Rosy Scenario Jude Wanniski September 8, 2000

The fact that the Bush campaign did not make any noise about the President's veto of the death-tax repeal legislation could turn out to be part of a clever strategy to sandbag Al Gore and the Democrats on the issue in the closing weeks of the campaign. Or, it could mean the absence of a meaningful Bush strategy on the issue. In any event, the issue is off the legislative table now that the House failed to override, with 15 of the 65 Democrats who supported repeal when they passed the legislation switching to support of the President. The quiet from Austin as Gore's polling numbers are scaring Beltway Republicans is now at least suggesting there may be method in the madness, with Bush holding his fire until he gets the timing right.

Some analysts are now attributing Gore's momentum not to his performance at the Democratic convention, which did not have that big an audience, but to the heavy buying by the Gore camp of negative tv spots on Bush's record as Texas governor. If you have not seen the spots, it is because they have only been shown in selected areas of battleground states. Remember this was the Clinton re-election strategy in 1996, with tons of money spent on identifying Bob Dole with Newt Gingrich in regions not on the radar screens of folks living in New York or Washington. Because the Bush camp has yet to unleash anything similar, even though it has a mountain of cash, we must assume they are timing their media campaign for a bigger impact in the closing weeks. This hypothesis is consistent with the fact that Republican candidates for the House and Senate are doing better than Bush, who is the focal point of the Gore media barrage. There is still optimism on tax legislation emerging which Clinton would sign, as Karen Kerrigan reports:

The Senate Finance Committee has unanimously agreed to a modified Chairman Mark -- for Chairman Bill Roth -- on his IRA expansion. Following is a list of highlights of the Retirement Security & Savings Act of 2000, which includes the provision for low-income savers that we alluded to in last week's report:

§ Increase the amount individuals can save in an IRA from $2,000 annually to $5,000 annually;

§ Allow savers over age 50 to contribute $7,500 annually to an IRA. This would allow people who temporarily leave the workforce (for example, women who opt to stay at home with their children for a few years) to catch up on their retirement savings when they re-enter the workforce;

§ Increase the 401(k), 403(b), and 457 plan contribution limits to $15,000 annually (from current law $10,500);

§ Increase the SIMPLE plan contribution limits to $10,000 annually (from current law $6,000);

§ Creates a "Roth" 401(k) which would allow workers to contribute after tax dollars to their 401(k) plan and withdraw the funds upon retirement tax free (as with a Roth IRA);

§ Creates a tax credit for small employer plan contributions and start-up costs which will help offset the first three years of costs that small businesses incur when starting a new retirement plan or their employees;

§ Provides a nonrefundable tax credit for low and middle income savers for contributions made to a qualified plan or IRA;

§ Allows workers over the age of 50 to make "catch up" contributions to their 401(k), 403(b), and 457 plans;

§ Requires faster vesting on employer matching contributions from 5 years of employment to be fully vested to 3 years and from 7 year graded vesting to 6 year graded vesting;

§ Requires participant disclosure (enforced by tax penalties) when a company converts its pension plan to a cash balance or similar hybrid plan and eliminates the potential for a participant's normal retirement benefit to be "worn-away" by the conversion;

§ Makes it easier to transfer funds between retirement plans. The corporate community is not happy with cash balance regulation. And there are some differences between the House and Senate versions that will need working out. The path has been paved for IRA expansion; the issue will be whether Clinton will be want to reconfigure or further expand the tax credit for low and middle-income savers.

The other vehicle for additional tax relief -- such as those included in the minimum wage package offered by House Speaker Hastert -- is the community renewal package favored by Clinton. This includes grants, capgains preferences and other tax breaks for selected "empowerment zones."

Phone tax repeal may be added to this package. Does the President plan an October shutdown impasse? That may be Clinton's plan and thinking at the moment, but it's certainly not appealing to the Democrat rank-and-file in the House and Senate. According to political operatives on both sides of the aisle, with the generic vote so close -- Republicans say they are a mere 1 or 2 points behind and they are rarely this close at this stage of the game -- a Clinton-Gore train wreck strategy is not necessarily in the best interest of congressional Democrats. Both parties will be itching to get home, and Democrats perhaps more anxiously than the GOP; the open seats in the House are leaning more favorably in the direction of Republicans.