Obama’s prosperity pledge not squaring with reality

May 6, 2011

As Barack Obama neared the Democratic presidential nomination in March 2008, he delivered an address dubbed “Renewing the American Economy.” The financial meltdown was still on the horizon, but he pointedly noted that most Americans were in the midst of a long economic slide that he said he would reverse if he were elected.

“For many Americans, the economy has effectively been in recession for the past seven years,” he said in the speech, delivered at Cooper Union in Lower Manhattan. He added, “Americans are working harder for less.”

Three years later, that speech could still be given by Obama — or, more ominously for him, by one of his Republican opponents.

As Obama launches his 2012 campaign, he faces the challenge of millions of Americans without jobs, as unemployment has shot up under his tenure — it has doubled from the 5.1 percent it was the day he gave that speech, and was 9 percent in April, according to numbers out Friday. But perhaps more worrisome for the president’s political hopes, most Americans who are still working aren’t pleased with the economy either, according to polls.

And economic data suggest reasons for their dissatisfaction. Income inequality has risen, gas prices continue to spike and household income has declined, even as the stock market rises and corporate profits are setting records. The “new era of opportunity and prosperity” the president promised in 2008 has not yet appeared.

“The challenge for the president is that by the time he comes up for reelection next year, I suspect people will not feel a strong sense of forward momentum,” said Lawrence Mishel, president of the Economic Policy Institute, a labor-supported think tank. “And that is what you hope would happen, from his perspective. We have had the unemployment rate drop over a percentage point in recent months, but you don’t get the sense that people are feeling a strong recovery.”

The number most closely monitored in both parties is the unemployment rate, which has hovered above 8 percent for 27 consecutive months — just one marker of the economic problems confronting the country.

In early 2008, even before the economy crashed and unemployment soared, Obama was campaigning against a broader economic malaise.

Unlike the economic growth of the 1990s, which led to strong gains in income and home ownership by middle-class Americans, the growth during much of the George W. Bush years was heavily concentrated at the top of the wage scale. Productivity gains led to increasing corporate profits and stock prices without turning into increased wages and benefits for workers.

When he spoke at Cooper Union, Obama laid out a broad agenda from tax cuts to health-care reform that would combat those troubling trends. But by the time he arrived in office 10 months later, the worst fiscal downturn since the Great Depression had reshuffled his agenda.

The president spent much of his first year dealing with calamities he had not anticipated early in his candidacy — the near-collapse of Wall Street and the U.S. auto industry. Obama then spent much of the next year pushing through complicated bills to reform the health-care system and tighten regulation of the financial sector, two priorities of his 2008 campaign.

The result is that Obama has a long list of accomplishments, yet many middle-class Americans don’t feel major changes in their lives.

Many of the new health-care provisions have not yet kicked in, and others have not had any effect on people who already have insurance. White House aides acknowledge that their message on the stimulus and the auto bailout — which is that tens of millions of Americans would have been adversely affected if those measures didn’t pass — has failed to convince much of the public. And the financial regulatory bill also has limited impact on most middle-income families.

Mostly negative

“Economically, I would say his policies have not benefited or hurt me,” said Kayla Mock, 28, who works at the deli counter at a Giant supermarket in Manassas. “He came into a tough situation. But I think the only way we are going to get out of this economic slump is by empowering workers. It is not going to happen by giving the rich tax breaks.”

The daring raid that ended in the killing of Osama bin Laden boosted the president’s approval ratings, but it did not affect the negative view most Americans have of his handling of the economy, according to a recent Washington Post-Pew Research Center poll.

Between spring 2008 and September 2009, nearly a quarter of U.S. households experienced at least a 25 percent drop in household income, according to the Economic Security Index, a measure of middle-class well-being assembled by a team of scholars led by Jacob Hacker, a Yale University political scientist.

Although the downturn made things worse, the December 2010 report said “Americans’ economic insecurity has been growing for years, and it appears to have little diminished since 2009.”

Some of the Obama administration’s proposals aimed at aiding the middle class, including doubling the child-care tax credit for moderate-income families, increasing aid for families caring for elderly relatives, capping student loan payments and creating automatic retirement savings accounts at the workplace have floundered in Congress.

Offset of federal benefits

The biggest immediately tangible benefit Obama has delivered, an income tax cut in 2009 and 2010 and a payroll tax reduction this year, has put an additional $1,800 in the pocket of the average American family.

But much of the public believes taxes have gone up, not down, under Obama. White House aides said this is in part a communication problem and in part reality; cash-strapped state and local governments in some cases have increased fees and taxes, offsetting the benefit of the federal cuts.

Liberals say Obama has done good things but should embrace a broader economic recovery plan that would help the jobless and bolster the middle class. And they say that Obama’s new focus on reducing the budget deficit will do little to improve conditions for most Americans.

“All indications are that ensuring a strong middle class is going to take a lot more bold policy making than is on the table now in Washington,” said Tamara Draut, vice president of policy and programs at Demos, an economic advocacy organization. “Given all the talk about spending cuts as the only way to trim the deficit, it is going to be very difficult to rally support around bold new public investments that we know are key to creating a strong middle class.”

But Obama is unlikely to embrace major new government spending. Politically, he is trying to win over independents wary of the deficit, and any kind of stimulus would probably be dead on arrival, as most Republicans would oppose it.

Most recently, Obama has expressed his support for the middle class primarily through rhetoric. He has criticized American businesses that won’t hire new workers even as they collect new profits, touted an agenda of education and innovation reforms under the banner of “Winning the Future” and repeatedly railed against high gas prices.

Dampened enthusiasm

White House advisers argue that with private job creation gaining steam and the economy growing, conditions are already improving for middle-class Americans, and they are hoping the economic climate will be much improved by November 2012.

But some of the president’s political supporters are not nearly as optimistic, and they say the continued problems confronting workers could dampen enthusiasm for Obama.

“Right now, I don’t think there is anywhere near the level of energy there was in 2008,” said Joseph T. Hansen, president of the 1.3 million member United Food and Commercial Workers Union and an Obama supporter. “Right now, I don’t know how we get back to that level.”

Michael A. Fletcher is a national economics correspondent, writing about unemployment, state and municipal debt, the evolving job market and the auto industry.
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