Why Obama Can't Rescue the Middle Class

The Fiscal Times

Robert Reich, the former Clinton administration Labor Secretary, recently lamented that the U.S. society has become “more and more unequal.”

The 5 percent of Americans with the highest incomes now account for 37 percent of all consumer purchases, he noted. Ninety-five percent of the economic gains since the recovery from the Great Recession began in 2009 are going to the wealthiest one percent of Americans. At the same time, the median household income adjusted for inflation keeps dropping.

Related: Obama Takes Aim at America’s Growing Income Gap

“The economy won’t really bounce back until America’s surge toward inequality is reversed,” he wrote. “Even if by some miracle President Obama gets support for a second big stimulus while Ben S. Bernanke’s Fed keeps interest rates near zero, neither will do the trick without a middle class capable of spending.”

It would take a herculean breakthrough in Washington’s prolonged partisan gridlock to reverse that trend – a highly improbable new consensus over the need to revamp the nation’s tax code, the minimum wage law, employment and educational policies, welfare rules, investment and infrastructure programs and much more.

In a show of pessimism, Reich told PBS in October that “so many people feel like the game is rigged . . . that they’re sort of giving up on politics.”

This downbeat assessment from a leading liberal on what, if anything, can be done to bridge the chasm between the very rich and the middle class is instructive in the wake of President Obama’s major economic address on Wednesday.

Related: Smart Policies Can Restore a Thriving Middle Class   

Obama declared he would dedicate the three remaining years of his second term to trying to reverse the “relentless decades-long trend” toward increasing economic inequality and declining opportunities for upward mobility in this country.

“It’s not enough anymore to just say we should . . . let the unfettered market take care of it,” the president said in offering an ardent defense of  government activism and laying down a challenge to his political foes who have fought him on virtually every major economic and social policy.

The president used lofty rhetoric to outline an egalitarian agenda seeking to help middle class Americans to pull themselves up after years of economic struggle, flat-lined wages and persistent unemployment.  Yet the timing of the speech was somewhat odd.

Right now, Obama is operating at the nadir of his public popularity and political clout on Capitol Hill. For months he has struggled to get beyond an epic political debacle over the highly flawed rollout of his signature health care reform law, and he is just now reaping some political benefit from major improvements recently made in the highly troubled HealthCare.gov website.

Related: How the New Tax Law Screws the Upper Middle Class

Only the day before, he held a pep rally at the White House to tout the elimination of hundreds of technical bugs in the website and try to redirect an angry public’s attention away from the technicalities of the online system to the potential benefits available to millions of uninsured Americans under the Affordable Care Act. 

Instead of following up on that strategy yesterday, the president chose to change the subject and deliver a speech to his progressive allies that was far more aspirational than realistic. The speech in some ways was reminiscent of Obama’s second inaugural address. He had lofty goals in the speech, a large majority unachievable because of divided government. The same is true here with his latest speech.

Most of his proposals had a familiar ring to them: Expanded education and job training, enforcement of equal pay rules, a higher federal minimum wage, comprehensive reform of the immigration laws, tax incentives and more spending on manufacturing and infrastructure. 

Few if any of these proposals are likely to go anywhere unless the Democrats manage to retain control of the Senate and break the GOP hold on the House in the 2014 mid-term elections. So if nothing else, the speech may help to rally the liberal base and provide talking points for the coming campaign.

But it will in no way encourage congressional Republicans to reconsider their current economic focus on spending and tax cuts, reducing government red tape and encouraging expansion of energy production.

Related: Why Colleges Give More Aid to the Wealthy

“It should be no surprise why his approach has left more Americans struggling to get ahead,” Brendan Buck, a spokesman for House Speaker John Boehner (R-OH), told the Washington Post yesterday. “The president’s economic policies promote government reliance rather than economic mobility. Rather than tackling income inequality by lifting people up, he’s been fixated on taxing some down.”

Jared Bernstein, Vice President Joseph Biden’s former chief economic adviser, said of Obama’s speech that it was a “very deep and persuasive diagnosis, and the prescriptions were also the right ones.”

“The likelihood that they will be legislated is close to zero,” he said. “But if he forms his agenda based on what House Republicans will allow, he might as well just fold up his tent and go home. It’s essential for him to set the terms of the economic debate over the next few years. Other people who join that debate won’t have the same solutions as he does.”

“But if they’re not talking about inequality, immobility, lack of opportunity, then they are not having the conversation they need to have with the American people,” said Bernstein, who is now with the Center on Budget and Policy Priorities.

Larry Sabato, a University of Virginia political scientist, sees Obama’s speech primarily as a way of “changing the subject from Obamacare to a subject that polls show is the public’s premier concern,” and that is falling further behind economically.

“Obama can forget about playing major league ball on the economy and most everything else,” Sabato added. “My early prediction is that congressional numbers will only worsen for him after November 2014.

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