Why Obama’s ‘Middle-Class Economics’ Sounds Familiar

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Photo: Mandel Ngan-Pool/Getty Images

Tonight, Barack Obama coined a new phrase, as far as I can tell: “middle-class economics.”

Will we accept an economy where only a few of us do spectacularly well?” he asked as a framing question at the beginning of his speech. “Or will we commit ourselves to an economy that generates rising incomes and chances for everyone who makes the effort?”

The implicit answer is that Republicans are rooting for the first rhetorical, and Democrats the second. The awkward part for President Obama and the White House is that inequality has hardly abated on their watch, and that the feeling that not everyone who makes the effort might see those rising incomes has sunken in.

Since the late 1970s, rising income inequality has been a rarely relenting facet of economic growth, with stock-market crashes and their ensuing recessions the only check. Now there is evidence that wealth inequality has started to grow as well, cementing the differences between the haves and the have-nots, between the 99 percent and the one percent. 

This has been one of the central, underlying challenges of both Democratic and Republican administrations stretching back two decades. Even with unemployment back to 5.6 percent, even with the most robust economy we have seen since the late 1990s, millions of American families feel squeezed by stagnant earnings and rising costs. The flight of dollars to the hands of the already wealthy is both symptom and cause. And the two political parties remain utterly and completely at odds as to how to solve that problem.

On Tuesday, Obama reiterated his party’s long-proffered raft of proposals to tackle it, along with some new additions. For the rich, higher taxes on investment income, on inheritors, on big banks, on huge retirement accounts. For the lower income, bigger tax credits. For infrastructure, investment. And then Republicans offered their often-repeated fixes. Fewer regulations. Lower taxes. The repeal of the Affordable Care Act.

If it all feels a little steady-state, that is because it is. Obama’s proposed something like the domestic policies in this speech a thousand times before. Republicans have swatted those policies down just as many times. But on Tuesday, he made them again forcefully. “Middle-class economics means helping working families feel more secure in a world of constant change,” he said, arguing for a larger government role in the security of average families. “That means helping folks afford child care, college, health care, a home, retirement  — and my budget will address each of these issues, lowering the taxes of working families and putting thousands of dollars back into their pockets each year.”

And he staked a yet stronger claim — not just that his proposals are the right proposals, but that they have shown themselves to be the right proposals. “Middle-class economics works,” he said. “Expanding opportunity works. And these policies will continue to work, as long as politics don’t get in the way. We can’t slow down businesses or put our economy at risk with government shutdowns or fiscal showdowns. We can’t put the security of families at risk by taking away their health insurance or unraveling the new rules on Wall Street or refighting past battles on immigration.”

This seems like the soft spot of his otherwise athletic, optimistic argument. Yes, the Obama administration has overseen a period of extraordinary job growth and deficit shrinkage. Unemployment has dropped. Gas prices are below $2 a gallon in some parts, and there are tentative signs that wages are starting to pick up. But — as Republicans have often pointed out — middle-class incomes have not risen. Wages remain stuck. Poverty rates remain uncomfortably high. And the labor-force participation rate remains low. One of Obama’s top former economic officials, Larry Summers, has started warning about “secular stagnation” that might afflict growth rates for years to come.

But the truth is that many of Obama’s proposals would or will help those aggrieved middle-class families. The Affordable Care Act is at its heart a piece of redistributive legislation, taxing the rich to provide health care to lower-income families and limiting the financial burden insurers can place on American households. His stimulus plan sought to stabilize the markets and jump-start the economy when lower-income families were hurting the worst.  

Many other more forward-facing plans have failed to pass, to be sure, and those Obama proposed on Tuesday almost certainly will as well. But tonight we saw an Obama like the one we saw on the campaign trail — fired up, optimistic, discursive, happy-hearted, and historical. Tonight we saw an Obama who decried Washington but still seemed convinced in hope and change. Tonight we saw Obama thunder, trumpet, and staccato-shout his policies, despite the nonexistent odds they have of passage. And the fact that the economy has turned around so much seemed to give him hope that the middle class would start feeling better, even if Washington never helps.  

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Obama’s ‘Middle-Class Economics’