Politics

01.28.14

Why Obama Can’t Solve Inequality

Why does Obama conflate income inequality with mobility? Because it allows him to preach populism while doing nothing.

If there’s one dead-of-winter public spectacle even more soul-sapping and self-congratulatory than the Grammys —now taking its cues, however well-intentioned, from the late Rev. Sun Myung Moon by staging mass weddings —it’s the annual State of the Union address (due to be delivered tonight at 9 p.m. ET).

Like high school graduation speeches, State of the Union addresses are typically forgotten in real time, even as they are being delivered. Perhaps realizing his time in office is dwindling down with little to show for it, Obama will take a page from Lady Gaga at the 2011 Grammys and emerge from a translucent egg.

Alas, that’s as unlikely as his declaring an end to the federal war on pot. By all accounts, Obama will instead talk a lot about economic inequality, the increasing spread in income and wealth between the richest and poorest Americans that he calls the “defining challenge of our time” and that has only gotten worse on his watch.

If past pronouncements are any indication, the president will immediately—and erroneously—conflate growing income inequality with reduced economic mobility. As he said in a speech last December, “The problem is that alongside increased inequality, we’ve seen diminished levels of upward mobility in recent years.”

This is flatly wrong. Research published last week by economists at Harvard (Raj Chetty, Nathaniel Hendren) and Berkeley (Patrick Kline, Emmanuel Saez) concludes that rates of mobility among income quintiles have not in fact changed in decades. As the Washington Post summarized it, “Children growing up in America today are just as likely—no more, no less—to climb the economic ladder as children born more than a half-century ago, a team of economists reported Thursday.”

While noting large variations in mobility based on geographic location and other factors (the biggest being “the fraction of single parents in the area”), Chetty, et al. conclude “a child born in the bottom fifth of the income distribution has a 7.8% chance of reaching the top fifth in the U.S. as a whole.”

“Don’t expect anything new from tonight’s speech. This is a president who is long on revealed truth and exceptionally short of wisdom borne out of his experience in office.”

That chance at going from bottom to top may strike you as unacceptably low—it does me, for sure—but the larger point is that it hasn’t changed over time. Elsewhere, the researchers show similarly constant rates of mobility for people born into middle and higher-income quintiles. Growing inequality doesn’t mean that mobility has declined, much less stopped altogether, and policies designed to level or redistribute income won’t increase mobility (if they even succeed at actually squeezing income disparities).

It’s important to stress that the new study by Chetty et al. simply confirms what other researchers have been finding for years. For instance, Scott Winship, who has worked at Pew and Brookings and now is a scholar at the Manhattan Institute, compared mobility for Americans born in the early 1960s and early 1980s. He found “that upward mobility from poverty to the middle class rose from 51 percent to 57 percent between the early-'60s cohorts and the early-'80s ones. Rather than assert that mobility has increased, I want to simply say—at this stage of my research (which is ongoing)—that it has not declined.”

As Winship told me in a 2012 interview, “You can be concerned that there’s not enough [economic] mobility or enough opportunity, but you don’t have to also believe that things are getting worse.” Winship also underscored what is clear from the past 50 years or more: It’s actually incredibly hard to figure out exactly how to increase mobility rates.

Tonight, don’t expect President Obama to cite any research showing that mobility has remained constant. Instead, expect him to echo his December speech, which was filled with lines about “a dangerous and growing inequality and lack of upward mobility that has jeopardized middle-class America’s basic bargain—that if you work hard, you have a chance to get ahead.”

From a political perspective, the erroneous but strategic conflation of inequality and mobility makes obvious sense. After all, if mobility is as alive and well as it has been in the post-war era, then the sense of urgency the president needs to sell any legislation is largely undercut. As important, constant mobility rates also make a mockery of the president’s long-preferred strategy of redistributing income from the top of the income ladder down to the lower rungs. Whether he’s talking to Joe the Plumber (god, that seems like a different planet, doesn’t it?) or addressing Congress, Obama rarely misses an opportunity to ask richer Americans to “do a little bit more.”

But as it stands, the United States already has one of the very most progressive tax systems in the world. Even the liberals at Wonkblog grant that much. The real problem, they and others note, is that rather than give direct cash payments to the less well-off, the U.S. prefers to dole out favors via tax breaks that are far more likely to benefit the wealthy and not the middle or lower classes (think mortgage-interest deductions on not just one but two homes).

Don’t expect Obama to talk seriously about reining in tax breaks or reforming entitlements that benefit the wealthy even as he says they must pay “a bit more.” In fact, don’t expect anything new from tonight’s speech. This is a president who is long on revealed truth and exceptionally short of wisdom borne out of his experience in office.

Instead, get ready for a long list of calls to maintain and increase many programs that have been in place since before Obama took office: extending unemployment benefits (without paying for them by, say, cutting defense spending), making it easier for people to buy or stay in homes whose prices are inflated by government policies, and increasing access to higher education in ways that continue to increase prices far higher than the rate of inflation. Pump more money into a broken K-12 education system whose per-pupils costs rise as results stay flat (certainly the president won’t call for giving parents and children the right to choose their own schools).

In short, expect Obama to invoke income inequality and supposed declines in upward mobility as a way of maintaining a status quo that has managed to increase inequality without affecting mobility rates.

The upside to tonight’s speech? We all will have forgotten it by the weekend, when we still might be talking about the Grammys’ mass weddings.