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Obama the populist

The president is making noises about helping the middle class. Is it a real economic plan, or pandering?

January 26, 2010

President Obama seems so rattled by Republican Scott Brown's victory in the Massachusetts Senate race that he's scrambling to reestablish his bona fides with The Little People. Last week he picked another fight with big banks, calling for new limits on their size and business ventures. In his weekend radio address, he bashed the Supreme Court for handing "a huge victory to the special interests and their lobbyists" by eliminating some limits on corporate and union electioneering. And on Monday, he outlined a proposal to provide larger tax cuts and subsidies for middle-class families.

Although some of these proposals address real problems, the populist tone struck by Obama and his aides made their efforts seem like pandering. That's particularly true of Monday's announcement, which was billed as a preview of initiatives from the White House's Middle Class Task Force. Obama noted that "creating good, sustainable jobs is the single most important thing we can do to rebuild the middle class" -- a sentiment shared across the political spectrum, even if Democrats and Republicans disagree sharply over how to achieve that goal. But, he added, "we also need to reverse the overall erosion in middle-class security."

The administration's plan for shoring up the middle class' fortunes includes a much more generous tax credit for moderate-income families who pay for day care so the parents can work or attend classes, as well as more child-care subsidies for low-income workers. It offers more help for people caring for elderly relatives, and easier repayment terms for federal student loans. And it provides a larger tax credit for retirement savings, coupled with a proposal (recycled from last year) to give workers the option of having part of their paychecks deposited into a tax-sheltered retirement account.

Middle-class Americans have certainly felt squeezed over the last decade, as median U.S. incomes failed to keep pace with inflation. And some of the administration's moves could conceivably yield more benefits in the long run than they would cost. Yet Obama seems to be responding to the wrong problems. The public is anxious about jobs, the economy and the massive federal deficit. If the administration is going to seek new tax breaks or subsidies, the point should be to put people to work and spur economic growth, not just make life easier for a particularly valuable segment of the electorate.

The White House declined to discuss how much the new benefits for the middle class would cost or how they would be paid for, saying only that those issues would be addressed when Obama releases his proposal for the fiscal 2011 budget on Feb. 1. There have been reports that the administration plans to call for a freeze on some domestic spending, in which case the tax cuts and subsidies outlined Monday would represent trade-offs more than simple handouts. But the bigger problem is that the administration appears to be flailing, reacting to the shifting political winds instead of pursuing a clearly defined economic strategy. That's no way to inspire the confidence among consumers and businesses that's crucial to a robust recovery.

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