Do Obama's SOTU Pledges Really Help the Young and Impoverished?

President Obama’s proposals to grow the middle class aren’t likely to move forward any time soon, said Harry Holzer, professor of public policy at Georgetown University.

In the State of the Union address on Tuesday, Obama called for a child-care tax credit, free community college for all and tax cuts for working couples in an effort to stymie the country’s widening economic gap.

But with a Republican-controlled Congress, Obama will have a hard time getting any of those proposals implemented, Holzer said.

“I think the president probably knew that but was trying to build a longer-term agenda for Democrats,” he said.

In a 2013 speech on economic mobility for the Center for American Progress, a nonpartisan educational group, Obama called economic inequality “the defining challenge of our time.” Now, with just two years left in office, he has made “middle class economics” a centerpiece of his policy agenda.

“That’s what middle-class economics is: the idea that this country does best when everyone gets their fair shot, everyone does their fair share, everyone plays by the same set of rules.” Obama said in his speech. “We don’t just want everyone to share in America’s success; we want everyone to contribute to our success.”

In recent years, the middle class has seen little growth in their wealth. A 2014 Pew Research Center analysis found that the wealth gap between America’s upper- and middle-income classes has reached its highest level on record. According to Pew, a nonpartisan think tank researching social issues and trends in the U.S., upper-income families now have a median net worth nearly seven times that of middle-income families, up from about three times that of the middle-class in 1983.

According to Pew, the middle-class hasn’t gained any wealth since the end of the recession, meaning that despite a healthier economy, many middle-class families don’t feel that they’ve actually benefited from the economic recovery. And without such a recovery, it becomes increasingly difficult to yank more and more children out of the poverty trap.

Part of Obama’s strategy for strengthening the middle class is to make it more affordable to attend community college. Under Obama’s plan, the federal government would partner with states to provide tuition for “high-quality programs” for the first two years of community college, according to the White House website. To qualify, students must be enrolled at least half-time and maintain a 2.5 grade point average.

Obama’s plan was inspired in part by the Chicago Star Scholarship, which will begin this fall and covers the cost of tuition, fees and books for three years or until an associate’s degree has been completed, according to the scholarship website.

The plan, however, has drawn criticism from some experts who say it should include a limit on qualifying students’ incomes.

In an article for Brookings Institution, an independent think tank that researches government, policy and economics, Stuart Butler, a senior fellow in economic studies, said “the plan is badly targeted.”

Butler said the plan could mean paying for middle- and upper-income students, “even though many do not need the help.” He said it could also lead to community colleges filling up with these students and crowding out lower-income students.

Holzer shared a similar concern, saying poor people need work study programs or stipends more than free tuition, since they can also receive Pell Grants to help with costs.

He also said encouraging more people to attend community college may have “some perverse affects,” with the possibility of lower success rates, less guidance and an overall lower-quality education.

Besides free community college, Obama also proposed a larger child-care tax credit, which would give more money back to families who use child-care, as well as tax cuts for families with two earners.

According to a 2014 report by Child Care Aware of America, an organization providing child-care information and resources, more than 600,000 children in Illinois under the age of six need child care. The report also found that the average cost of child-care in Illinois, depending on the age of the child and the type of child care, ranged from approximately $4,500 to more than $12,500.

For “a single mom, let’s say without a college degree, it’s burdensome,” Holzer said.

The maximum tax credit would be $3,000. While this could cover a significant portion of child-care costs for some families, the wide range of these costs in Illinois mean for others, care may still be unaffordable.

“It’s going to add up pretty quickly,” Holzer said regarding child-care costs, “but it’s got to help.”

It’s a “huge step in the right direction,” said Ed Walz, a spokesman for the First Focus Campaign for Children, a bipartisan children’s advocacy group.

Walz said quality child-care provides a strong foundation for learning and make it easier for parents to work a job that will support their family.

According to Child Care Aware, children who received high-quality care scored higher for academic and cognitive abilities and also misbehaved less. However, “much of the child care in the United States is not quality child care,” according to the website.

Holzer said the tax break for families with two earners made sense as well, especially as other assistance programs, such as the earned-income tax credit, are phased out.

“Marriage alone pushes people into a higher tax bracket,” he said, which can discourage one spouse from working in order to remain in the lower bracket.

To fund all three middle-class economy initiatives, Obama proposed closing the “trust fund loophole,” which prohibits taxing capital gains on someone’s inheritance, as well as taxing capital gains at a higher rate. Together, these tax increases would place most of the tax burden on America’s top 0.1 percent of earners, according to the White House website.

In an opinion piece for Brookings Institution, Holzer said the huge growth in the United States’ inequality makes redistributing some wealth a good idea.

In addition to tax relief and free community college, Obama also proposed higher wages, seven days of paid sick leave for all workers and paid maternity leave.

Leave a Reply