President Obama took the podium for last night’s State of the Union Address at a time when mood of the country is sour—toward the president and toward the economy.
An objective look at the data and the record of the last several years suggests that this shouldn’t be the case.
Historically speaking, presidents get credit for the positive economic news that happens on their watch and get blame for the bad things that happen—even when they are not entirely at fault. The first George Bush had the misfortune to have a shallow recession and slow recovery come in the second half of his term. Bill Clinton had the phenomenal luck to preside over a period of economic nirvana—the end of the Cold War, the entry of China into the global trading system, the internet and telecom boom—and leave just in time.
Obama’s timing was reasonably good. The recession had started in early 2008 and the financial crisis came just a few weeks before the election. But the worst of the economic downdraft came in his first six months of office.
Things started to turn around rather quickly. I’ve been arguing for years that America is coming back better, stronger, and faster than many people anticipated, and than many of its peers. And it’s mostly happening. The stock market has gone nuts, more than doubling since its March 2009 nadir. Gross Domestic Product surpassed its late 2007 peak in 2011 and hasn’t looked back. (Britain’s economy has yet to return to its pre-recession size.) The U.S. economy is now closing out its 55th straight month of growth. Monthly exports—an indication of competitiveness and the utility of what we do—are at a record level and are up nearly 60 percent from the April 2009 bottom.
Virtually all the bailout money to financial institutions and car companies was paid back. GM and Chrysler are thriving, and the U.S. financial system is on solid footing, as evidenced by the pervasive decline in financial failure. The economy has added jobs for 39 straight months—beating the streak of 37 months in which the economy added jobs in the George W. Bush years—with the private sector adding a cumulative 8.2 million jobs since February 2010. The deficit, which peaked at an unimaginable $1.4 trillion in fiscal 2010, is shriveling by the day. It came in at $680 billion in fiscal year 2013, and is down about 40 percent through the first three months of fiscal year 2014. This is truly the Golden Age of Deficit Reduction.
Companies won’t boost wages, even though they’re sitting on record profits and record amounts of cash.
Oh, and two more important, previously unimaginable developments have materialized in the past couple of years—thanks in no small part to Obama administration policies. Health care cost inflation is falling for the first time in ages. And housing, while still a bit wobbly, is definitively back.
All the elements of a feel-good story are here: aggressive policies that worked, the natural regenerative forces of the U.S. economy coming to the fore, competing successfully in international markets, and a continuing revolution in the energy sector. Many things that were completely FUBAR in 2008 and 2009 are fixed.
But Obama doesn’t—and can’t—own this record for two big reasons.
First, he doesn’t tell economic stories naturally. When Obama speaks about human rights, or foreign policy, or his personal story, or race, or health care, this preternaturally gifted orator speaks from both the heart and the head simultaneously. But on the economy, it just seems to be the head talking. There’s a great story to be told about the relationship between public infrastructure investment and economic growth, but for Obama it came out as “you didn’t build that.” He mixes bromides like “the private sector is doing fine,” with the occasional half-hearted stabs at populism (“fat-cat” bankers), which are inevitably followed bymeetings with CEOs and bankers. On health care and the economy, he needed Bill Clinton to bail him out with some explaining at the convention in Charlotte.
When he’s dealing with other issues, Obama is like a slugger walloping juicy softballs. When it comes to talking about the economy, he’s like a weak-hitting minor leaguer facing Clayton Kershaw with a thin bat and the sun shining in his eyes.
There’s another problem. Virtually all the exciting progress and data points cited above, which economists and wonks can appreciate, are negated by the easily understood, and intimately felt, problems of wage stagnation and the inequitable distribution of growth. The 1 percent are killing it and reaping virtually all the remarkable gains that have been created. But companies won’t boost wages, even though they’re sitting on record profits and record amounts of cash. As a result, median income is falling in Obama’s America.
Obama hasn’t been able to halt these trends. And he doesn’t have much of a program to do so. Sure, he’s done some redistribution—the wealthy are being taxed at a higher rate to subsidize the extension of health insurance to those at the bottom. But that development is bound up with the broader Obamacare debate. He can’t get Congress to boost the minimum wage, or to stop engaging in the austerity policies that have helped sandbag growth.
Most significantly, he hasn’t shown an ability to explain to the nation, and to the nation’s CEOs, why higher wages are good—as a matter of social justice, yes, but also as a matter of public policy and business practice.
Of course, actions speak louder than words. In the speech, Obama announced he will sign an executive order that will force federal contractors to pay employees a minimum wage of $10.10 per hour.
Now, as Amy Traub, senior policy analyst at Demos, notes, this is not exactly revolutionary. It will apply to new contracts and contracts that are up for renewal—so it’s not like all the federal contractors worker at or near the current minimum wage will get an immediately boost. Realistically, she notes, a couple hundred thousand people might get raises this year. That’s a very small fraction of the U.S. workforce.
Still, this is an important step. Congress may still be reluctant to act. But something is clearly happening in America when it comes to the minimum wage. Many states and cities are acting to create higher-wage ecosystems through minimum-wage and living-wage laws and ordinances. Now the federal government is adding its considerable consuming power to the mix. “Historically, this is how we’ve seen broad sweeping change occur on a variety of different policy issues,” said Traub. “They’re creating facts on the ground.”
And facts on the ground speak more eloquently than facts in a spreadsheet.