During President Clinton’s final term, he spent a lot of time blocking plays. Republican bills were racking up strong majorities in Congress, thanks to modest Democratic support. But they weren’t veto-proof majorities, so the legislation died.
For Bush, political life won’t be that hard. His own party drives the agenda, even with the Senate split. Congress will restart versions of legislation that Clinton stopped, and Bush will sign. Bush also will work his will through the thousands of new appointees soon to arrive in Washington to kick the Democrats out. Federal rules will be reinterpreted. Federal laws will be differently enforced.
Tax cuts dominate the money story. If income-tax rates go down, everyone would get a piece. At the middle- and lower-income end, you’d get a little more money to spend. At the high end, you’d have enough to add to savings, too. But tax cuts often come slowly, so don’t shop in advance.
You’ll also hear plenty about reducing the so-called marriage tax. In real life, nothing on the 1040 says, “Married? Pay here.” About 25 million couples do indeed pay more than they would as singles. But that’s only because they earn about the same amount, and their combined paychecks push them into a higher bracket. Some 21 million couples with only one earner (or one major earner) pay less as marrieds, because they get lower tax rates than singles do.
Tax cuts for couples will leave the unmarried (never-married, widowed, divorced) feeling even more unloved. Try this for a lonelyhearts ad: “Fun-loving single seeks partner for mutual tax support.”
Phasing out the estate tax is also high on the Republican list. It passed Congress last year, with some Democratic support. The well-to-do people who owe this tax occasionally buy cash-value life insurance to help pay the bill. If you’re considering such a step, choose term insurance instead, to tide you over these months when we don’t know whether repeal will actually occur. (The term policy should be convertible to cash-value coverage, in case you need permanent insurance after all.)
Beyond tax cuts, Republicans have been laying out a clear agenda for people seeking a boost in their personal health and wealth. Here’s what else is on the table:
Retirement accounts. Last year the House passed a popular bill to raise the deductible amount you can put into retirement accounts. For example, the ceiling on IRAs would rise to $5,000 a year from $2,000 now. The 401(k) ceiling would rise to $15,000 from $10,500. You could make extra contributions if you’re 50 or older. Small-business owners could contribute more for themselves when setting up a companywide retirement plan.
That’s great for people who can afford it, but the average saver will shrug. Of workers with 401(k)s, no more than 6 percent are contributing the maximum today. Among the 4 percent of tax-payers with IRA deductions, just half contributed the maximum in 1997, according to a Treasury estimate.
The minimum wage. Last year House Republicans joined with Democrats to pass a $1 increase in the $5.15 minimum hourly wage (packaged with some business-tax breaks). But that was an election year. Republican leaders generally oppose an increase in the wage. The slowing economy will strengthen their argument that companies can’t afford to pay workers more.
Education IRAs. Currently you can contribute $500 a year to a tax-deductible IRA for college expenses. But there’s no point. State-run “529” college-investment plans provide better tax breaks and let you invest much larger sums (for details, see savingforcollege.com).
So why are Republicans pushing to expand the education IRA? Because they want it to cover savings for private primary and secondary schools, including religious schools. The Senate passed this bill handily last year, but it got tangled with other issues in the House. Clinton threatened a veto, calling it a windfall for the moneyed class. Presumably Bush would sign the bill if Congress tried again.
Bankruptcy. A bill passed both houses that would have made it tougher and costlier for wage earners to go bankrupt, but Clinton refused to sign. Bankruptcies are expected to rise this year, due to higher unemployment and the burden of “subprime” loans on people with few resources. The credit industry wants a law, and fast.
Privatizing Social Security. That’s a tough sell, politically, when people are losing money in stocks. Senate Majority Leader Trent Lott has proposed yet another study commission–presumably to produce a recommendation he wants. Earlier commissions have already delved into the costs and implications of privatization, but Congress has never agreed on where to start. One positive result of the Lott commission might be an actual bill, showing the public who’s helped, who’s hurt and how the transition would be financed.
Drug benefits for seniors. Bush campaigned on giving seniors fast help by providing federal money to states. But only 19 states have subsidized drug programs in place, and limited numbers of seniors qualify. Broader benefits await a total Medicare overhaul.
Patients’ rights and other health issues–a short watch list. (1) Will you be able to sue an HMO that delays or denies covered medical treatment? Bush backs the limited type of lawsuit currently allowed in Texas, with a cap on what you can recover. Still, a federal bill will be tough to pass. (2) Will Congress take action on coverage for the uninsured? This could become a sleeper issue, as workers lose jobs during the slowdown and companies slice health benefits for early retirees. Bush has proposed a tax credit for people who buy indi-vidual coverage–not enough to pay for a policy, but at least a start. (3) Keeping your medical records private. Congress couldn’t agree on how to do it, so Clinton issued regulations. Now Republicans say Clinton went too far. These regs may be scaled back.
In all, you’re looking at a major change in political thinking. Even in disputed elections, winners win.
