On Monday, the Administration released the President’s Budget for Fiscal Year 2012. It’s a Budget that meets two goals: it makes tough but necessary cuts that put our nation on a sustainable fiscal path. And it’s a budget that invests wisely to ensure economic opportunity for working Americans.
As the President said Monday, this is a budget designed to help America win the future by out-innovating, out-educating, and out-building our global competition. But in order to afford those investments, the government needs to start living within our means. So we’re proposing over $1 trillion in deficit reduction, of which two thirds comes from spending cuts.
Yet we cannot abandon the needs of working families at this point in our economic recovery. Yes, our cuts have involved tough choices, and they will require sacrifices from many Americans. But there’s also a lot in this budget to help middle-class families get back to work, afford college, to protect them at work, and strengthen their retirement.
A few examples:
Cutting Taxes for the Middle Class: Late last year, the President and Congress reached a bipartisan deal to cut taxes on middle-class families, which is reflected in the President’s budget. The deal included income tax cuts and a temporary payroll tax holiday that, taken together, will mean that typical families will see thousands of dollars more in their paychecks this year.
Helping Keep Child Care Affordable: The Budget proposes to expand the Child and Dependent Care Tax Credit, which helps families cover the rising cost of child care. Our proposal will nearly double this tax credit for families making less than $75,000 a year, and nearly all eligible families making less than $103,000 a year will see their credit increase.
Helping Students and Their Families Pay for College: The Budget proposes to build on the gains we’ve made over the last two years in boosting college affordability, including permanently extending the President’s new American Opportunity Tax Credit, which provides students and their families with a tax credit of up to $2,500 a year to help pay for college. The Budget also makes the tough choices necessary to maintain the $5,550 maximum Pell Grant award.
Strengthening Retirement Security for American Workers: The Budget proposes to give more workers access to better retirement savings options by requiring employers who don’t already offer a retirement plan at the workplace to automatically enroll their workers in a direct-deposit IRA. Workers will be able to opt out of these automatic IRAs if they choose, and the smallest employers will be exempt, but this proposal will help provide an easier and better way to save for the 78 million Americans who don’t currently have a retirement plan at work.
Providing Support for Family Caregivers: The Budget proposes to devote $96 million to the Administration's Caregiver Initiative, an effort to expand assistance for families and seniors so that caregivers can better manage their multiple responsibilities and seniors can live in the community for as long as possible.
Investing in Infrastructure and Clean Energy to Create Jobs Here in America: The Budget proposes several major investments in infrastructure and clean energy that will increase American competitiveness and create jobs. These proposals include making major investments in roads, rail, and high-speed internet, extending a highly effective clean energy manufacturing tax credit, and improving incentives for purchasing electric cars.
Some will argue that the goals of fiscal discipline and investing in the middle class are mutually exclusive. President Obama does not believe so, which is why this budget embodies the reality that we must do all we can to meet both of those goals.
Jared Bernstein is Chief Economic Advisor to the Vice President