Obama to Offer Aid for Families in State of the Union Address

By SHERYL GAY STOLBERG | NY Times
January 24, 2010

WASHINGTON — President Obama will propose in his State of the Union address a package of modest initiatives intended to help middle-class families, including tax credits for child care, caps on some student loan payments and a requirement that companies let workers save automatically for retirement, senior administration officials said Sunday.

By focusing on what one White House official calls “the sandwich generation” — struggling families squeezed between sending their children to college and caring for elderly parents — Mr. Obama hopes to use his speech on Wednesday to demonstrate that he understands the economic pain of ordinary Americans. The proposals also include expanded tax credits for retirement savings and money for programs to help families care for elderly relatives.

The address is still being written, but one senior official, describing it on the condition of anonymity, said its main themes would include “creating good jobs, addressing the deficit, helping the middle class and changing Washington.”

With his poll numbers down and Democrats fearing disaster in this year’s midterm elections, Mr. Obama is at a particularly rocky point in his presidency and has been shifting his rhetoric lately to adopt a more populist tone. He heads into his first formal State of the Union speech in a radically reshaped political climate from even one week ago.

His top domestic priority, a health care overhaul, is in jeopardy after the Republican victory in last week’s Massachusetts Senate race — a setback that White House advisers interpret as a reflection of Americans’ deep anger and frustration over high unemployment and Wall Street bailouts.

One advantage of the president’s proposals is that they might appeal to people who are struggling financially without looking like the kind of broad expansion of the federal government that is making many Americans uneasy. They also would add little to the federal deficit at a time when Mr. Obama is pledging to reduce it.

Mr. Obama and Vice President Joseph R. Biden Jr. plan to outline the proposals on Monday when they meet with the White House task force that has spent the past year examining ways to help the middle class.

While Mr. Obama has been shifting his focus toward job creation in recent weeks, an official said the president also wanted to spotlight what the White House regards as “critical areas where middle-class families need a helping hand to get ahead,” like paying for college and saving for retirement.

For example, the president is calling on Congress to nearly double the child care tax credit for families earning less than $85,000 — a proposal that, if adopted, would lower by $900 the taxes such families owe to the government. But the credit would not be refundable, meaning that families who pay no income tax would not receive cash payments. The nonrefundable credits reduce the tax liability, and therefore may increase the refund, of households that do pay taxes.

Another of the president’s proposals, a cap on federal loan payments for recent college graduates at 10 percent of income above a basic living allowance, would cost taxpayers roughly $1 billion. The expanded financing to help families care for elderly relatives would cost $102.5 million — a pittance in a federal budget where programs are often measured in tens if not hundreds of billions of dollars. And the automatic paycheck deduction program would simply be a way to encourage workers to save, and would include tax credits to help companies with administrative costs.

Such programs are, notably, much less far-reaching than Mr. Obama’s expansive first-year agenda of passing an economic recovery package, bailing out the auto industry, overhauling the health care system, passing energy legislation and imposing tough new restrictions on banks. That agenda has left him vulnerable to criticism that he is using the government to remake every aspect of American society.

Top advisers to the president insist that Mr. Obama is not in retreat and are resisting any comparisons to the kind of small-bore initiatives that the last Democratic president, Bill Clinton, used to try to get his presidency back on track.

“In no way does this represent a trimming of the sails,” one adviser said on Sunday, referring to the package.

Instead, the White House wants to use Wednesday’s address to explain how initiatives like the health care overhaul fit into his broader plan for job creation and the economy. On Sunday, as senior administration officials fanned out on the television talk shows, David Axelrod, Mr. Obama’s senior adviser, insisted that the health care bill was not dead. But he did suggest that the administration was now more focused on changing insurance practices than on a broad expansion of coverage to the uninsured.

“There are so many elements of this — tax breaks for small business, extending the life of Medicare, more assistance for seniors with their prescription drugs, a cap on out-of-pocket expenses, help for people with pre-existing conditions — that are too important to walk away from,” Mr. Axelrod said on the ABC program “This Week.”

With House and Senate leaders trying to figure out how to proceed legislatively, Mr. Axelrod also issued a warning to Democrats who were reconsidering their support for the health care measure.

“As a political matter, the foolish thing to do would be for anybody else who supported this to walk away from it,” he said. He added, “The underlying elements of it are popular and important, and people will never know what’s in that bill until we pass it, the president signs it and they have a whole new range of protections they never had before.”

How Mr. Obama will address health care in the State of the Union speech, though, remains an open question. Officials on Capitol Hill and at the White House said their talks on how to proceed with the legislation might not be resolved by Wednesday. This could put Mr. Obama in the awkward position of talking about a measure that is on shaky ground.

Another open question is what the president will say about his program for job creation.

The House of Representatives has passed a $154 billion bill to encourage job creation, and during an appearance in Ohio on Friday, Mr. Obama called for a jobs bill that would include tax breaks for small businesses and for people who make their homes more energy efficient. White House officials have not said what Mr. Obama’s jobs bill would cost, and they did not say on Sunday if he would mention a specific amount in Wednesday’s address.

But they did try to hit hard on the jobs theme. And Mr. Axelrod, speaking on “State of the Union” on CNN, said Mr. Obama’s current predicament was no surprise.

“A year ago, I said to the president, ‘A year from now, your numbers are going to be much different than they are right now because of the economic forecast that we were hearing,’ ” he said. “And we knew that even as the economy started growing, it would take time for the jobs to follow.”

This article has been revised to reflect the following correction:

Correction: January 26, 2010
An article on Monday about President Obama’s planned State of the Union proposals intended to help middle-class families described incorrectly nonrefundable tax credits, like the expanded child care credit Mr. Obama is expected to propose for families earning less than $85,000. Nonrefundable credits are those that do not result in cash payments for people who pay no income tax. They reduce the tax liability, and therefore may increase the refund, of households that do pay taxes.