You could look at President Barack Obama’s proposals in Tuesday night’s State of the Union speech as a bold set of prescriptions for a new Democratic agenda. Here’s another interpretation: Those prescriptions mostly demonstrate the timidity of the ideas that Democrats are willing to offer.
Start with the headline goal of revitalizing the middle class. Obama wants to shift the tax burden upward by raising the tax rate on capital gains, among other changes. He would use that money to offer a tax credit of $500 to households where two people work, as well as make permanent an increase in the earned income tax credit.
The debate over those individual tax changes neglects a broader question: How much can we expect to reduce inequality through the tax code alone? Talking about wage inequality without talking about the decline in unions, to take one obvious example, isn’t just unpromising – it’s myopic. Rather than reframing the debate, Obama is strengthening the current frame, and his goals for the middle class have little hope of succeeding within it.
Or take Obama’s proposals on retirement. Requiring employers that don’t offer plans to automatically enroll workers into individual retirement accounts is a great idea, depending on the details (not least the default contribution level).
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But in an age of stagnant wages, getting people to save more of their own money still leaves the middle class at risk of having inadequate retirement income. Reframing the debate would mean topping up those contributions with government matches (as other countries do), rules encouraging more companies to offer pension plans or even beefing up Social Security benefits (as Ontario is doing).
The same critique applies to Obama’s push to offer more favorable tax treatment for child-care expenses. Increasing the maximum value of the tax credit for child care and extending it to more families will make that care somewhat easier to pay for.
Know what would make it a lot easier? Creating a network of regulated day care centers, run by highly trained staff and subsidized with taxpayer money. If that sounds like a pipe dream, take a look at Quebec, which started offering $5-a-day care for 4-year-olds in 1998. Some economists argue the program pays for itself.
I’m not arguing that Obama ought to have made any of these proposals. Democrats face competing political incentives, among them the need to avoid appearing too radical for the median voter.
But let’s not pretend that any of what was revealed in the president’s speech constitutes exciting ideas. In fact, with the exception of higher tax rates on capital gains, none of it is even terribly partisan; Republicans have endorsed expanded tax credits for the middle class.
At some point, I hope a leading Democratic politician offers prescriptions that challenge the status quo – if only to remind Americans that what now seem like the outer bounds of policy choices actually represent a narrow range of options, at least by the standards of other developed countries.