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On Sunday, I posted a piece with this title and a slightly different subtitle, observing that the mainstream Republicans seem to have a death wish, drawing attention to the pitiful record of the Republicans in Congress when it came to delivering legislation to the President’s desk, and adding:
And when they come to tax reform, what is their big idea? To cut corporate taxes, which would be a boon, and to make up for the revenue losses that this would entail not by cutting expenditures but by gutting the 401k . The fact that their proposal that tax-free contributions to this retirement-savings vehicle be cut to $2400 a year has Wall Street up in arms bothers me not one whit. It is not the task of the US government to feed the greed of a particular industry.
It is its effect on the ordinary joe that I have in mind. I mean the fella who plays by the rules, works hard, and socks money away for his retirement, using the 401k. If self-reliance is a virtue and if promoting individual self-reliance serves the public good, as it surely does, then the provisions within the tax code providing for the 401k are among that code’s best provisions. From the perspective of macroeconomics, the 401k promotes capital formation. From the perspective of public policy, it reduces dependency. What’s not to like?
Moreover, subverting the 401k is bad politics. If Wall Street is up in arms, think about the fury that legislation of this sort will elicit from the ordinary joe once he feels the pinch. Are the Republicans in Congress so beholden to the Chamber of Commerce that they have forgotten their party’s base? If they gut the 401k, in 2018, they will lose both the House and the Senate in a landslide. Is there no one in the Republican Party’s congressional leadership who has any sense?
When this appeared, I was immediately taken to task by a member who argued that the Republicans had done a lot (though he had to concede they had actually passed next to no legislation). Then, with regard to the 401k, he added:
[C]an you inform us where, exactly, you saw this in print? Please provide the link, because I have only seen it one time, in an AP wire story last week, reprinted in WaPo and their left-leaning brothers. I’ve been looking for it ever since and can’t find it. I think a link to the actual “proposal that tax-free contributions to this retirement-savings vehicle be cut to $2400 a year” would be much appreciated, so I can be as outraged as you. I will write a letter to Cruz and Cornyn (I’m from Texas) and to Trump and Pence, once I have the proof in hand.
If you are only going to quote the AP story, I think a retraction would be nice.
This individual’s attention was then called to a similar piece in The Wall Street Journal, reporting, “Lobbyists and others in the retirement and financial services industries who have spoken to congressional staff and committee members say lawmakers are looking at proposals that would allow 401(k) participants to contribute significantly less than what is currently allowed in a traditional tax-deferred 401(k). An often mentioned amount is $2,400 a year. It isn’t clear whether that would only apply to 401(k)s or IRAs or both.”
To this, he responded with incredulity, “[I]n my book, that’s nothing but gossip. We’ve got ‘lobbyists and others’ who have spoken to ‘staff’ and etcetera say lawmakers are ‘looking at proposals’… and ‘An often mentioned amount is $2,400 a year’…”
As you may be aware, there has been a great deal more in the press recently about this supposedly fake news. One could, of course, suppose that — when the President of the United States intervened to indicate that he was opposed to gutting the 401k — he had been fooled by “gossip.” But it makes more sense to suppose that the Associated Press and The Wall Street Journal, not to mention Pravda-on-the-Hudson, had done some real reporting.
As it turns out, some very important Republicans are still intent on gutting the 401k. Yesterday, The Weekly Standard reported that — Donald Trump’s objections notwithstanding — Kevin Brady, chairman of the Ways and Means Committee in the House of Representatives, was still interested in the project. And there is a similar story on the front page of today’s Wall Street Journal., which once again intimates that the Republicans are thinking about restricting tax-free contributions to $2,400 a year.
I understand the propensity to regard the mainstream media as suspect. When Pravda-in-America in its various guises reports on Donald Trump, there tends to be an admixture of fiction with fact. But it is a mistake to respond reflexively in utter disbelief to news reports suggesting that the Republicans in Congress are on the verge of doing something really stupid. They, alas, do such things quite frequently.
In this case, however, it looks as if Donald Trump (who is more often than not underestimated) will wade in to save the congressional Republicans from themselves.Published in