Congressional Democrats appear to be on a collision course with the Bush administration over an aid package to help stabilize the ailing US auto industry. Despite increasing pressure from the Congressional majority leadership and even a short discussion on the issue with President-elect Barack Obama, the Bush administration remains opposed to the idea fearing it would open the door to a flood of aid requests from any company experiencing any degree of problems.

At the center of the disagreement is the proposed use of a portion of the $700 billion Troubled Assets Relief Program (TARP) passed by Congress in early October. Although the disbursement of the money remains largely under the control of the Treasury Department (ie – the Bush administration), the original intention of the program was to provide aid only for the Financial Services sector. In addition to its slippery slope objections, President Bush told his successor during their Monday meeting that he felt the easing of the credit markets the program was designed to facilitate would be a better use of the money than direct aid to Detroit.

Both President-elect Obama and Democratic Congressional leaders are whole-heartedly behind the idea of direct aid and are considering their options, including directly challenging the White House. In preparation for such a showdown, House Speaker Nancy Pelosi has directed House Financial Services Committee Chairman Barney Frank to begin drafting legislation specifically expanding the Treasury Department's authority to provide aid directly to automakers.

Although their strong victory in last week's elections has emboldened Democrats to directly confront the outgoing Republican administration, political realties could make that a difficult process. While the election increased the Democrats majority in both houses to pre-1994 levels, the new congress won't be sworn in until January. Any legislation that would come up for a vote in a lame-duck session would be with the congress as it is currently comprised. In that increasingly likely scenario, the Democrats would have very little margin for error if they wish to get something passed before the end of the year.

As it is very likely that President Bush would veto any bill re-directing TARP funds, a new bill creating direct aid may be the best course of action, particularly since bi-partisan cooperation is seen as increasingly essential. Although most Republicans are against such aid, a few like Senate Minority Leader Mitch McConnell represent states with significant auto manufacturing facilities, and are seen as those most likely to sign on to any proposed bailout bill.