Eight years after articulating his ideas about how to reshape the American economy as a young senator speaking in front of the 2005 graduating class at Knox College in Galesburg, Illinois, Barack Obama was back there today for another big speech about the economy. (Read the prepared remarks here.) His vision is roughly the same: The president’s top economic mission is to fight the hollowing out of the American middle class.
The speech was the first of a number of major addresses planned for the rest of the summer in which the president is expected to articulate the White House’s economic grand plan for the rest of Obama’s term. Despite major efforts by the president’s office to drum up journalists’ interest, though, skepticism was running high this morning. What could another speech possibly accomplish? Certainly not mellow out opposition in Congress — Republicans had already announced they’d send out press releases bashing whatever the president would say, even before his official remarks were made available. Staving off another manufactured crisis over renewing federal government funding and raising the federal debt ceiling (both issues are coming up again in October/November) didn’t seem in the cards either. New economic policy proposals? Hardly likely, given the stalemate in Washington. Expectations were low.
Unfortunately, the speech turned out to be just what most people thought: Nothing earth shattering.
To be fair, the address did offer a clear and consistent narrative of Barack Obama’s view of the American economy and the major problem the government needs to solve. What it didn’t do was offer a persuasive, comprehensive vision on how to get there.
The narrative goes like this: Emerging from WWII, the middle class was the backbone of a flourishing U.S. economic superpower, but starting in the late 1970s average American incomes started becoming decoupled from productivity. Hard work stopped being a guarantee of good wages. For a while, the impact of the fundamental changes working against the middle class was temporarily “papered over,” as the president put it quite effectively, by housing and financial bubbles. The financial crisis was a time of reckoning that unveiled the ugly effects of long-running trends. The president has fought the crisis and will now do whatever is in his power to “reverse the forces that have battered the middle class.”
This diagnosis of Uncle Sam’s main economic ailment is a powerful and, frankly, convincing one. And when Obama pins down the the “forces” depressing middle income salaries to technology and globalization, he is reflecting what major economists of various political stripes think (though that is not an exhaustive list). The policy prescription to fix this, though, seems pretty “meh.”
The president promised efforts to retain and create manufacturing jobs, revive and expand the country’s crumbling infrastructure, boost education, encourage home ownership, give people incentives to save for retirement and provide them with decent affordable health care. Not much new here at all.
True, as the Washington Post‘s Ezra Klein pointed out, this morning’s address was likely the “preview” speech, so we’ll likely get more detail on specific policies and initiatives later on. But what little the president alluded to in this “preview” betrayed a lack of both creative thinking and of meaningful evolution in such thinking since his first term.
Boldness and out-of-the-box solutions were the traits of Obama’s first few months in office: The crisis management phase. The Wall Street and Detroit bailouts averted what could have been another Depression and are arguably the most successful part of the White House’s track record on economic policy.
But the president’s plan for longer term economic policies seem anchored in an outdated vision of what the middle class should look like. “Homeownership,” said the president, is a “cornerstone of what it means to be middle class.” Really? Evidence from other countries with healthy middle classes suggests it doesn’t have to be. Likewise, Obama seemed to repeatedly equate”good jobs” with manufacturing job — a truism many economists would challenge.
Also, the White House still seemed fond of some ideas that didn’t quite turn out in the first term. “I’ll push new initiatives to help more manufacturers bring more jobs back to America. We’ll continue to focus on strategies to create good jobs in wind, solar and natural gas that are lowering energy costs and dangerous carbon pollution. And I’ll push to open more manufacturing innovation institutes that turn regions left behind by global competition into global centers of cutting-edge jobs,” the president said.
But, as the Economist noted reviewing the president’s track record on the economy ahead of the last election, industrial policy has so far yielded meagre results:
The bigger problem with this spending is that it went against the economic tides. Last year Mr Obama boasted that America would soon have 40% of the world’s manufacturing capacity in advanced electric-car batteries. But with electric cars still a rounding error in total car sales, that capacity is unneeded. Many battery makers are struggling to survive. Makers of solar panels face cheap competition from China, while natural gas from shale rock has undermined the case for electricity from solar and wind. As for high-speed rail, extensive highways, cheap air fares and stroppy state and local governments make its viability dubious. A $3.5 billion federal grant to California may come to nothing as the estimated cost of that state’s high-speed rail project runs out of control.
In other words, what we heard today about how to create more “good jobs” for Americans sounded like — sorry to sound like a Republican — more of the same, which is unfortunate.
This is not say that all the President’s ideas are bad. To the contrary, many — such as upgrading the skills of the American workforce — are obviously good. But it doesn’t sound like the disappointing outcomes of the latter part of Obama’s first term have spurred the White House to take a long, hard look at its core assumptions on what the middle class of the future ought to look like. In a world where America’s relative economic weight is poised to be much smaller than it has been for the past half century, it might not be feasible to go back to how things were in the manufacturing golden age of the post war years. Similarly, there doesn’t seem to have been much questioning within the Administration of the idea that government is capable to identify and adequately prop up the industrial champions of the future.
Granted, finding the right cure to America’s economic woes is tricky business. It is extremely difficult to make economic policy with the current gridlock in Congress. And the Obama administration — along with most economic policy makers around the world — are wading into unchartered territory. But after four and a half years in power, it was legitimate to expect the president would have some truly new ideas and approaches. And it is legitimate to feel disappointed that he didn’t.