Politics

01.21.14

Income Inequality is a Recipe for Stagnation

Five years into Obama’s presidency, both parties still don’t understand how to get America working again.

At the beginning of 2013, wealthier Americans saw their tax rates rise, and working Americans were stung by the end of the payroll tax moratorium.  Twelve months later, at the end of the year, the Bureau of Labor Statistics reported that work force participation had dropped to a 25-year low, but at the same time, the headlines announced that the S&P 500 and the Dow had reached new highs.  So this is Obama, hope and change, stock market rallies for the top five percent, and wage stagnation for the rest.

Meanwhile, the so-called solutions that are being offered aren’t really remedies, as much as they are political sops aimed at the base of each party.  For example, over the weekend, the Wall Street Journal reported that Obamacare has done little to insure the uninsured.  Rather, according to the Journal, “Insurers, brokers and consultants estimate at least two-thirds of those consumers previously bought their own coverage or were enrolled in employer-backed plans.” This latest revelation comes atop of the president’s broken promises that if you like your insurance you can keep it, and if you’re fine with your physician you can keep her too.

Ironically as the New York Times has acknowledged, many of the people whose figurative ox is being gored by Obamacare “are exactly the sort of people—liberal, concerned with social justice—who supported the Obama health plan in the first place.” In the words of Camille Sweeney, co-author of The Art of Doing:  How Superachievers Do What they Do and Do it So Well, whose insurance was canceled, “We are the Obama people… I’m for it… But what is the reality of it?” 

Yet, none of this has evoked reexamination by the president, and don’t expect him to do so between now and January 20, 2017.  The reality is that Obamacare shredded the social fabric, but the president has no incentive to switch gears because Obamacare remains popular with large swaths of the “Coalition of the Ascendant,” an electoral amalgam of millennials, minorities, and college educated women  (now not so ascendant, most of them—but don’t tell them that), without whom Obama would not have been elected and then reelected.

As Mark Halperin and John Heilemann wrote, Double Down, “Chicago’s research found the ACA was a plus… Guaranteed coverage was popular with African Americans and Hispanics, whose rates of uninsurance were high.”  Demographics really do count.

Yes, Obamacare may yet cost Harry Reid and the Democrats control of the Senate come November, but relatively speaking, it’s their problem.  Regardless of who ultimately gets to fill the Senate’s “legislative tree,” the Obamas are safely ensconced in 1600 Pennsylvania Avenue for three more years.

Moreover, despite Obamacare’s glaring shortcomings for America’s tax base, the Obamans’ game plan of redistribution has trickled down to precincts of urban America.  Obamacare is now a paradigm for things to come in Blue America.  For example, New York City Mayor Bill de Blasio now demands that businesses with five or more employees pay for five days of sick leave; presently the law contains a 50 employee threshold for paid leave.  De Blasio would also expand paid sick leave to cover tending to one’s grandparents, grandchildren, and siblings.  

So where does all this leave the America?  In a lurch and in a semi-civil war with itself.  Stressed as it may be, the Coalition of the Ascendant is not disappearing.  By 2020, the Democratic Party will likely be a majority-minority party, and America is on track to be a majority-minority country by mid-century.

The demands of the Coalition of the Ascendant are not simply limited to social acceptance, but for programs that cost real dollars and which impose burdens upon wealthier and taxpaying America, i.e. Obamacare.  Getting America back to work should be our top priority but unfortunately it is not.    

For Democrats, it’s about satisfying the wants of the party’s constituencies, while for Republicans it’s about nibbling away at Medicare and privatizing Social Security.  For neither is it about jobs, and that is a national shame.

Jobs are created when those who hold capital take risks, and workers who have  requisite skills are matched with an employer’s needs.  Jobs are also created when government steps in and harnesses the public’s imagination, as FDR did during the Depression.  These days, nothing much is happening.