January is synonymous with fresh starts. And in government, it is no different. With 2005 afoot, members of Congress are running into both new and old colleagues in those hallowed halls beneath the Capitol.
In November, Republicans increased their majority in the Senate from 51 seats to 55, and in the House by three seats. George W. Bush became the first president since 1936 to win a second term while gaining seats in the House and Senate.
By all conventional measures, it would appear this second-term president should be able to implement his agenda, but he’ll need to find common ground among members of both parties. The Republicans don’t have the magic 60 votes that would essentially ensure them control over the agenda. Here are the key business issues facing the 109th Congress.
Social Security
Social Security likely will dominate the president’s second-term domestic agenda. Bush has outlined plans for an ambitious overhaul. Approximately 77 million baby boomers will begin retiring in six years, drawing Medicare and Social Security benefits.
Until recent years, conventional wisdom on Capitol Hill saw retooling Social Security as politically unrealistic. Reform gained currency in the mid-1990s after Social Security’s own trustees projected a financial crisis.
Reports from a bipartisan commission concluded the system was a losing proposition for young workers. A single person born in 2000 with average earnings will see a real annual return of 0.86 percent on his or her contribution, the commission calculated.
Bush promotes redirecting some payroll taxes to individual savings plans. This school of thought suggests a higher rate of return from private accounts would lessen reliance on guaranteed Social Security benefits. The challenge for Congress will be the estimated $1 trillion cost of creating such accounts.
Health care
Some experts consider health care costs to be the largest problem facing businesses. To address those costs, Congress will likely take another run at limits on medical malpractice awards. The president also proposes increasing coverage to the uninsured by expanding tax-free health savings accounts (HSAs), letting small businesses pool resources into association health plans (AHPs) and creating health care tax credits.
Bush touts HSAs that combine low-cost, high-deductible health insurance with tax-free savings accounts to pay health care expenses. He has also proposed that insurance premiums associated with HSAs be tax-deductible.
The president also promotes greater access to association health plans. He says small businesses could negotiate together to obtain affordable health insurance, much as large employers and unions do.
And, the president believes Medicare would be strengthened if private health plans could compete for seniors’ business by providing better coverage at affordable prices. This would help to control costs through marketplace competition, not government price-setting. Seniors could choose the plan that best fits their needs.
Taxes
The president has endorsed simplifying the tax code, a top priority for congressional Republicans. However, they are split over how to do it. The most likely options are a flat tax or a sales or consumption tax.
Both parties agree on the importance of simplifying the revenue code. Democrats oppose replacing the income tax, saying it would increase taxes for middle- and low-income families, many of which pay little or no income tax. Capitol Hill insiders caution that the two largest obstacles to tax reform are shortages of time and political capital.
It is highly unlikely that Congress can address tax reform and Social Security reform simultaneously.
Tort reform
Republicans will try again to reduce what they consider frivolous lawsuits that increase business costs. The effort is likely to include raising the barrier to class action lawsuits by forcing more such suits into federal court. Republicans have also promoted creating a trust fund, rather than allowing the courts to adjudicate asbestos cases.
Bush and his allies contend an overhaul will spur economic growth domestically. But Democrats and allies in organized labor worry a trust fund will not be large enough to guarantee compensation to all claimants.
These issues will test Bush’s political will. But for lawmakers, finding good policy responses to creating jobs will be the central theme of much spirited debate.
Tommy Johnson is a specialist with Buchanan Ingersoll’s Government Relations Group. He assists clients throughout the firm in navigating the governmental process, including the pursuit of appropriations and grants. Reach him at [email protected]. Dennis Walsh is also a member of the firm’s Government Relations Group, and his practice primarily focuses on addressing the needs of clients before Pennsylvania state government and through changes in statutes and regulations. Reach him at [email protected]. For more information about Buchanan Ingersoll, visit www.buchananingersoll.com.
