Obama's plan to help the middle class: how it might affect you

A tax credit here and an expanded program there are part of Obama's new plan to relieve financial stress on the middle class. Among the beneficiaries, if Congress goes along: families with children in child care, college students, and workers without employer-sponsored retirement programs.

President Obama’s new plans to help the middle class are not sweeping initiatives. They would not create big new government programs or thousands of jobs. By Washington standards, they’re fairly cheap.

But the president’s moves could provide a small boost for millions of Americans struggling to pay for care for children or elderly relatives, college, and retirement.

“We ... need to reverse the overall erosion in middle-class security so that, when this economy does come back, working Americans are free to pursue their dreams again,” said Mr. Obama Monday at a meeting of the administration’s Middle Class Task Force.

The White House billed the moves as a preview of an effort that will be expanded upon in the State of the Union address on Jan. 27 and the full report of the task force, set for release in February.

But a fact sheet released Monday outlined some specifics about how the ideas would work.

Child care. The administration is proposing to nearly double the child-care tax credit for families whose income is less than $85,000 a year. For those folks, the percentage of child-care expenses eligible for reimbursement via the credit would rise from today’s 20 percent to 35 percent.

In dollar terms, the maximum credit for a two-child family making, say, $80,000 a year, would increase from $1,200 to $2,100. That’s a $900 benefit.

Families with incomes up to $115,000 a year would be eligible for at least some increase in their child-care tax credit, on a sliding scale.

The administration also is proposing to increase by $1.6 billion the amount of money in the Child Care Development Fund, which pays for child care for poor families, including those receiving public assistance.

Child care for an infant can cost up to $10,000 a year, noted Jared Bernstein, chief economic adviser to Vice President Joe Biden, in a Monday conference call with reporters. For many families, child care costs more than housing, Mr. Bernstein noted.

“These are serious budget issues affecting millions of working families,” he said.

Dependent care. The White House is proposing to add $52 million to the Caregiver Initiative, a Department of Health and Human Services program that provides temporary respite care, counseling, and referrals to critical services for hard-pressed families taking care of elderly relatives. According to the administration, this extra cash means the program will serve an additional 200,000 people.

The administration is also proposing to add a further $50 million to programs that subsidize adult day care, transportation, and aides who help seniors bathe and cook.

College expenses. In perhaps the biggest move announced Monday, the administration is proposing to limit the amount of student loan money that a borrower must repay to 10 percent of the borrower’s income, over and above a basic living allowance.

The proposal would also cap the total amount of money a borrower must pay. For borrowing students who enter a field of some kind of public service, all remaining debt would be forgiven after 10 years of payments. For others, forgiveness would follow 20 years of payments.

Retirement savings. About 40 percent of working heads of households don’t have any kind of employer-sponsored pension or retirement plans. The administration thus is proposing to require employers who don’t offer such plans to enroll their workers in automatic, direct-deposit IRAs (individual retirement accounts).

Employees could opt out if they wanted to. All contributions would be voluntary.

The administration also wants to streamline the process by which workers enroll in 401(k) retirement plans.

After Monday’s rollout of these initiatives, some Republican leaders criticized them as not addressing the most important problem now facing the middle class: unemployment.

“Where are the jobs?” said House minority leader John Boehner (R) of Ohio in a news release.

White House officials said that the president is deeply concerned about the unemployment rate – and that child care, college expenses, and retirement are areas where the middle class felt squeezed even before the latest recession began.

“We don’t think it makes sense to wait until the unemployment level comes down to an acceptable level before tackling the budget issues these families face,” said Bernstein.

The White House can carry out some of its initiatives for the middle class on its own, by executive order. In other cases – particularly those involving money – they would have to be approved by Congress.

"In most cases, these are new versions of programs that were under discussion or are already in place," said Mr. Bernstein.

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