President Obama’s State of the Union address builds on his speech in Osawatomie, Kan. in December and that is a very good thing. That speech identified “whether this will be a country where working people can earn enough to raise a family, build a modest savings, own a home, and secure their retirement” as the key issue and argued against “you’re-on-your-own economics,” the economic perspective that says everyone should fend for themselves. We have increasingly followed such a vision over the last few decades and the results are clear, “fewer and fewer of the folks who contributed to the success of our economy actually benefitted from that success. Those at the very top grew wealthier from their incomes and investments than ever before.”
In contrast, the SOTU speech said, “We can either settle for a country where a shrinking number of people do really well, while a growing number of Americans barely get by. Or we can restore an economy where everyone gets a fair shot, everyone does their fair share, and everyone plays by the same set of rules.”
Obama pointed the way with a “blueprint for an economy that’s built to last – an economy built on American manufacturing, American energy, skills for American workers, and a renewal of American values.”
This is a much more encouraging policy vision than that offered by any of the president’s possible political opponents in the upcoming election; their policies are various versions of cutting taxes, especially on incomes obtained from wealth, redistributing the tax burden onto middle-class and low-income families and generating large permanent deficits. This is doubling down on the failed policies of the past.
Of course, whether Obama’s plan can lead to the desired results will depend on a political configuration that allows such policies to be legislated. It also depends on having a budget policy that actually delivers on the expanded public investments in innovation, education, infrastructure and manufacturing that are central to this strategy. That requires reversing the current course of budgets which imply major retrenchment of public investments over the next 10 years. The president’s establishment of the Buffett rule can help in this regard, especially since the SOTU clarified it as, “If you make more than $1 million a year, you should not pay less than 30 percent in taxes.” It would be stronger and more effective if we just taxed earned and unearned income at the same rate.
Last, as the president has noted at other moments, the typical working family has not benefited from productivity gains and economic growth over the last three decades. His pillars of growth (clean energy, infrastructure, innovation, education and skills) will strengthen productivity growth but do not directly address the need to reconnect pay and productivity growth. That requires low unemployment, a much higher minimum wage, better and actually enforced labor standards, and establishing in practice the ability of workers to conduct collective bargaining. It requires a trade policy (and exchange rate policies) that does not undercut our manufacturing sector. It requires the administration to stop its silly mantra of doubling exports and ignoring imports since the reality is that it is the ‘net’ of these two that affects growth and jobs. It requires building an economy where the financial sector is not dominant. And, that will require policies opposed by wealthy interests, a difficult trick in the age of Citizens United. That means we will need to weaken the impact of money in our democracy. There’s nothing easy about this path, but there is no alternative if we truly seek a democracy and an economy that work for everyone.