Monday, January 25, 2010

White House Proposals...

Compared to recent proposals coming out of Washington today's announced "Middle Class Relief Efforts" seem almost quaint in their size and cost.

1) The child care tax credit is probably a good idea. The cost of child care is certain an issue for many middle class families and any effort to ease that burden should be applauded. I think there might be other alternatives to this tax credit - how about Kumon style after school learning centers - but it's not terribly expensive to try a tax credit, so go for it.

2) Cap on federal student loan payments at 10% of income is also a relatively cheap way to buy some goodwill with the public. The problem with college in my opinion is that access to cheap money and too many student loans has allowed college pricing to get out of line with reality. My policy on this front would be exactly the opposite. Make it harder to get money for school and fewer people will apply and we can burst the bubble in higher education costs. Again, I'd also support a federally funded university that works with industry to attract the best students. More competition for the best kids will also put pressure on college pricing.

3) Expanded financing for elder care. Again, access to cheap money is the problem, not the solution, but at just $100 million it's hard to be against this proposal.

4) Requiring all employers to give workers an option of automatic workplace direct-deposit IRAs. This feels like a successful Wall Street lobbying effort. Wall Street is concerned that despite their best efforts to get everyone excited about joining the party again, individual investors have for the most part stayed on the sidelines during this rally. Why? Investors tired of being burned (tech bubble, housing bubble). A new direct deposit IRA would force feed funds into investments and would spur greater equity participation but I'm not sure that's a good thing. I'll wait for more details on this plan.

All together, it's a fairly benign set of proposals from the President and I think it foreshadows what is coming for the balance of 2010 as both parties attempt to "do no harm" before the mid-term elections.

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