In the prepared text of his eighth and final State of the Union address, President Obama speaks specifically to House Speaker Paul Ryan, who’ll be standing directly behind him during the speech, calling on him to collaborate with Democrats on expanding support for low-income Americans:
President Obama says he and Paul Ryan can agree on fighting poverty. That’s half right.
Dylan Matthews was a senior correspondent and head writer for Vox’s Future Perfect section. He is particularly interested in global health and pandemic prevention, anti-poverty efforts, economic policy and theory, and conflicts about the right way to do philanthropy.
I also know Speaker Ryan has talked about his interest in tackling poverty. America is about giving everybody willing to work a hand up, and I’d welcome a serious discussion about strategies we can all support, like expanding tax cuts for low-income workers without kids.
This is a slightly obscure reference without context, but Obama is specifically talking about plans both he and Ryan have put forward to expand the earned income tax credit, the biggest federal program supporting the working poor. The plans are so similar, they’re nearly identical. They both want to double the credit’s maximum value from $503 to $1,005. They both want to increase the phase-in/phase-out rates to 15.3 percent. They both want phase-out to start at $11,500 for single, childless people rather than $8,220. Given that Obama’s plan came first, it appeared that Ryan simply copied it wholesale.
But the odds that Obama and Ryan will come together and have a “serious discussion” about passing this plan aren’t particularly good. Sure, they agree entirely on how to expand the EITC. But they don’t agree at all about how to pay for it.
A debate as old as time: raise taxes or cut spending?
Obama’s plan costs $59.7 billion over 10 years. That’s a pittance in the grand scheme of the federal budget, and it’d be easy enough to just add $6 billion a year or so to the deficit and leave it at that. But both parties have generally accepted a norm in recent years where all budgetary proposals must be at least deficit-neutral, so both Obama and Ryan included measures to pay for the idea in their plans.
And neither set of pay-fors is remotely acceptable to the other side. Obama would pay for the expansion by raising taxes on hedge fund managers and rich self-employed people, while Ryan would cut other safety net programs and “corporate welfare,” which is this case means specifically energy subsidies the Obama administration likes. Ryan has explicitly rejected Obama’s funding mechanism, and it’s hard to imagine Obama accepting Ryan’s.
Is it theoretically possible that the two of them could sit down and hammer out a compromise funding package for the deal? Absolutely. The Ryan-Murray budget deal of December 2013 and the Cromnibus deal a year later suggested that the parties are capable, when they really want to, of making small-scale fiscal compromises.
More promising still, the 2015 budget deal simply declined to pay for a bunch of big provisions — including ones making past expansions to the EITC and child tax credit permanent — suggesting that it might be possible to pass this particular EITC expansion without raising taxes or cutting spending at all.
But those deals were made with the threat of a government shutdown looming over Congress and the president, vastly increasing the incentives for a deal. EITC expansion would do a lot of good for childless workers, but it isn’t at the top of either Ryan or Obama’s agendas for the next year. Until it is, don’t expect it to reach the president’s desk.
