Helping Middle-Class Families Win the Future

The Federal Budget

Having emerged from the worst recession in generations, the President has put forward a plan to rebuild our economy and win the future by out-innovating, out-educating, and out-building our global competitors and creating the jobs and industries of tomorrow. But we cannot rebuild our economy and win the future if we pass on a mountain of debt to our children and grandchildren. We must restore fiscal responsibility, and reform our government to make it more effective, efficient, and open to the American people. The President’s 2012 Budget is a responsible approach that puts the nation on a path to live within our means so we can invest in our future – by cutting wasteful spending and making tough choices on some things we cannot afford, while keeping the investments we need to grow the economy and create jobs. It targets scarce federal resources to the areas critical to winning the future: education, innovation, clean energy, and infrastructure. And it proposes to reform how Washington does business, putting more federal funding up for competition, cutting waste, and reorganizing government so that it better serves the American people.

To help middle-class families win the future, the Budget will:

Equip American Workers to Compete and Win in the Global Economy. In this increasingly interconnected global economy, it is important that we give American workers the capabilities and American businesses the tools to compete and win in the global economy. We must transform our economy from one too focused on speculation, spending and borrowing to one that is educating, innovating, and building. The Administration is committed to smart investments in a lifetime of learning that will improve the capabilities of our workforce. The Budget proposes to:

  • Establish a Competitive Early Learning Challenge Fund. Recognizing that quality early education is an investment that pays off for years to come, the Administration proposes creating a competitive fund to encourage States to take dramatic steps to improve the quality of their early childhood development programs. 
  • Improve Elementary and Secondary Education. Too often, education funds are allocated based on factors not tied to success. In the context of  the reauthorization of the Elementary and Secondary Education Act, the Administration is committed to consolidating narrow programs into broader authorities with higher, clearer standards and assessments; recognizing and rewarding schools that help students make gains; and giving States and school districts new flexibility to help all students graduate from high school, college- and career-ready. The Budget proposes to do this by expanding the successful Race to the Top program to school districts, funding the Investing in Innovation program and creating new “pay for success” bonds that invest in proven innovative approaches to student learning.
  • Consolidate Redundant and Stove-Piped Programs to Improve Outcomes. The Budget proposes eliminating 13 Department of Education discretionary programs and consolidating 38 K-12 programs into 11 new programs that emphasize using competition to allocate funds, giving communities more choices and using rigorous evidence to fund what works.  The Administration will make sure that, under these competitions, there is an equitable geographic distribution of funds nationwide.
  • Give Students Access to Successful Schools. The Budget provides significant funding to school turnaround grants to help States and school districts turn around our Nation’s lowest performing school and expand educational options by helping to grow effective charter schools and other autonomous public schools that achieve positive results. 
  • Launch “First in the World” Competition. The Budget invests $150 million in a new initiative to increase college access and completion and improve educational productivity through an evidence-based grant competition. In addition to these competitive grants, the Budget also provides $50 million in 2012 and a total of $1.3 billion over five years in performance-based funding to institutions that have demonstrable success in enrolling and graduating more high-need students and enabling them to enter successful employment.
  • Improve Job Training. The Budget provides funding for a competitive Workforce Innovation Fund that will allow States and localities to create and test new ideas and strategies for delivering better employment and education results and provides nearly $10 billion to fund Workforce Investment Act (WIA) programs to match unemployed people with jobs and give people with skill gaps the training they need to secure employment. The Administration will also work with Congress to reform the WIA to better meet the needs of employers and regional economies.

Spur Job Creation.
While the economy has added jobs for each of the last 12 months, too many Americans families are still hurting and the unemployment rate is unacceptably high. Moreover, there is evidence that the longer the recession’s effects are allowed to linger, the more damage it does to individuals and communities. That is why the Administration is continuing a series of targeted steps to spur job creation and economic growth in the short term in a fiscally responsible way. As 2010 ended, families across the Nation faced the prospect of rising taxes. The Administration not only prevented a tax increase, but also negotiated a series of measures to create jobs and protect vulnerable populations most affected by the recession by establishing a payroll tax cut that will provide a $1,000 tax cut to the typical family; extending unemployment benefits for 13 months, preventing an estimated 7 million workers from losing their benefits as they search for jobs; allowing businesses to expense 100 percent of certain investments, which is estimated to generate more than $50 billion in additional investment and fuel job creation; continuing key tax credits for college students and lower-income families; and extending the 1603 renewable energy grant program which accelerates the growth of clean energy industries and allows them to hire more workers. These provisions resulted in outside forecasters significantly improving their outlook for economic growth and employment in 2011. The Budget also proposes an upfront investment of $50 billion in infrastructure as part of a new surface transportation bill that will jump-start additional job creation and fund improvements in the Nation’s surface transportation, airports, and the air traffic control system, making the U.S. more competitive going into the future.

Hold Insurance Companies Accountable, Lower Health Care Costs, and Boost Health Care Quality by Implementing the Affordable Care Act. Health care comprises one-quarter of non-interest federal spending, and it is the major driver of future deficit growth. That is why the President signed into law the Affordable Care Act (ACA) which, according to the Congressional Budget Office’s latest analysis, will save more than $200 billion over the next 10 years and reduce the deficit by more than $1 trillion over the second decade. Realizing this deficit reduction and efficiencies in the health care system that will reduce cost and improve quality will require effective implementation of the ACA. The President is resolutely committed to implementing the ACA fairly, efficiently, and swiftly because it brings millions of Americans health care benefits and provides important protections from insurance company abusers. To do more to restrain health care costs, the Budget proposes specific offsets for two years of necessary increases in the Sustainable Growth Rate (SGR) formula in Medicare, as well as a commitment to work with Congress on long-term, fiscally responsible reform.  It also proposes to implement cost-saving components of the Affordable Care Act that target spending to maximize efficiency and quality per dollar spent, especially in Medicare and Medicaid, and aggressively reform our medical malpractice system to reduce defensive medicine, promote patient safety, and improve patient outcomes.

Protect Consumers by Implementing the Wall Street Reform and Consumer Protection Act. The Dodd-Frank Wall Street Reform and Consumer Protection Act, enacted on July 21, 2010, was the most sweeping improvement of U.S. financial regulations since the 1930s.  The Administration supports regulators’ efforts to fully and effectively implement the requirements of the Act to create a more stable and resilient financial system.  The Administration also fully supports the oversight and analytic work of the independent Financial Stability Oversight Council and Treasury's Office of Financial Research.  The Act also created the landmark Consumer Financial Protection Bureau (CFPB), which will provide citizens with the tools and information they need to make wise financial decisions and will assure their protection in the financial products marketplace.  The Treasury Department’s interim authority to stand-up the CFPB will terminate on July 21, 2011, and the CFPB will then be established as an independent bureau within the Federal Reserve.  Beginning on this date, the CFPB will assume some of the consumer protection authorities currently performed by existing Federal regulators, as well as its new role in overseeing similar authorities for non-bank financial institutions to ensure that all aspects of the American financial system are subject to appropriate oversight. 

Extend Expanded Tax Cuts for Working Families. The Budget permanently extends expansions of the Child Tax Credit and the Earned Income Tax Credit that were passed in the Recovery Act and continued as part of the bipartisan Tax Relief, Unemployment Insurance Reauthorization and Job Creation Act that the President negotiated and signed into law in December. The expanded refundability of the Child Tax Credit provides a larger credit to 11.8 million families with 21.3 million children. The expansion of the Earned Income Tax Credit is worth up to $600 for families with three or more children, benefitting 5.8 million families with 12.5 million children.

Help Homeowners Avoid Foreclosure. The Administration is continuing to fund programs that help eligible homeowners reduce their monthly mortgage payments, remain in their homes, and avoid foreclosure.  Through HUD’s FHA “loss mitigation” program, FHA borrowers at risk of defaulting on their loans are offered loan modifications and forbearance.  In addition, FHA is offering refinancing opportunities that allow underwater borrowers to refinance into an affordable FHA loan when lenders agree to write off loan principal at least 10 percent, and Treasury’s TARP housing funds are being used to share any subsequent default losses.  Through the TARP Home Affordable Modification Program (HAMP), eligible homeowners are being provided loan modifications to make their mortgages more affordable, a forbearance program for unemployed borrowers, and foreclosure alternatives for those who do not qualify for a modification.  In addition, TARP has allocated $7.6 billion to Housing Finance Agencies in 18 States and the District of Columbia to devise innovative local solutions for borrowers facing unemployment and negative equity in their homes.  The Budget also includes $168 million for housing and homeowner counseling through HUD and the Neighborhood Reinvestment Corporation (NeighborWorks).  Over half of these funds are dedicated to foreclosure assistance.  NeighborWorks’ National foreclosure Mitigation Counseling program has assisted over 1 million households since its inception in 2008.

Help Creditworthy Americans Buy a Home. The Administration projects that the Federal Housing Administration (FHA) will insure $218 billion in mortgage borrowing in 2012, supporting new home purchases and re-financed mortgages that significantly reduce borrower payments.  FHA financing was used by 38 percent of all homebuyers, 60 percent of African American homebuyers and 61 percent of Hispanic families who purchased homes in 2009.  It also is a vital financing source for first-time homeowners, roughly 30 percent of whom use FHA insured financing.  But FHA is also a vital option for homeowners facing foreclosure. FHA’s loss mitigation program minimizes the risk that financially struggling borrowers go into foreclosure.  Since the start of the mortgage crisis, it has helped more than half a million homeowners.  The Budget continues the restructured premium levels that FHA implemented in October 2010 and includes another premium increase planned for this year.  These will boost FHA’s capital reserves—to better protect the taxpayer against the risk of net credit losses by the program—and increase Federal revenues. 

Extend Child Tax Credit and Expand Child and Dependent Care Tax Credit.  The Budget also proposes a permanent expansion of the Child and Dependent Care Tax Credit.    Nearly all eligible families making under $103,000 a year would see a larger credit.

Provide Billions in Tax Assistance to Help Students and Their Families Pay for College. The Tax Relief, Unemployment Insurance Reauthorization and Job Creation Act extended for two years the new American Opportunity Tax Credit (AOTC), a partially refundable tax credit worth up to $2,500 per student per year that helps more than 8 million students and their families afford the cost of college.  The Budget proposes to make AOTC permanent and also includes other tax benefits to help with the cost of college including the student loan interest deduction.

Extend Child Tax Credit and Expand Child and Dependent Care Tax Credit.  The Budget also extends the Child Tax Credit at the $1,000 level, and expands the refundability established in the Recovery Act, which will continue to help nearly 10.5 million lower-income families with 18 million children. The Budget also proposes a permanent expansion of the Child and Dependent Care Tax Credit.    Nearly all eligible families making under $103,000 a year would see a larger credit.

Increase Access to Higher Education. To boost the number of college graduates, we need to make it easier for students to afford a post-secondary education and support efforts to increase the number of students who get their degree. One of the most effective ways to help students afford college is the Pell grant program. The Budget maintains its commitment to Pell Grants by sustaining the $5,550 maximum award, which will help over 9 million students in 2012. The Budget pays for this expansion with a difficult but necessary Pell Grant Protection Act that ends the costly new “year-round Pell Grant” and eliminates the ineffective in-school interest subsidy for graduate students, among other measures. While this approach fully funds the currently anticipated needs for Pell Grants, the Administration is also committed to working with Congress to develop an approach that addresses future costs.

Improve Retirement Security.  After a lifetime of employment, American workers deserve to know that their efforts have resulted in a secure retirement. The Administration is committed to giving Americans more and better choices to save for retirement while also strengthening the existing private pension system. The Budget proposes to expand and improve employment-based retirement security by establishing automatic workplace pensions and doubling the Small Employer Pension Plan Startup Credit from $500 a year to $1,000 per year.

Help States Provide Paid Family Leave to Workers.  Too many families must make the painful choice between the care of their families and a paycheck they desperately need.  The Family and Medical Leave Act allows workers to take job-protected unpaid time off, but millions of families can’t afford to use unpaid leave. A handful of States have enacted policies to offer paid family leave, but more States should have the chance. The Budget supports a $23 million State Paid Leave Fund within the Department of Labor that will provide competitive grants to help States that choose to launch paid-leave programs cover their start-up costs. 

Boost Funding for Workplace Safety. The Budget includes a $44 million, or 5 percent, increase for the Department of Labor’s worker safety and health agencies to make sure they have the resources to meet their responsibilities to the Nation’s workers. The Budget also provides an additional $25 million the Occupational Safety and Health Administration to enforce workplace rules, of which $6 million will be used to strengthen protections for workers who blow the whistle on unsafe and unscrupulous practices. The Budget also proposes a $20 million increase for the Mine Safety and Health Administration to enforce mine safety and health laws and reduce the more than 18,000-case backlog at the Federal Mine Safety and Health Review Commission.

Ensure Proper Classification of Employees to Protect Benefits.  When employees are misclassified as independent contractors, they are deprived of benefits and protections to which they are legally entitled, such as overtime and unemployment benefits. Misclassification also costs taxpayers money in lost funds for the Treasury and in the Social Security, Medicare and Unemployment Insurance Trust Funds.  Building on the 2011 President's budget proposal, the Budget includes $46 million to combat misclassification, including $25 million for grants to states to identify misclassification and recover unpaid taxes and $15 million for additional Wage and Hour Division personnel  to investigate misclassification

Support Sustainable Communities. The Budget sustains support for the multi-agency Partnership for Sustainable Communities. The Budget includes $150 million to create incentives for more communities to develop comprehensive housing and transportation plans that result in sustainable development, reduced greenhouse gas emissions, and increased transit-accessible housing.  As a part of this effort, up to $5 million will be used to improve energy efficiency in HUD-assisted public and privately-owned housing through better energy use data collection and analysis. Combined with DOT’s funding for strengthening State and local infrastructure capacity and EPA’s technical assistance, this Partnership aims to lower the cost of living while improving the quality of life for families. This will work in concert with the Administration’s proposal for surface transportation re-authorization, a multi-pronged approach to improve and expand infrastructure investment to accelerate economic growth. 

Strengthening our Urban Communities. Urban communities are where most Americans live and work.  The Budget reflects an integrated and performance-driven approach to distressed urban neighborhoods, where the challenges tied to jobs, education, public safety, and other needs intersect.  The Budget provides $250 million for the Choice Neighborhoods initiative to continue transformative investments in high-poverty neighborhoods where distressed HUD-assisted public and privately owned housing is located, a significant increase from the 2010 enacted level.  The Budget will reach 5 to 7 neighborhoods with grants that primarily fund the preservation, rehabilitation and transformation of HUD-assisted public and privately-owned multifamily housing, and will also engage local governments, nonprofits, and for-profit developers in partnerships to improve surrounding communities.  Choice Neighborhoods is a cornerstone in an interagency neighborhood revitalization effort to leverage multiple program funds to strengthen beneficial impacts to participating communities.