The jobs situation in the United States is not merely a concern. It is a crisis. The unemployment rate has fallen to 6.7 percent but only because so many have stopped looking for work. Employment-to-population levels suggest the actual rate is probably closer to 9 percent. Minorities have been crushed. The young in particular have been battered. Employment-to-population ratios of those twenty-one to twenty-five have fallen by 10 percentage points since 2000. The middle class has less earning power than it did more than a decade ago, while the costs of education and healthcare have soared. As has been much noted, one percent of Americans have earned 95 percent of the increase in incomes in the five years since Barack Obama came to office, mostly because of gains in the stock market. Wages for the rest haven’t budged.
By making jobs the centerpiece of the speech, President Obama gave one of his best, most politically adroit State of the Union addresses. He put particular emphasis on raising the national minimum wage; the current plan in Congress is to raise it from $7.25 an hour to $10.10. The president promised to use executive authority to increase wages for those working under federal contract and calls for equal pay for women. He called for extending unemployment benefits for those out of work for more than six months—the long-term unemployed. He also demanded an immigration bill, and more job training. And he will do what he can with or without Congress.
These are all crucial steps on an issue Obama should have been talking about consistently from day one. And Congress is a bigger obstacle today than it was when he came to office. In his first term, once he had passed the $830 billion stimulus, he focused his attention on the rising federal deficit, which was never the threat he thought it was. His advocacy of the Affordable Care Act, his signature reform, was half-hearted. But the president made no excuses for past mistakes, not even for the disastrous rollout of the healthcare initiative. He delivered an unapologetic speech more optimistic than many of those in his past, and more optimistic than the nation itself. The proportion of Americans who think the country is moving the wrong direction is high—much higher than in 2009, Obama’s first year in office—and has been rising again recently.
Yet the president’s optimism is a welcome shift in tone. Many commentators and members of Congress seem to believe that trying to solve what has become a full-fledged jobs emergency is futile. And of course it would be in the Republicans’ interest to have the president fail. New York Times columnist David Brooks argues that most of those who will get more income through a higher minimum wage live in families that are not below the poverty line. This is said by some to be thoughtful criticism. To the contrary, it reflects a nation desensitized to the plight of its workers.
The poverty line is desperately low. For a family of three it is roughly $20,000 a year—less than the cost of a single year of tuition at many public universities. About 25 percent of American families earning $20,000 a year or less will benefit from a minimum wage hike. More than half earning $40,000 or more would get a wage hike, and they need it. About 70 percent of those under the nation’s median family income of roughly $62,000 would get an increase with the higher minimum wage.
But for all this, Obama’s State of the Union message fell short of a full appraisal of the economy’s current predicament. The nation remains handcuffed by outsized fears of the federal deficit, and the president has done his share to contribute to them. From the beginning he gave priority to cutting the deficit over supporting jobs. It was a bad policy miscalculation, no doubt reinforced by his economic advisers in 2009. He formed a bipartisan commission on balancing the budget that was led by two conservatives, Democrat Erskine Bowles and Republican Alan Simpson; and he almost never boasted about how his Keynesian stimulus plan saved the economy from considerably more destruction. Instead of pushing for government investment in jobs, he readily agreed to the sequestration compromise—which actually withdrew government money from the economy.
Thus, the most necessary measure of all—continued fiscal stimulus to stimulate growth—is not being entertained. Obama dare not even bring it up. Imagine if we were to tie more fiscal spending to infrastructure spending. It would be a win-win-win, pumping up the economy now, creating good jobs in the process, and building the economy for the future. Of course, we should also extend unemployment insurance as the president urges, the blocking of which is another sign of Congress and so many commentators growing more callous.
Many industrial jobs created in recent years come with far fewer protections and benefits than they did in the past, even as they pay lower wages. Thankfully, the president made a full-throated and moving defense of his healthcare reform in his speech. The truth is that the program is already helping thousands of people get needed care, and millions of people are now covered who were previously uninsured. Its success is the best chance to get Americans to believe in government again, and as I’ve written in The New York Review, its benefits far outweigh its costs. Obama talked straight to his opponents about it without flinching.
But there is much more that can be done. Fiscal stimulus is most important because it will result in more economic growth, and this is always the best way to create jobs. More infrastructure investment is ideal. The president could consider outright job creation through government programs, like FDR’s Works Progress Administration. These new jobs in parks, roads, schools, and other institutions could be directed at the young and minorities, who have been disproportionately affected by the crisis. More thinking about how to reduce the value of the dollar to encourage exports and create manufacturing jobs is needed. Those who wail about the death of manufacturing leave the perennially overvalued dollar out of the conversation.
The president has announced a far more modest agenda. And as he knows—and we know—Congress is not going to oblige with even these small steps. But maybe that’s his point. At least he has focused attention on what the legislators can and won’t do. In this regard, however, he could have done much more. He could have said, for example, “In a more cooperative political environment, we could be talking about infrastructure, pre-K, a major investment in job training.”
The best hope for the economy now is that, despite sequestration, which has removed tens of billions of dollars from the economy, GDP will keep growing. It has some momentum at last. If it does, the federal deficit as a proportion of GDP will also keep falling, and there may be room for the government initiatives that are necessary. For working Americans, the faster economic growth that results will mean more jobs and reduced unemployment.
This is a critical mid-term election year. If the economy does not continue to improve, Republicans will gain a stronger foothold. They will strangle needed domestic legislation. I think on balance Obama kicked off the year with the right tone. But he will still need Congress. He can’t even raise the minimum wage without its approval.