But, as President Obama noted last weekend, these recent trends cannot mask deeper, systemic weaknesses in the American economy. The U.S. middle class is shrinking, income inequality is increasing to record levels, and the touch stone of the American Dream--social mobility--is disappearing.
“If we don’t do anything, then growth will be slower than it should be. Unemployment will not go down as fast as it should. Income inequality will continue to rise,” the president said in an New York Times interview. “That’s not a future that we should accept.”
According to a recent study by the non-partisan Congressional Research Service, upward income mobility has stagnated so much that America now has the highest rate of income inequality in the industrialized world. “The United States is a comparatively immobile society--that is, where one starts in the income distribution influences where one ends up to a greater degree than in several advanced economies” including most European nations, the CRS report finds. Since the Great Recession, matters may have actually gotten worse. While US incomes grew by 2.3 percent in the recovery of 2009-2010, the top 1 percent saw income skyrocket by more than 11 percent; incomes of the remaining 99 percent of Americans grew by a scant .2 percent
This is bitterly ironic, since creating economic opportunity for all Americans and rebuilding the middle class were the dominant issues in the campaign just eight months ago. Mitt Romney lost the election, in part, at least, because his condemnation of the “47 percent” of “takers” carried not just a faint whiff of elitism, but suggested a failure to understand that middle class growth and social mobility are the keys to a robust American economy and a health polity.
In his first post-election press conference, Obama emphasized that rebuilding America’s middle class would be the central purpose of his second term. “This nation succeeds when we’ve got a growing, thriving middle class…that’s the idea at the core of the plan that I talked about on the campaign trail over the last year: rewarding manufacturers and small businesses that create jobs here, not overseas; providing more Americans the chance to learn the skills that businesses are looking for right now; keeping this country at the forefront of research, technology and clean energy; putting people back to work rebuilding our roads, our bridges and our schools…”
But this centerpiece agenda has been swallowed up by Washington’s hyper-partisanship, Republican anti-government obsessions, and Democrat’s preoccupation with seemingly more immediate political issues like gun control, immigration, and the misguided spending “sequester.”
Earlier this summer, for example, Larry Summers and others released a study showing that government borrowing at current historic low rates will actually improve U.S. growth and lower the debt over time. But the political class seems oblivious, and many in both parties embrace anti-government biases so deeply that they seem incapable of learning practical lessons from recent events. On the whole, the government actions taken to address the economic and financial crisis of 2008 and 2009 were remarkably successful, with the auto industry saved and loans paid back, financial sector stabilized, and the housing sector recovering more slowly only because the government has failed to shore up underwater mortgages. Only the lack of greater ambition and investment was wanting.
No issue is more important than average Americans having a true opportunity to better their lot, and the lives of their children. If the president is to have the courage of his convictions, he should propose a truly ambitious plan of investment—as he outlines above--to revive the American middle class, and convince Democrats around the country to run on it in the mid-term elections. That is, the president should nationalize the mid-term elections as a decision on the fate of the American middle class and challenge the Republicans to embrace his plan or propose one of their own. Anything less is to consign the country to three more years of economic drift, and average Americans to a country in which they really don’t stand a fighting chance.
Bledsoe is president of Bledsoe & Associates, a public policy consultancy. He was communications director of the Senate Finance Committee under the chairmanship of former Sen. Daniel Patrick Moynihan (D-N.Y.).