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Washington Casts Its Eye on Little Guy

Whatever the working poor want - tax breaks, protected pensions - Congress may give them

All of a sudden, the concerns of the working poor have become a cause celebre on Capitol Hill.

In coming weeks, Congress may consider bills to protect worker pensions, offer a $500 per-child tax credit, and allow workers to keep their health insurance as they change - or lose - jobs. Then there is the issue that won't die: hiking the minimum wage.

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This focus on low-income families is driven in part by the success of a Democrat-led campaign to portray Republicans as the ruthless party of the rich. It also reflects the burgeoning political power of the working poor.

These looming debates will showcase two vastly different economic philosophies. Republicans argue that a balanced federal budget will lower interest rates, and that cuts in taxes and regulation will spur economic growth and create jobs. Democrats contend that the rising number of poor households requires a corresponding expansion of programs designed to help them.

Not only will the outcome affect the pay stubs of America's most fragile working citizens, but it could also determine which party prevails in November.

According to Census data, about half of the 40 million Americans in poverty live in households where somebody has a job. About 7.4 million live in households with a full-time worker. In total, about 18 million households have annual incomes below $28,500.

Studies suggest more American households than ever are hovering just above the poverty level, and a variety of economic forces are conspiring to keep them there.

In the last three elections, the working poor have proved to be an active and volatile voting bloc. Their support has buoyed the presidential candidacies of Ross Perot and Patrick Buchanan, and helped Republicans capture both houses of Congress in 1994.

But so far, Democrats have proved more adept at addressing issues that resonate with low-income families, and at making Republicans look like fat cats.

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Last year, Democratic pressure and public opinion forced Republicans to abandon a proposed cut in the Earned Income Tax Credit: a program that allows households earning less than $28,500 a year to pocket more of their earnings. Although the savings would have come from exempting workers with no dependent children, Democrats made headway by painting the cut as a tax increase on the poor at a time when Republicans were pushing cuts in the capital gains tax, which would most benefit upper-income Americans.

In recent months, Democrats have antagonized the Republican congressional leadership by trying to force a vote on raising the minimum wage by 90 cents, to $5.15 an hour. Republicans have blocked the measure so far, but are losing resolve in the face of polls that show 80 percent of Americans favor the move. A vote could come this week.

The next skirmish will likely involve pension security. Democrats plan to mount another attack on a Republican bill that would allow companies to pocket any money in their pension funds above 125 percent of their current pension liabilities. Republicans argue that the bill would help businesses expand and create jobs. Democrats say the proposal amounts to a giant "raid" on employee retirement money.

On other fronts, Democrats claim that a current Republican plan to scale back the rate of increase in the federal food-stamp program will have a devastating effect on the 2 million working-poor households with children that receive food stamps.

In addition, Democrats have assailed the current GOP plan to reform Medicaid, the federal health- care program for the poor. The proposal would trim $246 billion from Medicaid over six years by paying states in block grants and dropping many federal rules - including the current guarantee of coverage for all minors. Democrats call it an "assault on children."

Rattled by these attacks, GOP leaders have supported several policies in recent weeks designed to address the economic insecurity of the working poor: from a bipartisan health-insurance reform bill that would allow workers to keep their insurance when they lose a job or switch jobs, to repealing a 4-cent increase in the gasoline tax.

"Republicans are clearly more concerned about the perception that they are more for the rich than the poor," says one Republican House staffer. "There's been a concerted effort to counter that."

IN the end, Republicans must make the case that the only real solution to the problems of the working poor is a vigorous economy, and that every spending program jealously guarded by Democrats will add to the likelihood of economic ruin.

Although a majority of Americans say they favor a balanced budget, and believe that the nation is overregulated, Republicans say, these abstract arguments are easily overcome by short-sighted Democratic sound bites.

In addition, Republicans argue, mandates like the minimum wage hike have negative long-term consequences that voters won't be able to identify. While workers who receive the minimum wage will see a difference in their pay stubs, Republicans argue, they won't make the causal connection when employers are forced to let some workers go.

Currently, Republicans plan to soften the minimum wage bill by yoking it to a package of deep tax cuts for small businesses designed to offset the costs of the wage increase.

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