In State of the Union, Obama calls for new paths to the middle class

President Obama on Tuesday detailed his job-creation plan in the State of the Union address, adding that it won't increase the deficit. (The Washington Post)
February 12, 2013

President Obama’s State of the Union address on Tuesday sounded like a familiar speech touting the economic importance of a thriving middle class. But behind his proposals is a desire to tackle a much less widely accepted phenomenon: a growing inequality of opportunity.

Sometimes directly and sometimes subtly, Obama and his advisers have been sounding the alarm that the poor and middle class may have less chance to advance up the economic ladder than they did a generation or two ago.

Tuesday night, the president outlined a package of ideas targeting the problem, which has only recently started to gain the attention of economists and sociologists. While stagnant wages and high unemployment are the challenges of the moment, some fear that reduced equality of opportunity will be a central economic problem in coming decades.

“We need to build new ladders of opportunity into the middle class for all who are willing to climb them,” Obama said in his address.

In his first term, Obama’s policies sought to end an economic crisis. They also took a step toward reducing inequality through his health-care law, which taxes the rich more heavily in order to pay for health insurance for the poor and lower middle class.

The highlights from President Obama’s first State of the Union address of his second term. (The Washington Post)

The vast majority of economists regard income inequality — the gap between the earnings of rich and poor — as a natural consequence of a capitalist system. But for many, inequality of opportunity is a different matter.

A relatively level economic playing field has long been thought to be a hallmark of the U.S. economy, and for much of the post-World War II period, it was. Now, as noted in an analysis by University of Arizona sociologist Lane Kenworthy, Americans have less opportunity to move up the economic ladder than people in many other rich countries, including Australia, Canada, Denmark, Finland, Germany, Norway, Sweden and the United Kingdom.

“This may well be the first generation where the gap between the life prospects of the children of the rich and the children of the poor has risen,” said Lawrence Summers, a Harvard professor and one of Obama’s former top economic advisers. “There’s no justification for inequality of opportunity — whatever is true of the outcome.”

Summers added that tackling this problem may be more politically attractive than trying to shrink the wealth gap, given that “reducing income inequality . . . raises questions about redistribution,” a term that many don’t like.

Obama is not the first president to try to lift the wages of the poor and middle class, a common talking point for left-leaning politicians. His Democratic predecessor, Bill Clinton, expanded a major tax credit for the working poor.

And Obama’s vision isn’t an antidote for the nation’s deep economic problems — figuring out how to blunt the impact of globalization and technological advances on working-class Americans is a complex and largely unresolved question.

Nor is it as ambitious as it could be. By declaring that none of his proposals “should increase our deficit by a single dime,” Obama is limiting how much money he can devote toward his cause.

But taken together, the ideas advanced in the State of the Union speech echo proposals by a range of experts to address declining “intergenerational mobility,” the term economists use to describe a person’s chances of improving upon the economic condition into which he or she was born.

The most ambitious is a proposal to provide every low- and moderate-income 4-year-old with a “high quality” preschool education, a policy that has been embraced in countries that have successfully promoted greater equality of opportunity.

According to Education Department statistics, only a small fraction of U.S. children attend such schools today.

Obama also seeks to make college more affordable by rewarding schools that hold costs down and by publishing more information about tuition. The unemployment rate for people with a four-year college degree is 3.7 percent; for the general population, it’s 7.9 percent.

The president is also trying to lift the income of the working poor, proposing to increase the minimum wage to $9 by 2015.

A recent study by professors at the University of California at Irvine and the University of Wisconsin at Madison notes that if a low-income family can make $3,000 more during a child’s first five years of life, the child is likely to make almost 20 percent more as an adult.

Because it takes decades to chart a child’s path into adulthood, economists are just starting to come to grips with the patterns of declining mobility that Obama is targeting. But there are strong signs of the problem — such as the growing gap between the wealthy and the poor in opportunities to attend college, at a time when a college education is more important than ever for predicting income.

Research by University of Michigan economists found that 5 percent of poor Americans born in 1960 graduated from college, compared with 36 percent of wealthy Americans — a gap of 31 percentage points. By contrast, 9 percent of poor Americans born in 1980 graduated from college, compared with 54 percent of wealthy Americans — a gap of 45 points.

Zachary A. Goldfarb is policy editor at The Washington Post.
Comments
Show Comments
Most Read Business