Arrow-right Camera


Obama plans middle-class help

Tue., Jan. 26, 2010, midnight

Tax breaks, loan aid proposed alongside federal spending freeze

WASHINGTON – Moving to address rising voter anger over the tattered shape of their pocketbooks, President Barack Obama is readying new initiatives for federal belt-tightening as well as aid to middle-class families on problems ranging from child care and student loans to retirement savings and assistance with aging relatives.

The new priorities are expected to dominate Obama’s State of the Union address Wednesday, but the first concrete demonstration of the change came Monday at a White House meeting where the president and Vice President Joe Biden announced a set of proposed tax changes and other steps that were aimed at middle-class Americans.

Under the proposals, the child care tax credit would nearly double for families earning less than $85,000, federal student loan repayments would be capped at a lower level, employers would have to offer automatic payroll deductions for retirement accounts, and financing would increase for families caring for elderly relatives.

“None of these steps alone will solve all the challenges facing the middle class,” Obama said. “But hopefully some of these steps will re-establish some of the security that’s slipped away in recent years. Because in the end, that’s how Joe and I measure progress – not by how the markets are doing, but by how the American people are doing. It’s about whether they see some progress in their own lives.”

On the soaring federal deficit, which polls show is a major factor in voters’ discontent, Obama will announce on Wednesday that the budget blueprint he files next week will contain a “hard freeze” on discretionary spending that lasts through 2013, an effort his advisers liken to the fiscal discipline average families impose on themselves every day.

The speech, delivered to a joint session of Congress, will also address the stubbornly high unemployment picture, aides said, as well as key foreign policy goals and new proposals to improve transparency in government. The White House said the speech was still being written and did not make details on those initiatives available Monday.

With his job approval ratings in decline and political horizon darkening in recent days, Obama is fighting to keep his Democratic majorities in Congress through the fall elections. That means persuading disillusioned voters to reinvest in him and his party for another two years.

“That sense of angst is what drove him to seek office,” said White House communications director Dan Pfeiffer. “It is something we have focused on in his year in the White House … and a big part of what we will do in 2010 and the rest of the presidency.”

House Republican Leader John A. Boehner of Ohio lit into the president’s economic plans.

“After spending most of the last year focused on their costly government takeover of health care, the White House and congressional Democrats again claim they are pivoting to the issue of jobs – even as they remain committed to their job-killing agenda,” Boehner said in a written statement. “Americans are asking, ‘Where are the jobs?’ ”

On Monday, Obama said the loss of 7 million jobs since the recession began is “an epidemic that demands our relentless and sustained response,” but he did not say what he might propose in the State of the Union speech.

Administration officials said the tax credits and other measures rolled out Monday are directly linked to job creation.

White House press secretary Robert Gibbs told reporters that curbing student loan payments, for example, would entice people to return to school – a prelude to landing a new job.

“If you’re trying to figure out how you’re going to go back to school so you can get that next job, we don’t want you to be crushed by the burden of skyrocketing tuition payments,” Gibbs said.

Aides briefing reporters on the deficit proposal said Obama would vow that if Americans had to tighten their purse strings, then their federal government ought to do the same thing.

Under his 2011 budget proposal, any discretionary spending unrelated to national security will be frozen at its current level, two senior administration officials said Monday. The freeze will affect roughly one-sixth of the federal budget.

The president will propose to keep the freeze in place through 2013 so that, by the middle of the decade, that component of the budget will reach its lowest level of the gross domestic product in 50 years. The savings from the three-year freeze is expected to amount to $250 billion over the next decade, compared to the baseline set in 2008.

“Some agencies will be up, some agencies will be down,” said one senior administration official. “While there’s an overall freeze, it doesn’t mean that every agency and every agency’s budget will be frozen.”

A second administration official said the message should make perfect sense across the country.

“The president made these decisions like a family would do sitting around the dinner table,” the second official said. “You can’t afford to do everything you might want to do.”

With those dinner-table decisions in mind, the president will offer relief to college students who graduate with substantial student loans – a situation in which more and more graduates find themselves.

Obama plans to limit a graduate’s federal loan payments to 10 percent of his or her income, above a basic living allowance. At present, the yearly payments are capped at 15 percent of discretionary income.

The child and dependent care tax credit would nearly double for middle class families earning less than $85,000 a year. To do so, Obama will increase their tax credit rate from 20 percent to 35 percent of child-care expenses.

Other initiatives are meant to help a larger pool of American workers, including creation of a system of automatic workplace IRAs. Obama proposes expanding tax credits to match retirements savings, as well as enacting new safeguards to protect retirement savings. He also plans to expand support for families balancing work with caring for elderly relatives, although aides to the president did not say exactly how he intends to achieve that.

There are six comments on this story »