A user’s guide to President Obama’s new economic promises
“Middle-class economics” was the star of President Barack Obama’s sixth State of the Union address on Tuesday night. The president coined the term to cover his sweeping proposals to strengthen the middle earners of the US economy with better wages, lower taxes, more childcare, and jobs.
Sounding, finally, like the president that his liberal supporters want him to be, Obama outlined the economic agenda for the remaining two years of his presidency. While ambitious in its scope, it did not contain many new ideas. Mostly it was a laundry list of proposals that Obama has tried to get through Congress time and again.
Few experts – even those sympathetic to Obama – believe this slate of proposals will become reality. The last minimum wage increase took place in 2009; ever since the federal minimum wage has been stuck at $7.25. Tax reform, a legislative unicorn, last made it through Congress in 1986. And overtime pay hasn’t changed since 1975. Many of the goals laid out by Obama have been a long time coming, and the middle-class Americans that Obama has been trying to woo need them more than ever.
Now, with no more campaigns to run, Obama is attempting to strengthen his reputation as a progressive president. The omnibus of goals, promises, and policy hopes was enough even to bewilder experts. Here is a non-expert’s guide to Obama’s economic plan, with the President’s words followed by a snapshot of where things stand.
Let’s simplify the system and let a small business owner file based on her actual bank statement, instead of the number of accountants she can afford. And let’s close the loopholes that lead to inequality by allowing the top one percent to avoid paying taxes on their accumulated wealth. We can use that money to help more families pay for childcare and send their kids to college. We need a tax code that truly helps working Americans trying to get a leg up in the new economy, and we can achieve that together. We can achieve it together.
Of all of Obama’s proposals, this is the longest shot.
There is bipartisan support for overhauling corporate tax – in theory. Both sides agree on reducing the corporate tax rate from its current 35%. (Republicans want the new rate to be 25%, while Obama prefers 28%.) Obama also proposed a tax on banks, to deter them from excessive borrowing .
Incoming ways and means committee chairman Paul Ryan already has a draft of the Tax Reform Act of 2014, created by his predecessor Dave Camp. Obama petitioned for capital gains taxes and stringent taxation of offshore income. But Camp’s tax reform proposal got aggressive pushback from Wall Street for attempting many of the same changes. It remains to be seen if Congress tackles the challenge in the run up to the 2016 Presidential elections. SS
Twenty-first century businesses need 21st century infrastructure – modern ports, and stronger bridges, faster trains and the fastest internet. Democrats and Republicans used to agree on this. So let’s set our sights higher than a single oil pipeline. Let’s pass a bipartisan infrastructure plan that could create more than 30 times as many jobs per year, and make this country stronger for decades to come.
The White House announced several initiatives , following last July’s Build America Investment Initiative. These include a $600bn water plan over the next 20 years, pushing public-private partnerships for infrastructure investment and for infrastructure initiatives in rural America.
There has also been bipartisan support on infrastructure in Congress: Democrat John Delaney and Republican Mike Fitzpatrick refiled their Partnership to Build America Act in the House. The bill aims to create an infrastructure fund that private corporations can buy bonds from, for tax breaks on offshore income. In the Senate, congressmen Michael Bennett, Democrat of Colorado, and Roy Blunt, Republican of Missouri, have promised to bring back the bill this Congress.
Sparing no opportunity to dismiss the Keystone XL Pipeline, Obama scored points by promoters of infrastructure spending as well as environmental activists. “President Obama hit the nail on the head by urging us to focus on expanding jobs in our nation’s infrastructure,” said Rhea Suh, the president of the National Resources Defence Council. Suh points out that clean energy infrastructure initiatives created nearly a quarter million jobs in the last three years, way more than the thousands the controversial pipeline project will create. SS
Sick leave, paid maternity
Today, we’re the only advanced country on Earth that doesn’t guarantee paid sick leave or paid maternity leave to our workers. Forty-three million workers have no paid sick leave. Forty-three million. Think about that. And that forces too many parents to make the gut-wrenching choice between a paycheck and a sick kid at home.
So I’ll be taking new action to help states adopt paid leave laws of their own. And since paid sick leave won where it was on the ballot last November, let’s put it to a vote right here in Washington. Send me a bill that gives every worker in America the opportunity to earn seven days of paid sick leave. It’s the right thing to do.
President Obama might have breezed past the issue of maternity leave to discuss his plans about paid sick leave, but it is an issue of importance. Just 11% of US workers have access to paid maternity leave . That number is so small because only 5% of US companies offer fully paid maternity leave . Half of US workers qualify for unpaid maternity leave under the Family and Medical Leave Act, which ensures that they can take 12 weeks off work. Why just half? Because the law only applies to companies with 50 or more employees.
Paid maternity leave goes a long way – especially in the current economy, where most of the household have two working parents. Women eligible for a paid maternity leave are more likely to come back to work . According to the Census , the women who do have access to paid maternity leave take advantage of it. In 1981, 37.3% of women took paid maternity leave. In 2008, that number was 50.8% . That same year, 42% of pregnant women took unpaid leave and 10% went on disability leave.
The problem with getting time off from work doesn’t end with giving birth.
As President Obama points out, many US workers often have to make a choice between a sick child and a paycheck. About 61% of the 147 million working Americans have access to paid sick leave. Jessica Davis, a McDonald’s worker from Chicago, is not one of them. So when her four month old got sick, Davis had to call out of work . Next week, her hours at work were cut as a punishment for her absence.
Tired of waiting for federal law to catch up, some state and local governments have implement paid sick leave laws of their own. New York City’s paid sick leave law was signed into a law in March 2014 by Bill de Blasio. Under the new law, New Yorkers who worked at least 80 hours a year could get one hour of sick leave for every 30 hours of worked. Each worker could accrue up to 40 hours of sick leave per year. In Massachusetts, paid sick leave bill was up for a vote during the midterm elections and was approved with 60% of the vote .
Obama pointed to these voters as the reason that Congress should pass a paid sick leave. In 2013, Iowa senator Tom Harkin and Connecticut congresswoman Rosa DeLauro introduced the Healthy Families Act , which similarly to the New York law would allow workers to earn one hour of paid sick leave for every 30 hours worked . The bill died in committee. JK
In today’s economy, when having both parents in the workforce is an economic necessity for many families, we need affordable, high-quality childcare more than ever. It’s not a nice-to-have – it’s a must-have. It’s time we stop treating childcare as a side issue, or a women’s issue, and treat it like the national economic priority that it is for all of us. And that’s why my plan will make quality childcare more available, and more affordable, for every middle-class and low-income family with young children in America – by creating more slots and a new tax cut of up to $3,000 per child, per year.
Child care is one of the most costly expenses for American households. In the north-east, full-time childcare costs for two children can amount to as much as $22,099, according to Child Care Aware of America 2013 report . In the south, it’s $15,200. In the midwest, $16,933; out west, $17,965.
“In 31 states, decent childcare costs more than in-state tuition,” Obama pointed out in June .
American families are spending twice as much on childcare as they do on food, found Child Care Aware. So it’s no surprise that one of the types of assistance that low-income families depend on are childcare subsidies provided under the Child Care and Development Block Grant program, which was re-authorized by Obama in November . The $5.3bn-a-year program served about 1.5 million children under 13 years old in 2013.
Often, the subsidies cover only fraction of the childcare costs. The $3,000 tax cut per child proposed by Obama could alleviate some of the burden felt by American parents.
Childcare in America is also a business issue. Since many US children have two working parents, any issues with childcare can and do affect the parents’ workplace. In a three-month period, about 29% of parents experienced some breakdown with childcare that lead to parents either skipping work, being late or not being able to concentrate, according to Child Care Aware . Overall, such childcare breakdowns cost US businesses as much as $3bn a year. JK
We still need to make sure employees get the overtime they’ve earned
In this case, President Obama isn’t waiting for the Congress to do something. He is just sayin’.
In March last year, the president instructed the Labor Department to change overtime requirements so that more workers would be eligible to get time-and-a-half for any extra hours of work. Currently, workers who make more than $455, or $23,660 a year, don’t qualify for overtime. The salary threshold was last updated in 2004, but according to experts it remains basically unchanged since 1975.
At that time, 65% of salaried workers were eligible for overtime. In 2013, that number was down to 11%. Overall, 18% of both hourly and salaried workers is eligible for overtime. Raising the salary threshold would mean that average folks like deli managers, cooks and shift “supervisors” who are no longer part of that 18% would once again qualify and get paid overtime.
The Economic Policy Institute and Center for American Progress have both offered their own threshold proposals: $960 a week and $1,327, respectively. Both are more than twice the current threshold.
It remains to be seen where the department will set its threshold. The Labor Department was first expected to make an announcement on what the new overtime rule will be in November. It is now expected to make that announcement next month. The announcement is usually followed by 90-day public comment period, after which the department prepares the general rule. Since there is no set date by which the final rule has to be issued, it might be another year before the new overtime requirements are announced.
Americans have no choice but wait as a bill on overtime is unlikely to pass through the Republican-controlled Congress. One such bill was introduced by Senator Tom Harkin last year, but died in committee without a vote. JK
Equal pay and the minimum wage
This Congress still needs to pass a law that makes sure a woman is paid the same as a man for doing the same work.
To everyone in this Congress who still refuses to raise the minimum wage, I say this: If you truly believe you could work full-time and support a family on less than $15,000 a year, go try it. If not, vote to give millions of the hardest-working people in America a raise.
Equal pay and the minimum wage are intertwined. There is a reason why women still make just 78¢ for every dollar that a man earns . Women represent about two-thirds of minimum-wage workers . With the federal minimum wage stuck at $7.25, annual full-time earnings come out to be $14,500.
For years, Obama has called on Congress to pass the Paycheck Fairness Act . And while the Act keeps being blocked by House Republicans, Obama had already established himself as a champion of equal pay by choosing Lilly Ledbetter Fair Pay Restoration Act as the first bill he signed into law.
President has similarly attempted to raise the minimum wage. In 2014, Obama asked Congress raise the wage floor to $10.10, instead of $9. As Congress thwarted his efforts, states took matters into their own hands. More than 20 states have already seen their minimum wage increase this year .
Women advocated have come out in support of Obama’s renewed calls for a higher minimum wage and more equal pay.
“These proposals are especially important to women, who still earn lower wages than men, make up two-thirds of workers in low-wage jobs, and yet shoulder the lion’s share of caregiving responsibilities,” said Nancy Duff Campbell, co-president of the National Women’s Law Center in a statement . “We call on Congress to act.” JK
But as we speak, China wants to write the rules for the world’s fastest-growing region. That would put our workers and our businesses at a disadvantage. Why would we let that happen? We should write those rules. We should level the playing field. That’s why I’m asking both parties to give me trade promotion authority to protect American workers, with strong new trade deals from Asia to Europe that aren’t just free, but are also fair.
Obama’s demand for the Trade Promotion Authority or the provision to fast track trade negotiations on the TPP and TTIP may not have gone down well with his own party. In his address, he attempted to temper down fears about the negative effects of the deals on jobs by admitting that past trade deals negotiated by the US had caused more damage than good.
The US Trade Representative Michael Froman has indicated that the Trans Pacific Partnership might be cruising along and be signed in as less than two months. Some Democrats immediately showed their displeasure with “demonstrations” in the morning after the State of the Union address, albeit tepid ones. –
“[W]e’re making it easier for vets to translate their training and experience into civilian jobs. Joining Forces, the national campaign launched by Michelle and Jill Biden, has helped nearly 700,000 veterans and military spouses get new jobs. So to every CEO in America, let me repeat: If you want somebody who’s going to get the job done, hire a veteran.
President Obama’s proposal on veterans is nothing new. In 2014, Obama also emphasised that veterans need assistance translating “their skills and leadership into jobs here at home”. The difficulty explaining how their responsibilities in the service have prepared them for other jobs is the reason that many veterans struggle to connect with recruiters and hiring managers .
In December, the overall veteran unemployment was 4.7%. The unemployment rate for the more recent veterans – those who have served sometimes after 2000 – is much higher at 6.9%. While that number is lower than the 7.3% unemployment rate a year ago, the number of recent veterans out of labor force has increase to 755,000 from 511,000 in December 2013, according to the Bureau of Labor Statistics’ December jobs report .
In addition to Joining Forces , the White House initiative to get more business to hire veterans, other organizations have taken interest in hiring veterans. Among them: JP Morgan, which has spearheaded an effort known as 100,000 Jobs Mission. According to a recent report , the 179 private companies behind this mission are on track to hire 200,000 veterans in five years.
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