The Inequality President
There are a few interesting bits in this New York Times interview with President Obama. For one thing, it’s striking to hear how centrally he views combatting inequality to his legacy. For another it’s somewhat remarkable to hear him indicate that he sees economic inequality as a threat to racial and civil equality — a formulation that’s hardly unheard of on the Left, of course, but is less publicly associated with this hyper-cautious and often self-consciously moderate man.
Note the article’s juxtaposition:
“Racial tensions won’t get better; they may get worse, because people will feel as if they’ve got to compete with some other group to get scraps from a shrinking pot,” Mr. Obama said. “If the economy is growing, everybody feels invested. Everybody feels as if we’re rolling in the same direction.”…
During much of the interview, Mr. Obama was philosophical about historical and economic forces that he said were tearing at communities across the country. He noted at one point that he has in the Oval Office a framed copy of the original program from the March on Washington for Jobs and Freedom 50 years ago, when the Rev. Dr. Martin Luther King Jr. gave his “I Have a Dream” speech.
He uses it, he said, to remind people “that was a march for jobs and justice; that there was a massive economic component to that. When you think about the coalition that brought about civil rights, it wasn’t just folks who believed in racial equality. It was people who believed in working folks having a fair shot.”
The bit that should make liberals happiest, though, is the way Obama tries to shoehorn his Big Picture concern into the small bore, day-to-day partisan jockeying of Washington, DC.
He does this, chiefly, by proposing a new dichotomy for national politics. Instead of the issue being the deficit and cuts — and instead of the choice before voters being Republicans’ cut a lot vs. Democrats’ cut a lot but don’t do it stupidly — Obama wants to reframe the dichotomy as austerity and inequality on the one hand, social investment and upward mobility on the other. With him, of course, holding the better hand:
Without a shift in Washington to encourage growth over “damaging” austerity, he added, not only would the middle class shrink, but in turn, contentious issues like trade, climate change and immigration could become harder to address….
“I want to make sure that all of us in Washington are investing as much time, as much energy, as much debate on how we grow the economy and grow the middle class as we’ve spent over the last two to three years arguing about how we reduce the deficits,” Mr. Obama said. He called for a shift “away from what I think has been a damaging framework in Washington.”
Now, not all liberals are going to be pleased. Some are going to (not unreasonably) point out that they were telling the president to do this years ago. And that’s true. It shouldn’t have taken so long — and a whole reelection campaign — for the president to get to this point. But you gotta reward good behavior just as assiduously as you punish the bad, I say. There’s no harm in applauding him today while holding fast to your criticism from yesterday.
In any event, reading the piece, you get the impression of a guy already trying to define the way his presidency is interpreted and his immediate post-presidency is understood. I don’t think that’s saying he’s checked out; but I do think we can get glimpses of someone who understands that, with immigration as an outside-chance exception, nothing much is coming through Congress for the remainder of his presidency. If he spends the next few years talking inequality as a result, well, we could do worse.
I also thought the Weds. speech was more about giving an interpretive frame for his economic policies to date (whether one that’s true to the reality of those policies or not) more than it was about offering new proposals for action – hence the widely noted lack of “new ideas.”Report
I find it rather amusing, because under his watch the gap between white and black net worth has doubled. He’s wiped out a generation or two of African American economic gains, all in the name of “social justice”.Report
What’s the agency mechanism there, George?Report
Being president during a recession. Obama really should have known better.Report
I agree with George. Obama’s full tilt support of Bernanke and the Fed’s QE policies have been responsible for the widening of inequality. The Fed’s policies have only served to enrich Wall Street speculators and those directly responsible for putting us in the recession in the first place while leaving everyone else in the dust.Report
So presumably John & George agree with Duncan Black that Obama caused this divergence by failing to pursue the necessary change in the law and appointing the right Fed personnel that would have resulted in the Fed augmenting QE with a series of significant direct payments to all Americans on the order of, say, $10K or more each year since 2009. Maybe there’s agreement here after all.Report
Well, profound economic ineptitude, for one. His call to soak the rich, along with Obamacare and its inevitable tax effects on business (for those who didn’t have close enough ties to the administration to be granted a waver), resulted in layoffs, cuts to workers hours, and the longest period of sustained high unemployment since the Great Depression – without even counting the millions who left the work force.
During such periods, teens and minorities are the hardest hit because the market to find the few available jobs becomes very tight, and white teens often win out because they’re essentially disposable (they move on to other jobs), make few demands, and are will to work for pizza money. And then when you fling open the Southern border, the low income groups face stronger competition from illegal immigrants (who ironically are leaving because even they can’t find work).
Many blacks, already having less net worth than whites and thus more dependent on a steady income, ended up losing their homes and cashing out their savings and retirement accounts just as the markets hit bottom. So over a third of black families ended up with negative net worth, while whites just took the temporary paper loss and rode out the market.
Minorities were harder hit during the housing crash because they had more exposure (their houses represented a greater proportion of their total assets), and were twice as likely to be victims of “predatory lending” thanks to the 1995 class action lawsuit Obama won, which forced banks to make loans to minorities even knowing the borrows would go under. (Almost every black family that was part of Obama’s lawsuit ended up declaring bankruptcy, and his lead client declared bankruptcy twice, and now the assessed value of her house is about half what she owes on it).
Of course Obama blamed the obvious results of math on cronyism and “the unscrupulous practice of some bad actors,” along with other emotional but meaningless phrases taken from the class-warfare play-book instead of an economics text.
The poor also got hit with rising food prices and rising gas prices, the intended result of Obama’s energy policy (which he made no bones about), and those prices are extremely regressive in their effects, the same as having a $2,000 per household one size fits all tax increase. And in fact, poor families are even more likely to drive a car that isn’t fuel efficient, so his policies both increased the daily costs of being poor relative to being rich, while undermining the resale value of their vehicles.
But they got free cell phones, so I guess it all worked out. Now if only they listened to Pastor Manning, who warned them about voting for a long-legged mack daddy.Report
Mike;
You’re right to scoff at George’s recriminations, if you’re going to blame Obama for the recession, you might as well blame him for Hurricane Sandy too, he has about as much control over the weather as he has over the economy.
But that itself is a problem if you think it possible to grow away your debt problem. Moving the growth needle enough to grow away your debt would be a massive undertaking. Increasing real, per-capita annual GDP growth by so much as 25 basis points (a change too small to do much of anything to your debt problem) would be, for a highly developed country, utterly unprecedented. I can think of two things which could achieve it:
1) Reducing the cost of orbital lifts enough to enable the industrialisation of space (including economical asteroid mining)
2) The coming of the Singularity.
Its possible that there are other things, but make no mistake, you’re talking about an event on par with the Industrial Revolution, something that is beyond any conventional policy intervention. Growth is the politically easy solution to a debt problem, and its the best solution if you can manage it. But it’s not something you can do by tinkering at the edges. Its probably not something you can do at all.Report
Actually, I didn’t scoff at Gearge’s account. I responded to John’s response to my actual question with the only thing I can see as the logical problem with Obama’s approach to monetary policy that doesn’t involve pushing even harder for the same kind of action Bernanke has been taking. I threw George into that because he hadn’t yet responded despite making a strong claim about Obama’s agency in causing the effect he described.
I don’t dismiss George’s entire account out of hand by any means; it has some valid points as a critique of economic policy during a recession. I just don’t think it amounts to establishing that the effect George pins on Obama’s actions (the loss of wealth among black households) wouldn’t have taken place in this recession regardless of those of Obama’s actions that appear as points in the critique. (One point of his that is not valid is the pinning of the recession itself on the lawsuit on which Obama was a very junior associate lawyer whose billings amounted to about 2% of those on his side of the lawsuit.)
The rest of his points can be argued out as to how much they impeded recovery, but I don’t regard them as scoffable, even though it is a little hard to take too seriously someone who doesn’t make reference to the leading mainstream critique of the entirely of Obama’s policy to address the economic crisis during his administration – namely the lack of direct aid to distressed homeowners – when the main particular harm you’re raising is the loss of housing wealth among an economically disadvantaged group in society.
As to your point; public debt seems like yet another issue we could talk about, but not one that either John or George raised that I can see, so I’m a little unclear if you take yourself to be responding to something one of us has said or raising it on your own as related to the inequality issue.Report
…I suppose actual Mike may have scoffed, though. (My bad.)Report
Obviously, the way to address the debt is by further tax cuts and perhaps starting a few new wars,Report
This, then, is the devious magic of Obama.
He manages to get George Turner to write a rant that could have been lifted word for word from a diary at Daily Kos.
Eleven dimensional chess, my friends.Report
“Obviously, the way to address the debt is by further tax cuts and perhaps starting a few new wars,”
Both of which Obama has done.Report
@Mike,
I see the inevitability of the loss of minority net worth from the housing crisis as stemming from several factors.
The first is that many who went under shouldn’t have been getting home loans they couldn’t objectively afford, and that’s an aspect of being “helped to death,” a phrase we’ve used in Appalachia to refer to well-meaning but disastrous policies that devastate communities – while the implementers take credit for having a big heart and helping us. Other examples of this would be welfare trapping people in poverty and breaking up minority family structures (more money per child for single moms), and the government’s encouragement of massive farm loans to help the small farmer, which ended up causing so much bankruptcy that the mid-West was traumatized (but we got Farm Aid concerts).
The list of examples is vast, and some economists and political thinkers and explored the underlying reasons why so many government programs or policy changes have had the opposite of their intended effects. For example, the market is often wrongly treated as a sitting target, as if something like a change in interest rates or the money supply won’t cause an immediate chain of dynamic reactions, which counters the change’s effects to a fairly large degree, as people compensate for the new environment. In some cases, the secondary and tertiary reactions to a rule change can dominate subsequent events.
Yet government fills up with people who campaign on “doing something to fix this,” usually using variations of the simplistic rhetoric of Haves and Have Nots. They’re determinedly and unforgivingly ignorant of the fact that society’s economic transactions are more complicated and interwoven than any delicate rain-forest ecosystem, and generally things work better without having a big thumb on the scales trying to sway predator prey ratios in the name of the latest fairness fad.
Such big government types rarely learn from their mistakes because the mistakes involve levels of complexity that aren’t part of the advocates’ mental model. Thus they invariably explain away predictable disasters as the result of outside influences, bad actors, greedy investors, endemic racism, or a Congress that just wouldn’t give them a big enough lever. Only a very few are smart enough to let let logic and complex analysis triumph over feel-good, sanctimonious emotion, such as Daniel Patrick Moynihan who profoundly laid the blame for the devastation of black families on the government’s failure to think through the secondary effects of the welfare programs. Most others continue to blame evil forces and insist on doubling-down on abject disasters, or else try to dodge responsibility by minimizing their role in the previous debacle. Sometimes they do both [^ref Dodd, Frank, and Obama]. And then they keep on doing more damage.
Example: In this past Friday’s news dump, the Obama administration has come out demanding that states ban the practice of allowing private employers to run criminal background checks on job applicants, citing a disparity in racial outcomes in hiring. So once again, in the name of fairness, they’re going to radically alter the environment without once pausing to consider whether there will be massive, unintended (or perhaps not) side-effects on minority hiring.
If an employer isn’t allowed to make sure the person he’s hiring has a relatively clean criminal record, which is the due diligence that any responsible employer undertakes to make sure he about to put a rapist, murderer, con-man, burglar, or mugger in with his female office workers, then the safest course is to not hire anyone who remotely fits the profile. Yes, some minority males in the prime of their earning potential still find jobs, and Obama is going to stop that so they’re more dependent on government than ever, and so he can prove that America is awash in widespread racial bias.
They do not think about complexities, they do not learn from past mistakes, and their main victims are the people they try to help. They make Jenny McCarthy look like a Nobel Prize winner in medicine.
So the class-action lawsuits demanding an end to any racial disparities in home loans set up part of the disaster, short-circuiting financial logic based on math with feel-good racial equality pablum, setting minorities up for the biggest personal financial catastrophe since the family farm fiasco that ended in charity concerts for 5th generation American corn and wheat farmers, who, thanks to our government’s brilliant incentives, needed more help than a bunch of starving Ethiopians.
The second part of the perfect storm of stupid was Fanny and Freddie, followed by the creation and growth of secondary mortgage markets based on a catastrophically flawed method of risk assessment that was invented by a Chinese professor (who quickly fled back to China to duck the aftermath of the “success” of this idea).
That idea was that the risk of an investment (a tranch of mortgages) could be measured by the insurance markets that covered the investment, as if somehow measures of a risk can be taking place without anyone actually going out and taking measurements. His theory kicked the can down the road. “Look, over there. Those insurance guys must be doing the on-the-ground risk assessment and we can just plug their prices into my formula!”
The fact that the housing market hadn’t undergone a downturn let the dice keep rolling for far too long, until eventually there was a reckoning because the loans being made were simply bad. The lending banks knew the loans were bad but didn’t want to be sued for discrimination, and they didn’t have to put themselves at risk because they could be dump the bad loans into the new secondary markets – which only existed because of a bad theory of risk and misguided government largess.
In an effort at fairness (and profit), we banned the knowledge and opinions of neighborhood loan officers, the only people in a personal position to do a one-on-one risk assessment, because they be raciss, and substituted “societal goals” and wishful thinking. As a result, over a third of black households now have negative net worth.
Trying to fix the aftermath with a new Cash for Clunkers program will probably not go as well as Cash for Clunkers did, itself a very damaging program to poor and minorities because it jacked up the prices for used cars from dealers by shrinking the supply, and ending up mostly being aimed at bankrupting Republican-owned car dealerships.
At some point it should become obvious that what’s killing the patient is round after round of incompetent invasive surgery by an witch-doctor who is determined to maintain his leadership position and tribal social status by convincing people that demonic possession is all around us, creating and then publicly expelling said demons, making people desperately sick and then pretending to cure them. If a few patients suffer horribly so the rest can bear witness to the witch doctor’s medical skills and caring, so be it, because he can always claim that a particular demon was just too darn evil for him to expel, but by gosh he tried, and frankly, the fault lies with the non-believers who wouldn’t bring him the proper potions.
Some might call it voodoo economics, but that phrase was already used to deride the idea that lower prices and higher supplies, coupled with more disposable income from lower taxes, helps consumers.
And all that is just focusing on the real-estate aspect of the damage, ignoring Obama’s role in maintaining high energy prices and trying to jack them up even higher with his determination to end coal, oil, fracking, and nuclear power – but fortunately without as much success as he would like.
In the US economy, post WW-II unemployment rates can be explained with only two variables to an extremely high statistical correlation: interest rates and energy prices. Based on historical data, it’s a pretty good bet that high energy prices will always produce high US unemployment. He wants high energy prices in the name of greenness, itself an aspect of a liberal hatred of oil companies – whose energy freed workers from hard physical labor and allowed them to vote with their feet in the job market.
Yet he also somehow expects that these high energy prices will create jobs. “He’s going to transform our economy!” That’s yet more magical thinking, divorced from reality and hurting consumers, especially poor consumers. The only way green energy would create jobs is by lowering energy costs, not raising them, unless of course you’re talking make-work programs to waste as much labor as possible, which gets you back to the famous canal building observation that if using shovels instead of heavy equipment creates more jobs, why not use spoons instead of shovels? Why not generate energy by paying people to run in big hamster wheels?
The whole notion is one of promoting anti-productivity, figuring out how to supply the a particular good with more workers instead of with less workers. Thank goodness he hasn’t focused on farming or half our population would be standing in a field with a scythe wondering what happened to all the high-paying cushy jobs. Of course that’s the only thing that would ever get him to crack down on illegal aliens, but only because they’d insist on using illegal tractors.
What we need is a president who’s not willing to sacrifice the welfare and livelihood of minorities on the altar of decades of accumulated progressive economic nonsense; one who doesn’t claim to be powerless when all his old policies fail, while claiming to be virtually omnipotent regarding the policy he just thought of; one who doesn’t dream up new worthless policies just so they’ll engender enough opposition so he can pose as a strong leader – but one embattled by nefarious enemies who hate women and black people.
It’s a kabuki dance from the top, and the little plastic chihuahua on the dashboard keeps bobbing his head up and down and up and down. So when Obama addresses inequality, keep in mind that if it didn’t exist, he would create it just to have something to talk about, and in large measures that’s just what he’s done.Report
Discussions like this always seem to miss something rather staggering.
Household income, at least since the late 1960’s, has remained relatively flat, though it has increased some. But during that time, women have entered the work force in great numbers; and that flat income comes from having two wage earners in the family. If you care to read about this in more detail, the Minn. Fed. did a study and detailed report in 2005, available here: http://www.minneapolisfed.org/research/SR/SR397bw.pdf
The point here is that much of the image of ‘middle class’ we think of when we look back before the late 1970’s is a world where there was a bread winner and a homemaker within a family. Attaining the same level of middle-class wealth now requires two breadwinners; and that entails a great deal of social change.
I cannot help but wonder if one of those changes might be in who has the free time to define ‘trendy’ and ‘cool.’ If Moms and Dads are too busy to consume, then it’s teens and grandparents, and that’s what I think we see today.Report
Meant to post this on Wither Babbitt, will transplant. Please forgive the duplication.Report
“And that’s true. It shouldn’t have taken so long — and a whole reelection campaign — for the president to get to this point. But you gotta reward good behavior just as assiduously as you punish the bad, I say.”
What kind of message would that send to the next Democratic President? Ignore the criticism from your left–they’ll stay on-board just long enough for you to pivot to them in your second term?Report
It’s traditionally how Republicans have kept the libertarians in line.Report
If you’re a leftist, it’s easy to spin these Obama comments as a concession that your worldview is correct — which can be more powerful when it’s coming from someone who isn’t necessarily seen as part of the tribe. O’s comments could also strengthen the hand of those within the Party who want to make the primary contest for 2016 about economic issues — inequality and economic justice — rather than veer more toward a neoliberal rhetoric of minimal, “smart” government that lets the free market lift all boats. He’s a popular guy within the Democratic Party, so the version of his legacy he leaves behind will matter.Report