Skip to main content

The President ignored the elephant in the room

Robert Reich, professor of public policy | January 27, 2011

The President’s new emphasis on the importance of investing in education, infrastructure, and basic research in order to build the nation’s long-term competitive capacities is appropriate. For the last three decades the federal government’s spending on these three essentials has declined as a percentage of its total spending, arguably threatening America’s technological and economic leadership.

But the President’s failure to address the decoupling of American corporate profits from American jobs, and explain specifically what he’ll do to get jobs back, not only risks making his grand plans for reviving the nation’s “competitiveness” seem somewhat beside the point but also cedes to Republicans the dominant narrative.

The address he gave last night could have been given (indeed, was given) by Democrats in the 1980s when Japan seemed to threaten America’s preeminence.   Bill Clinton’s 1992 campaign manifesto, “Putting People First,” laid out the case. Only now the competitive threat comes from China.

A similar call for economic patriotism and public investment emerged in the 1950s and 1960s, when the competitive threat was the Soviet Union. John F. Kennedy challenged America to get to the moon ahead of the Soviets. Before him, Republican president Dwight Eisenhower committed the nation to building the interstate highways system – forty-one thousand miles of four-lane (sometimes even six-lane) freeways to replace the old two-lane federal roads that meandered through cities and towns – in order to speed troops, tanks, and munitions across the nation in the event of war. And a National Defense Education Act to educate a generation of mathematicians and scientists to catch up with the Soviets in space.

President Obama made the parallel explicit:

Half a century ago, when the Soviets beat us into space with the launch of a satellite called Sputnik, we had no idea how we’d beat them to the moon. But after investing in better research and education, we didn’t just surpass the Soviets’ we unleashed a wave of innovation that created new industries and millions of new jobs. This is our generation’s Sputnik moment.

Reviving these ideas, and the feelings they provoke, is politically astute. A call for national unity and economic patriotism places the President above partisan rancor, and gives him a rationale for a strong and effective government at a time when Republicans want nothing so much as to shrink it.

But the new theme also poses a danger of appearing to ignore the elephant in the room – the nation’s continuing scourge of high unemployment that shows little sign of abating any time soon.

It’s one thing to challenge the nation to re-embark on the equivalent of a race to the moon when most people feel confident about their own family finances, but quite another when economic security is as endemic as now.

The President understandably wants Americans to feel upbeat about the economic recovery – “two years after the worst recession most of us have ever known, the stock market has come roaring back Corporate profits are up. The economy is growing again,” he said – but little of this has yet trickled down to ordinary people who continue to be plagued by a huge debt load, business’s unwillingness to create full-time jobs, and a still fragile housing market.

The Great Recession wasn’t due to America’s loss of “competitiveness” relative to the Chinese or anyone else. In fact, American corporations are now enormously competitive, racking up some of their highest profits in history. But much of their success is occurring outside the United States. GE, whose CEO, Jeffrey Immelt, was just tapped to head Mr. Obama’s new advisory council on jobs and competitiveness, has more foreign employees than American. General Motors now sells and makes more cars in China than at home.

Republicans and their supply-side economists say the nation got into trouble because government became too large, and the answer is therefore to cut spending, cut taxes, and shrink the deficit. The President, having apparently given up on Keynesian pump-priming, has no retort except to invest for the long term.

What the President should have done is talk frankly about the central structural flaw in the U.S. economy – the dwindling share of its gains going to the vast middle class, and the almost unprecedented concentration of income and wealth at top – in sharp contrast to the Eisenhower and Kennedy years.

Although the economy is more than twice as large as it was thirty years ago, the median wage has barely budged. Most of the gains from growth have gone to the richest Americans, whose portion of total income soared from around 9 percent in the late 1970s to 23.5 percent in 2007. Americans kept spending anyway by using their homes as ATMs but the bursting of the housing bubble put an end to that – leaving them without enough purchasing power to reboot the economy. So the central challenge is put more money into the pockets of average Americans.

This narrative would be politically risky (opening Mr. Obama to the charge of being a “class warrior”) but at least honest. And it would allow him to connect the dots – explaining why his new health-care law is critical to reducing medical costs for most working families, why tax reform requires cutting taxes on the middle class while raising them on the rich, why the Bush tax cuts shouldn’t be extended for the wealthy, why deficit reduction must not sacrifice education and infrastructure (both important to rebuilding middle-class prosperity) and why any cuts in Social Security or Medicare must be on the backs of the wealthy rather than average working families.

Importantly, it would give him a convincing counter-narrative to the Republican anti-government one. Government exists to protect and advance the interests of average working families. Without it, Americans have to rely mainly on big and increasingly global corporations, whose only interest is making money wherever it can be made.

Cross-posted from Robert Reich’s blog.

Comments to “The President ignored the elephant in the room

  1. It’s the global elites, including Obama, against America’s middle class, who need jobs. How about slapping some fat juicy tariffs on those shipping containers pouring into the Ports of LA, Oakland, and Seattle?

    Trade war, now!

  2. “The President’s new emphasis on the importance of investing in education, infrastructure, and basic research in order to build the nation’s long-term competitive capacities is appropriate.”

    Obama said that over three years ago. Do you know when he will start focusing on this and not paying off international bankers, and worshiping Chinese ingenuity? F.D.R. never fixed the eocnomy, and the left hate to speak about this and actually make up lies. Even Cal’s economic department has the sad data. Obama models himself after F.D.R., probably more for his social causes, because Obama nor even F.D.R. could understand his economic ideas.

    • Professor Reich is entirely correct in many of his statements on Obama’s priorities. Another way of saying it is that Obama’s top priorities include restoring Democracy in Washington, the American economy and most important of all, creating jobs for everyone who wants to contribute to and perpetuate our way of life and social stability.

      However, having been a student during the 60s, there is one more most important point I want to emphasize because even Obama cannot make any progress without our dedication to this point:
      We must never tolerate anyone who dares to threaten our Civil Rights, especially including Freedom of Speech.

      Sadly, UC Powers That Be appear to have returned to the era that created the need for SLATE and FSM in the 60s because a recent study produced the following most disturbing facts as documented in the California Watch report
      “Which colleges restrict free speech?”

      I most regret that this subject even has to come up once again, but with Prof. Reich’s emphasis on both education and research, I am reminded of one of the saddest episodes in UC history when Linus Pauling, winner of two unshared Nobel Prizes in Chemistry and Peace, was a professor at UCSD. Pauling was the father of molecular biology, and one of the greatest spokespersons for “Peace On Earth” in the 20th century. Unfortunately, the Powers That Be marginalized and banned him from the UC system due to purely political reasons, also during the 60s.
      Ref: “Force of Nature – The Life of Linus Pauling by Thomas Hager, pp. 569-571.

      One of Pauling’s most famous quotes, that we must all live by today more than ever before, is a statement he made to Swedish university students at a Nobel ceremony is:
      “always be skeptical-always think for yourself.”

  3. “Government exists to protect and advance the interests of average working families.” Really, I thought government officials swore to “preserve, protect and defend the Constitution of the United States.”

    • Greg, Ike was the kind of true leader who could make up his own famous quotations.

      Ike was the last of a very small number of true American leaders and patriots in the 20th century, and along with FDR they were as good as any of our Founding Fathers. Ike was the last Republican I ever voted for because along came Nixon who was the opposite of Eisenhower, but the GOP didn’t care because Nixon won elections until he got totally out of control and started a whole new culture of republican politicians who don’t give a damn about the American people and Democracy.

      Back to the subject of this blog, most recently we had Clinton and his administration that decided it was really cool to shield over-the-counter derivatives from regulation, which some consider to be a key turning point that created the recession. It was legalized gambling with the most hideous of consequences.

      Then we got Bush who allowed others to make all his decisions for him, and they crashed our economy because he was totally incapable of understanding what was going at all, a true failure of America’s university system.

  4. Yes,It’s Rich Against Poor, Again. Greeks learned a lesson we forgot.

    Today, we are allowing our politicians to threaten America with hellacious cutbacks in:

    Education for pre-school and K-12 children (as much as eliminating six weeks a year).

    Support to Veterans who lost and risked their lives and body parts to protect America.

    Forcing increasin numbers of poor families and their children to starve, suffer diseases and preventable disabilities, and die sooner while cutting taxes for the Rich.

    Did the universities teach our politicians to do this? Are these the best politicians our universities can produce!

    As Ike said in his 1961 Farewell Address:
    “Down the long lane of the history yet to be written America knows that this world of ours, ever growing smaller, must avoid becoming a community of dreadful fear and hate, and be, instead, a proud confederation of mutual trust and respect.”

    Our political and intellectual aristocracy has not remembered this either, at our increasing peril.

    Time To Think And Act Outside The Box/Ivory Tower One More Time.

Comments are closed.