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Obama's Plan to Bail Out the Middle Class

Mar 12, 2010 Jennifer Williamson, Distance Columnist | 0 Comments

The American Dream might not be dead yet—but it’s not feeling so hot. In America, anyone from any economic background is supposed to be able to go to college, get a good job, buy a home and have a financially secure future.

But even before the recession, the Middle Class has slowly been squeezed out of that dream. According to the Economic Policy Institute’s most recent study, the top 1% of Americans made over 55% of the country’s wealth—and the bottom 90% made about 15% of that wealth. It’s clear that most Americans aren’t benefiting greatly with economic improvements, although they sure are being hit hard by the downturns. Many middle-class and even upper-middle class families today face rising health care costs, rising tuition, crippling student debt, unemployment, and mortgages they can no longer afford to pay.

President Obama has a host of reforms in mind that are designed to improve the situation for ordinary Americans. Some of these reforms are held up in Congress, and some have not yet been introduced. Here’s an overview of
some of the programs Obama would like to institute to help the Middle Class.

Middle Class

Student loan reform 

Obama entered office with a sweeping plan to eliminate banks’ involvement in administering federal student loans, making these loans available to students only directly through the government itself. This would allow the government to stop spending millions in bank subsidies, and use that money instead to expand the availability of Pell grants, administer Income-Based Repayment Programs, and give tax credits for education to college students and their families.

The health care overhaul

The health care overhaul is perhaps the  most ambitious—and challenging—aspect of Obama’s plan to help the middle class. Originally, Obama envisioned a nationwide mandate—so that everyone would have to buy health insurance—tempered by a series of steps designed to make that insurance more affordable, including a public option that would compete directly with private insurers. As of this writing, a tip in the Congressional balance between Democrats and Republicans has left Obama’s health care plan in jeopardy.

Jobs creation

Obama has proposed over $30 billion to help spur job creation and help small businesses thrive. Among the incentives offered under the new plan, small businesses get tax credits and don’t have to pay capital gains taxes, and companies of all sizes would receive $5,000 for each new person they hire. In addition, small businesses would have an easier time getting loans under a new government program that would increase guarantees for loans made to small businesses through the Small Business Administration. Road-building and construction projects are also projected to produce new jobs, and are set to begin in 2010. 

Child care tax credits

The President is asking Congress to approve a proposal to double the child care tax credit to families who earn less than $85,000 per year. The credit reduces a family’s tax bill dollar-for-dollar, rather than just counting for deductions—so it’s worth a lot more. However, this version of the child care credit increase wouldn’t’ be refundable—so families can only claim as much as their income tax allows, and won’t get a reimbursement check in the mail form the government if they pay no income taxes.

Help for students drowning in debt

Obama has already introduced the Income-Based Repayment  Plan (IBR), allowing students to repay their student loans based on their income. Under this plan, you’re required to pay only 15% of the amount you earn over 150% of the poverty level if you qualify—which is designed to be less than 10% of your income per year for most households.  If your income falls below 150% of the poverty level, you aren’t required to pay toward your student loans until your income rises again.

Help for families caring for the elderly

The most recent stimulus proposal includes about $102.5 million to help improve access to respite care for families who are providing care for elderly relatives. These programs provide caregivers that can take over for family members on a limited basis, transportation help, adult day care, and other help.

An automatic paycheck deduction program

This program takes a certain amount out of workers’ paychecks to put into savings—making it easier, theoretically, for families to increase their savings. The program includes incentives for companies to use it, including tax credits that are designed to defray administrative costs.

There’s no question that the Middle Class in America is facing a host of financial problems—and the American Dream is looking more distant than ever for many families. Hopefully this administration can pass measures that provide some form of relief to Middle Class families—because it’s sorely needed.


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