Wage Gap

Obama Income Inequality Speech Previews a 2016 Democratic Split

The president took on income inequality in a speech Wednesday—at a Clinton-friendly venue. But the issue threatens to divide his party, with an invigorated left looking for a new hero.

12.05.13 10:45 AM ET

Flanked by a dozen American flags, President Obama on Wednesday sought to reclaim the promise that he ran on in 2008: an economy that works for everyone. He called income inequality “the defining challenge of our time,” remembering with evident emotion, “It’s why I ran for president…It drives everything I do in this office.” Yet the divide that began in the late 1970s has only grown under Obama’s stewardship and now threatens to split the Democratic Party as it looks toward a future beyond Obama.

A White House official called Wednesday’s speech “a window into where the president will focus his energies over the next three years.” Obama’s chosen audience, the Center for American Progress, a liberal think tank, spoke volumes, too. Founded by John Podesta, who served as chief of staff in the Clinton White House, and headed by Neera Tanden, who worked for Hillary Clinton, CAP is widely seen as the Clinton campaign in waiting.

The issue driving Democrats is income inequality, and Obama offered sobering statistics. In 1979, the year he graduated from high school, the top 10 percent had a third of the nation’s wealth in an economy where everyone’s wages and incomes were growing. The economy has since doubled in size, and top earners take home half the national income while everyone else’s wages are stagnant. “The basic bargain at the heart of our economy has frayed,” Obama said, noting that even Pope Francis has addressed the issue. When a homeless elderly person dies of exposure in the cold, the pope said, it’s not news the way it is when the stock market falls.

“The combined trends of increased inequality and decreasing mobility pose a fundamental threat to the American dream, our way of life, and what we stand for around the globe,” Obama declared. It can’t get much more existential than that, yet Obama’s choice of economic advisers—establishment types more aligned with Wall Street than Main Street—combined with his own innate caution failed to make an appreciable difference when he might have had the opportunity early in his presidency.

“The diagnosis is very deep. Can he implement the prescription?” asks Jared Bernstein, an economist at the Center on Budget and Policy Priorities and a former adviser to Vice President Biden. “The answer is unlikely, but this is the debate we need to have, and it leads you to 2016.”

Obama describes his economic policies as building from the middle out, in contrast to the GOP’s top-down, don’t-tax-the-rich approach. CAP launched a “Middle Out Economics” project more than a year ago to lay the intellectual foundation for a progressive agenda. In ’08, Hillary Clinton was seen as the champion of more centrist policies, especially at the end of the campaign, when she was consistently defeating Obama among white working-class voters. But the pendulum has shifted, and an invigorated Democratic left is looking for a new hero.

CAP is not taking sides. Next week it hosts an event on Capitol Hill featuring Sen. Elizabeth Warren (D-MA) and her ideas on retirement security, which include expanding Social Security benefits. Clinton allies are mindful of Warren’s appeal to the Democratic base and compare her to Obama—“a purist who thinks she’s too good for the Senate,” says one. Warren’s prodigious fundraising suggests presidential ambitions are possible, though she says she is not running and has signed a letter along with every other Democratic female senator in support of Clinton.

Clinton has begun peppering her speeches with the word progressive, and her long history of fighting for women and children gives her credibility with the Democratic base.

What she needs is an economic message that takes into account new realities. Jim Kessler with Third Way, a moderate Democratic think tank that opposes left-wing populism as expressed by Warren, says there is reason for voter discontent because of income inequality, but expanding Social Security benefits is not the answer. “You, me, the Koch brothers, and the guy on the street, everybody gets more benefits, and the only thing you need to do is tax wealthy people more.” Third Way supports taxing the rich, but only about 320,000 people are making a million or more in gross adjusted income, says Kessler. Even if you could tax them more, it’s not enough. If progressives want money for schools and infrastructure and scientific research, entitlement spending has to be reined in, he says.

Obama didn’t offer any new proposals Wednesday to spur economic growth or close the income gap, but he warned that the pathologies once confined to the urban poor—single-parent households, drug abuse, obesity, isolation from church, absent fathers—now hurt everybody, people of all races. He ticked off the many policies he has proposed to no avail, from raising the minimum wage to quality preschool for every child, saving for the end of his speech a reference to what he called “the elephant in the room,” the inability to get anything done in Washington. “You owe it to the American people to tell us what you’re for, not just what you’re against,” he said, giving Republicans fair warning that he will use the bully pulpit to call them out—that is, if anybody is listening anymore to a president who has worn out his welcome with a lot of voters.