Obama’s ‘middle-class economics’ is proof he has no more campaigns to run

21 Jan 2015 | Author: | No comments yet »

Editorial: Obama thinks too small.

And it’s redemption that President Obama is looking for after six years of stumbling growth. Facing a hostile Republican Congress in his last best chance to substantially improve the American standard of living, President Obama thought surprisingly small for a man with grand ambitions.(Bloomberg) — President Barack Obama reached into his party’s progressive past to deliver a robust endorsement of higher taxes for the wealthy, government intervention in the economy and an array of new benefits for lower- and middle-income Americans. “Will we accept an economy where only a few of us do spectacularly well?

Before delivering the State of the Union Address to Congress, President Obama meets in the Oval Office on Tuesday with people who wrote him personal letters throughout the year, and who will attend the speech as his guests.(Photo: Saul Loeb, AFP/Getty Images) President Obama’s State of the Union Address was faithful to the core values of progressive government for which the Democratic Party has long stood — expecting the wealthier taxpayers to finance programs needed by the middle class and the poor. This, year seven, was finally the year in which a strengthening U.S. economy enabled the President to say that he was climbing from the wreckage of the Great Recession to build better futures for working- and middle-class families. Falling unemployment and steady job creation gave rise to Obama’s good mood even as he focused on the painful fact that, for three decades, Americans have been walking up a down escalator, their wages flat or slipping even as costs rose. His direct appeal to taxing the rich and giving to the poor is a sign of just how mainstream populism has become at a time when 2016 presidential hopefuls, including Democrat Hillary Clinton and Republican Mitt Romney, are talking about how to help those left behind. “We’ve seen a rhetorical shift from some Republican candidates for president in 2016. Surely we can understand the wife who won’t rest until the police officer she married walks through the front door at the end of his shift.” The president said he hopes everyone can agree that it’s good for the U.S. that the crime rate and incarceration rate are both lower for the first time in 40 years. “Kudos to President for calling to reform criminal justice system,” he tweeted in abbreviation. “Mandatory Minimum sentences are unjust and don’t make us safer.”

While he sketched proposals to invest in infrastructure, including expanded broadband access, he fell short on ramping up investments in basic research; on a commitment to cleaning up an anti-competitive corporate tax code, and on any hope of forward movement on immigration reform. The good news is that across the spectrum, political leaders now seem at least to agree that middle-class malaise is one of the country’s biggest problems. Conservative and libertarian thinktank Generation Opportunity scoffed that the community college plan would involve raising “taxes on 529 savings plans to fund his unaffordable government policies” which would in turn hurt middle-class families. Both parties are training their rhetoric at the same set of Americans, those who haven’t felt the benefits of booming markets and an economy growing at its fastest pace in more than a decade. By the time the president leaves office, the national debt will likely pass $20 trillion, meaning it will still pass the total value of all goods and services produced by Americans each year.

Rather than mount a full, frontal assault, Obama opted for worthy programs that may take the edge off financial pain for millions while playing well in the 2016 presidential election, particularly if Republicans buck. For Obama and fellow Democrats, the failure of the recovery to lift all boats is both a reminder that it’s politically risky to claim victory for policies already enacted and an incentive to target aid to the working class. We need new taxes on the wealthy, with the revenue mandated by Congress to go only to a “Debt Repayment Trust Fund.” Only a supermajority (say 75%) of both chambers could divert it for other purposes. Less useful was Obama’s call for free community college for all, the challenge being not to get more students into school but to get more students successfully through school. Of course, future congresses could try to change that requirement, but it would be politically difficult until the debt has been substantially reduced.

The cost of modernizing the country’s crumbling infrastructure, a favorite Obama issue, starts at $2.4tn, according to the Council on Foreign Relations. He would raise the capital-gains rate from 23.8% to 28%, the level when Ronald Reagan left office, for those earning more than half a million d ollars.

If it keeps going up at this pace, we will be paying increasing interest to our creditors, foreign and domestic, rather than spending tax dollars on people and on investments in our country’s future. A $3,000 tax break for childcare would seem like to run into the same shoals as Obama’s doomed tax proposal to raise fees on high earners again: this Congress cannot agree on taxes.

If I went on a trip around the world on my credit card, with first-class airfare, hotels and meals, and then returned home and dumped all my credit card receipts in my sons’ laps, and said “you pay,” well, that would be wrong. The financial crisis of 2008 left Congress and the White House with a lot to answer for, especially in terms of the falling fortunes of the middle class: the creation of six megabanks, whose $76bn in profits last year approached the record high of 2006, fueled by trillions of dollars in government stimulus measures; a jobs crisis that over the past five years has sent 1.85 million more workers into low-wage industries; growing poverty that has crept into the suburbs and increased the number of Americans receiving foods stamps by 45% since 2009; the lowest homeownership rate in nearly 20 years. These rifts reinforced a sense of structural injustice that fed into the Occupy movement and then, later, a fascination with the work of Thomas Piketty, who Obama himself termed an inspiration.

President Obama, too, has proved that his progressive policies are working, with substantial job increases since 2009 and an approval rating now at 50%. Romney’s campaign was hurt when he was recorded telling an audience that “47 percent” of Americans are dependent on the federal government and would vote for Obama on that basis. “Under President Obama, the rich have gotten richer, income inequality has gotten worse and there are more people in poverty than ever before,” Romney said Friday in a speech to Republican National Committee members. “The only policies that will reach into the hearts of the American people and pull people out of poverty and break the cycle of poverty are Republican principles, conservative principles.” The more important reason for the new Republican populism is that it reflects a change in the party’s base, said Schnur, who was communications director for John McCain’s 2000 presidential campaign. “As the Republican Party becomes driven more and more by social conservatism, a natural space has opened up for a more economically populist argument,” he said. “There’s no shortage of Republican presidential candidates who seem to want to talk about economic inequality.” Grover Norquist, president of the Washington-based group Americans for Tax Reform, said Republicans have to do a better job of demonstrating that their policies will help lower-and middle-income Americans. Clinton, echoing the arguments of Senator Elizabeth Warren of Massachusetts, wrote in a tweet last week that Republicans shouldn’t dismantle Wall Street changes. Another potential Democratic contender, Senator Bernie Sanders, elected as an independent in Vermont, referred to “obscene levels of income and wealth inequality” in endorsing Obama’s plan to tax the wealthiest Americans to expand tax credits for higher education and child care.

And Obama’s middle-class economics reflects, almost exactly, the Center’s project on middle-out economics, from apprenticeships to tax breaks to student debt relief. While Democrats roundly praised Obama after the speech, two of the nation’s most powerful labor organizations, the AFL-CIO and the Communication Workers of America, criticized his call for Congress to expedite new trade agreements as counterproductive. “Our opposition to fast-tracked trade deals that are giant giveaways to big corporations must be resolute,” AFL-CIO President Richard Trumka said in a statement. The Center for American Progress, a research group aligned with both the Obama White House and Clinton’s political operation, released a report last week, written by former Treasury Secretary Lawrence Summers and others.

In the long term, there are fundamental obstacles in our policy and financial system that will hinder the financial progress of those who can’t fall back on inherited wealth.

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