How Does Obama Plan to Save the Middle Class?

Source: Jamie Squire/Getty Images

Jamie Squire/Getty Images

While President Barack Obama spent much of the State of the Union address on Tuesday showing off the country’s improvements, he also used it to place middle class economics on his list of priorities.

Many would argue that this seems a bit belated — it’s been known for some time that the middle class is struggling and, more seriously, disappearing, and that setting up policies that would improve the middle class’s economic standing would help the economy in general. And some would say this plan is similar to what Obama has been doing, though it hasn’t been helping the middle class enough.

“At every step, we were told our goals were misguided or too ambitious; that we would crush jobs and explode deficits. Instead, we’ve seen the fastest economic growth in over a decade, our deficits cut by two-thirds, a stock market that has doubled, and health care inflation at its lowest rate in 50 years,” Obama said during his State of the Union address. “So the verdict is clear. Middle-class economics works. Expanding opportunity works. And these policies will continue to work as long as politics don’t get in the way.”

So let’s unpack what Obama’s middle class economics really entails.

Improving wages

Politico points out that Obama’s middle class economics agenda comes in response to the one glaring failure in his tenure. Almost every other economic measure has improved since the recession: GDP growth, unemployment, consumer spending, foreclosures, home sales, inflation, and energy prices. And yet, middle class wages have not. 

While he skirted around the issue of wage stagnation, Obama did reinforce his commitment to raising the minimum wage. The White House notes that, since the 2013 State of the Union, when Obama made a call to action regarding raising the minimum wage, 17 states and the District of Columbia have taken action to raise wages, and about 7 million workers will reap the benefits.

Taxing the rich

Closing tax loopholes for the upper class is another box to check on Obama’s middle class economics list, citing that eliminating the trust fund loophole could create funds for measures to help middle class families.Obama proposed a $320 billion tax increase that would target the wealthy and big banks. The White House also includes “cutting taxes with a $3,000 credit per young child to make child care more available and affordable, while creating a new second earner tax credit for working families.”

Obama is also proposing tax reform that would piggy-back off the success of the American Opportunity Tax Credit (AOTC), established in 2009, which gave refunds for college students and their parents. Now Obama wants to target tax-based financial aid, hoping to cut taxes for 8.5 million families and students, as well as allot up to $2,500 a year to  students working toward a college degree. This goes along with his plan to offer two free years of community college to “responsible” Americans.

Catching up to the rest of the world’s sick leave policies

Another step Obama thinks will help the middle class is state-led sick leave policies that will make sure Americans are able to earn paid sick days. The lack of protected paid sick leave is an impetus primarily for people working hourly jobs with lower incomes, as they can lose their jobs over missing a shift. “People with the cushiest jobs and the biggest salaries have the most flexibility at work,” Jared Bernstein, former chief economist to Vice President Joe Biden, said to Bloomberg.

Obama addressed the fact that this is a problem almost unique to the U.S. “Today, we’re the only advanced country on Earth that doesn’t guarantee paid sick leave or paid maternity leave to our workers,” Obama said in the State of the Union. The White House notes that 43 million private sector workers go without paid sick leave. In response, he’s proposing “more than $2 billion in new funds to encourage states to develop paid family and medical leave programs, following the example of California, New Jersey, and Rhode Island.” He’s also planning to ask Congress to pass legislation allotting federal employees six weeks of paid maternity or paternity leave.

While many of these policies are a long time coming, some have argued that Obama’s plan is just a bolder version of what he’s already done during the economic recovery. “President Obama calls higher taxes, more bureaucracy and Washington spending ‘middle-class economics,'” Rep. Tom Price (R-Ga.) wrote in an opinion piece for RealClearPolitics. “Yet it’s those economic policies that have created a recovery that’s been particularly lousy for America’s middle class.”

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