Archive for Monday, January 29, 2001

GOP to push plans for IRAs, Social Security

January 29, 2001


No one can predict exactly what the new President Bush will do. But you can get a hint, based on what Congress couldn't get through during President Clinton's time.

Many Republican bills racked up strong legislative majorities, thanks to modest Democratic support. But they weren't veto-proof majorities, killing the legislation.

With Bush in the White House, Republicans will drive the agenda, even with a Senate split. Congress will restart versions of legislation that Clinton stopped. The president will press his own conservative ideas.

Tax cuts dominate the headlines, but many other important proposals are on the table that affect your wealth and health:

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 set aside more for themselves in their employee plans.

That's great for people who can afford it, but the legislation doesn't affect the average employee. You need an upper income to benefit from this likely law.

Of workers with 401(k)s, no more than 6 percent are contributing the maximum today. Among the 4 percent of taxpayers 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 businesses 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 to it. State-run "529'' college-investment plans provide better tax breaks and let you invest much larger sums (for details, see

So why are Republicans pushing to expand the Education IRA? Because they want it to cover savings for private primary and secondary schools.

The Senate passed this bill handily last year, but it got tangled with other issues in the House. Clinton threatened a veto, saying it amounted to 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, thanks to higher unemployment and the burden of high-rate loans on people with no savings and marginal jobs. The credit industry's top priority is to get this bill through.

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 already have delved into the costs and implications of privatization, but Congress has yet to agree on where to start.

One positive result of a 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 widen state programs. But only 19 states have subsidized drug benefits for seniors, and limited numbers of seniors qualify. More general benefits await a total Medicare overhaul.

Patients rights' and other health issues. Here's a short watch list:

1. Will you be able to sue an HMO that delays or denies covered medical treatment? Bush is on record as saying he backs the type of limited lawsuits 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 individual 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 the Clinton administration issued regulations. Now Republican leaders say that Clinton went too far.

In all, you're looking at a major change in political thinking. Even in disputed elections, winners win.

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