Obama's Misguided Focus on Inequality

Until Democrats—liberals and centrists alike—show government can work, the public won't be receptive to government-driven social-justice proposals.

Kevin Lamarque/Reuters

I have come to dread President Obama’s speeches.

They are often thoughtful, nuanced, highly evocative, and exceptionally well-delivered—and worse than inconsequential. They raise expectations—a world without nukes! Ending global warming! Finally curbing gun violence!—but are not followed by much of anything. These barren speeches are one reason the public, and especially the young, are becoming disaffected from politics, bad news for any democracy.

I am not so ambivalent about Obama’s December 4 speech focusing on inequality, though perhaps not in the way one might expect. I hope it gains little traction—though truth be told, his track record means I am not losing much sleep over the matter. The speech's flaw is that it seems to align the president with the Elizabeth Warren and Bill de Blasio wing of the Democratic Party. For though this left wing may be hot during the primaries, it is most unlikely to produce a winning candidate for the 2016 election.

Democrats seem to find it too painful to stay united, sit back, and enjoy the squabbles within the GOP. After briefly standing together to oppose the budget cuts Republicans demanded in exchange for ending the government shutdown and avoiding default, the party has returned to its traditional factional infighting between the left and centrists. The very impressive victory of de Blasio, who ran an openly left-wing campaign for New York mayor; Elizabeth Warren’s election; and several locally successful campaigns to increase the minimum wage have suddenly revived the dispirited liberal branch of the party. (The fact that the usually dour and critical Paul Krugman is rhapsodic about Obama’s inequality speech is another sign of the times.)

But there is little evidence that most Americans have changed their mind about inequality. Despite the Great Recession, the stagnation of real wages, and the sharp growth of the gap in income and wealth between the rich and rest, most Americans seem to still expect to become rich one day themselves and hence do not line up behind programs that seek to soak the rich. When Obama made permanent the temporary Bush tax cuts—a policy that largely benefits the well to do—there was little pushback from the masses. Occupy Wall Street fizzled, among others reasons, because there is rather limited support for an anti-capitalist agenda.

True, polls show that 76 percent of Americans favor raising the minimum wage, at least to $9 per hour. But my research shows that often this popularity is based on Americans’ support for a fair society and to the concept of basic decency, not fondness for some version of socialism. Americans I interviewed told me that they believe a person is entitled to a “day’s wage—for a day’s work,” and to a “living wage,” by which they mean that, if a person works a full week, he or she should be able to meet the basic needs of his or her family and not be mired in poverty or have to draw on food stamps to make ends meet. Even if the minimum wage rises, it will do very little to reduce inequality, because the rich get richer much faster than the minimum wage rises. Only major tax increases on the rich—on not just income but also inheritance—and a large transfer to the lower classes can achieve that.

Centrist Democrats argue that what the nation needs is a return to fast growth, the old tune that a rising tide lifts all boats. They point to the era of centrist Democratic hero Bill Clinton—a time of peace, prosperity, and balanced budgets. They support the agenda laid out in previous Obama speeches: investing public funds in education (to ensure that American workers have the skills and knowhow to compete) and in infrastructure (to facilitate private production and commerce)—but not significant  “redistribution” of wealth—the kind which would truly reduce the differences in wealth. (Progressive income tax, various anti poverty programs, Social Security and Medicare and ACA lift many millions of people out of poverty—but have not prevented the differences in income and wealth from ballooning.) The leaders of the centrist think tank Third Way published an op-ed in the Wall Street Journal (of all places) attacking progressive suggestions to expand the portion of income on which Social Security taxes are collected and to increase taxes on the rich, as Warren and de Blasio favor.

As I see it, the left and the center can reach a mutually beneficial understanding by focusing on tackling two major issues.

First, they should address the likely possibility that a return to a higher-growth pathway will not produce a windfall of jobs. New jobs will pay less and provide fewer benefits than the ones that disappeared. If every working person is entitled to least a living wage, American society will need to rethink how work is distributed and paid for. For example, taxing overtime could encourage workers to leave “after-hours” work for those who have no jobs. Ensuring that every dollar earned accrues sufficient benefits would make part-time jobs (which today often include few or no benefits) more rewarding. These measures may be insufficient, and they may not be politically viable—Congress is unlikely to support even such modest leveling measures. All this says is that it is an issue that needs more attention.

Second and even more essential is making clear that the government—whose power both leftist and centrist Democrats wish to employ—is increasingly captured by narrowly based private-interest groups. Thanks to these groups' influence, Washington is increasing inequality by channeling many of the billions it raises from the general public to interests with deep pockets—from enriching Big Pharma by preventing Medicare from bargaining over drug costs to allowing hedge-fund managers to pay low capital-gains taxes on their earnings. Three Supreme Court decisions striking down campaign-finance restriction—Davis v. FEC (2008), Citizens United v. FEC (2010), and McComish v. Bennett (2011)—removed most of the few remaining barriers to this perversion of government. Now corporations and their associations can in effect legally bribe members of Congress to their bidding, with impunity.

Democrats may wish for us to think of the government as the provider of Social Security, Medicare, passports, and national parks, but many millions of Americans feel that the government is not responsive to their needs—and for good reason. The populism that feeds the Tea Party and a growing libertarian sentiment—a sentiment, which, when it comes to the economy, six in 10 Americans endorse—is, in part, a reaction to the fact that the government often does not serve the people. Until Democrats showing that lack of responsiveness is not an inherent flaw of the government but a result of private hands raiding the public till and twisting the way the state functions, any effort to draw on the government to promote growth and social justice will lack widespread support. Both factions of the Democratic Party need to return to their respective drawing boards—or, better, find one they can share—to fashion a message Obama can bring, and which will be followed by more than a day of warm sentiments.