush set up election-year fights with Congress this year on a broad range of fiscal issues, threatening to ratchet up his efforts to curtail spending — particularly on earmarks — and vowing to veto any bills that would increase taxes.

Bush said Monday night that the budget he will unveil a week later will propose $18 billion in cuts to “bloated” programs. He warned Congress not to “load up” the stimulus package he negotiated with House leaders with additional spending.

And Bush vowed to veto appropriations bills unless they cut the number and cost of earmarks in half.

Bush’s State of the Union Speech for the most part steered clear of broad statements about his vision for the country and focused instead on issues Congress likely will deal with in some fashion this year.

In addition to fiscal issues, he called on Congress to pass domestic spying legislation that many Democrats find unpalatable. He also warned Congress against turning away from an Iraq policy Democrats disdain — an issue that will come up soon as Congress debates the next round of war funding.

Despite direct challenges to Democrats on a number of fronts, Bush in his final annual message to Congress called for the parties to set aside their differences to get things done.

“In this election year, let us show our fellow Americans that we recognize our responsibilities and are determined to meet them,’’ Bush said. “And let us show them that Republicans and Democrats can compete for votes and cooperate for results at the same time.”

Yet Bush also called on Congress to renew billions in expiring tax breaks enacted early in his presidency (PL 107-16 and PL 108-27), a non-starter with the current leadership in Congress.

However, Bush’s vow to veto any tax increases could have ramifications for Democratic leaders who have promised to pay for any new proposals they advance.

The speech drew sharp jabs from Democrats.

“I thought he had stopped drinking,” House Ways and Means Chairman Charles B. Rangel , D-N.Y., said in response to Bush’s comments on extending tax cuts. “I think there are certain things that the president just has to say, even though he knows that there’s absolutely no chance.”

Bush spoke of few areas where he is likely to see find much cooperation with Congress — perhaps quick passage of a $150 billion bipartisan anti-recession stimulus package, reauthorization of the No Child Left Behind national education program, a mortgage industry overhaul and $30 billion more for his global anti-HIV/AIDS initiative.

Missing from Bush’s address were broad policy initiatives of years past such as his call last year for an overhaul of the nation’s immigration policy and his 2005 plan to allow private accounts in Social Security. In their place, he called for stepped-up border security and urged Congress to tackle the financial problems of Social Security and Medicare without offering any detailed prescriptions.

Limits of Bipartisanship

Democrats, while recognizing they still must address Bush’s proposals this year, believe that the public has largely moved beyond Bush’s presidency and is focusing its attention on the November 2008 presidential and congressional elections.

“What people want in 2008 is change from George Bush’s policies,’’ said Rep. Rahm Emanuel , D-Ill., leader of the House Democratic caucus. “People know in the marrow of their bones that the country is off in the wrong direction.’’

Minority Leader John A. Boehner , who has said bipartisanship in Congress has its limits, reiterated that position in his comments on the speech. “Tonight, the president called on Congress to act quickly on a number of key priorities, and Republicans stand ready to work together with the majority when it’s in the best interest of the country,’’ he said.

Sen. Pete V. Domenici , R-N.M., pointed out how frequently one side of the chamber applauded while the other stayed quiet.

“Discord is in abundance in this chamber,” he said.

Some of that discord spilled over from the dramatic event of the afternoon, when Sen. Edward M. Kennedy , D-Mass., endorsed Sen. Barack Obama , D-Ill., for their party’s presidential nomination.

Obama and rival Sen. Hillary Rodham Clinton , D-N.Y., both were besieged by colleagues who wanted to shake their hands, but Kennedy was swarmed by Republicans eager to praise the speech.

Clinton and Obama sat about 30 feet from each other, flanked by supporters, but at one point Clinton approached Kennedy with outstretched hand.

Obama, who was sitting to Kennedy’s right, turned his back to Clinton.

Earmarks Targeted

Bush and House Republicans, chastened by the 2006 election in which corruption related to earmarks was partly to blame for GOP losses at the polls, appear headed to a showdown with Democrats over earmarks.

House Speaker Nancy Pelosi , D-Calif., reacted with scorn to Bush’s veto pledge on earmarks. “If the president wants to do away with earmarks we should start with presidential earmarks,’ she said.

Added Rep. Chris Van Hollen of Maryland, chairman of the Democratic Congressional Campaign Committee, called Bush’s position an “11th-hour conversion.”

“Democrats have led on this issue. Now he is joining us,” Van Hollen said.

On Iraq, Democrats were stymied last year in their attempts to force a withdrawal deadline for U.S. forces and promised to try again in 2008. Bush, who says his “surge” strategy has reduced violence in Iraq in recent months, made it clear he will continue to reject timetables for withdrawal.

“Our enemies in Iraq have been hit hard. They are not yet defeated, and we can still expect tough fighting ahead. Our objective in the coming year is to sustain and build on the gains we made in 2007, while transitioning to the next phase of our strategy,’’ he said.

In other foreign policy areas, Bush renewed his warnings to Iran about its nuclear programs and its confrontational activities in Iraq and the Persian Gulf. “America will confront those who threaten our troops, we will stand by our allies, and we will defend our vital interests in the Persian Gulf,” Bush told the Iranians.

On trade, Bush faces a tough fight to win congressional passage of three pending free trade pacts. First up this year will the treaty with Colombia, which many Democrats oppose because of violence in that country against trade union activists.

A large part of Bush’s speech was taken up with attempts to reassure Americans that despite the nation’s financial jitters, the economy is basically strong.

“As we meet tonight, our economy is undergoing a period of uncertainty,’’ he said. “And at kitchen tables across our country, there is concern about our economic future. In the long run, Americans can be confident about our economic growth.”

With much of his 2007 State of the Union proposal to reduce U.S. gasoline consumption by 20 percent in 10 years incorporated into energy legislation enacted last month (PL110-140), Bush recycled some of his other energy ideas. He called on Congress to expand oil and gas drilling in the Outer Continental Shelf in Alaska and to double the strategic petroleum reserve to 1.5 billion barrels by 2027.

Bush also reiterated support for more nuclear power and funding clean coal technologies, ideas that most Democrats oppose.

It was much the same on health care. Bush made few new proposals, but repeated ideas Congress has dismissed, such as offering tax deductions to people who buy private health insurance, rather than through employers. He asked Congress to pass legislation to ban “unethical” biomedical research practices, “such as buying, selling, patenting or cloning of human life.”

Richard Rubin, Timothy R. Homan and Molly Hooper contributed to this story.

First posted Jan. 28, 2008 6:05 p.m.