Obama’s New Economic Plan
July 28, 2013 Leave a comment
This past week Barack Obama delivered his much anticipated speech on economic policy before an enthusiastic audience at Knox College in Galesburg, Illinois. It was the same place where he delivered his first major speech after taking office as Senator in 2005, and this speech had the same focus as on that previous occasion.
I came here to talk about what a changing economy was doing to the middle class and what we as a country needed to do to give every American a chance to get ahead in the 21st century.
The President explained that
In the period after World War II, a growing middle class was the engine of our prosperity. … This country offered you a basic bargain, a sense that your hard work would be rewarded with fair wages and decent benefits, the chance to buy a home, to save for retirement and – and most of all, a chance to hand down a better life for your kids.
But over time … that bargain began to fray. … The income of the top 1 percent nearly quadrupled from 1979 to 2007, but the typical family’s incomes barely budged. And towards the end of those three decades, a housing bubble, credit cards, a churning financial sector was keeping the economy artificially juiced up … .
But by the time I took office in 2009 as your president, we all know the bubble had burst. And it cost millions of Americans their jobs and their homes and their savings. … And the decades long erosion that had been taking place, the erosion of middle-class security, was suddenly laid bare for everybody to see.
However, he continued, “America has fought its way back.”
Over the past 40 months our businesses have created 7.2 million new jobs. This year we’re off to our strongest private sector job growth since 1999. … We sell more products made in America to the rest of the world than ever before. … The cost of health care is growing at its slowest rate in 50 years. And our deficits are falling at the fastest rate in 60 years.
Five years ago the main concerns in the midst of the economic crisis were the exploding national debt and the expanding budget deficit – leftovers from the Bush presidency that Obama and Congress had to contend with. Calls were made for strict austerity measures, slashing government spending and maintaining low taxes. Stimulus measures, which would increase government spending, were argued against. Spending was reduced. A sequester was imposed. And Obama’s proposals for new spending on infrastructure, renewable energy, and education were beaten back.
The economic measures taken at that time were defensive in nature. They were meant to stave off economic collapse, and they worked. America successfully steered away from the brink of disaster. Now the crisis has passed. But the thinking remains the same. Congress continues its austerity mindset with calls for even further cuts in aid to needy families, education, health care, and other areas. But austerity does not create jobs. Cutting support to the needy does not get them spending more money.
The economy has turned the corner. Improvement has been slow but steady. While unemployment is still high, job numbers are going up. Housing prices have stabilized. Manufacturing has increased. The banks are strong again. And the stock markets have recovered. Americans cannot afford to allow these hard won accomplishments to come unraveled.
Changing the Conversation
America needs to move forward. Rather than focusing on the strategies of the past, the country needs to develop new strategies for a successful future. It will require a new way of thinking. As President Obama stated in his address his week,
What we need is not a three-month plan, or even a three-year plan. We need a long-term American strategy based on steady, persistent effort to reverse the forces that have conspired against the middle class for decades. That has to be our project.
In his address President Obama outlined five main cornerstones of middle-class security: 1) a good job with decent wages and benefits, 2) a good education, 3) a home of your own, 4) retirement security, and 5) health care security.
Those expecting to find a set of detailed proposals under these headings may have been disappointed. The details will be unveiled in a series of further addresses over the next several weeks as the President takes his case “on the road” to present it to the American people. This first event was intended to merely set the stage for those presentations and to provide what the President referred to as “a quick preview of what I’ll be fighting for and why.”
Ezra Klein, writing in The Washington Post, argues that Obama’s speech is intended to signal a major “pivot point” in the nation’s discussion of the economy. The President is attempting to shift the focus from the strategy of “trickle-down” economics, which has been utilized since the 1980s and has enriched the wealthy but actually shrunk the middle class, to what he calls a “middle-out” expansion of the economy.
Good jobs, a better bargain for the middle class and the folks who are working to get into the middle class, an economy that grows from the middle out, not the top down, that’s where I will focus my energies … not just for the next few months but for the remainder of my presidency.
Two major studies prepared over a decade apart by the World Bank and the International Development Fund have empirically shown the superior benefits of economic policies that primarily benefit the middle class. However, the Republican members of Congress are almost sure to oppose Obama’s new economic plan, and the President recognizes this. So he is calling on these members to present their own alternative proposals for boosting the economy. “It’s not enough for you to just oppose me,” he says. “You got to be for something. What are your ideas?”
If you’re willing to work with me to strengthen American manufacturing and rebuild this country’s infrastructure, let’s go. If you’ve got better ideas to bring down the cost of college for working families, let’s hear them. If … you think you have a better plan for making sure that every American has the security of quality, affordable health care, then stop taking meaningless repeal votes and share your concrete ideas with the country.
Repealing “Obamacare” and cutting spending is not an economic plan. It’s not. If you’re serious about a balanced long-term fiscal plan that replaces the mindless cuts currently in place, or if you’re interested in tax reform that closes corporate loopholes and gives working families a better deal, I’m ready to work.
The President is attempting to shift the conversation in a new direction and chart a new course for the future. In the weeks to come he will unfold the details of his five cornerstones to economic growth for the middle class. We will also see if his Republican opponents have any substantive counter proposals to put on the table. Or perhaps they will simply continue to decry his ideas without presenting constructive proposals in return.