Obamanomics

The other major economic news of the day was Obama’s economic address (the first of several to come over the next couple weeks) at Knox college. The speech was more of a broad overview of Obama’s second-term economic agenda rather than a policy-heavy address–the gist of it being that the American middle class has struggled enormously over the last several decades, and President Obama aims to reverse those trends:

What we need isn’t a three-month plan, or even a three-year plan, but a long-term American strategy, based on steady, persistent effort, to reverse the forces that have conspired against the middle class for decades.

The President’s plan rests on, by my count, six main pillars:

1) bringing back American manufacturing/upgrading American infrastructure

2) improving American education at all levels, pre-K through vocational training

3) easing the burden on current and future homeowners by assisting w/ refinancing and regulating creditors

4) securing retirements for all by improving the fairness of the tax code and shoring up social security with immigration

5) improving American health care by holding down costs while improving quality of care

6) increasing inter-generational income mobility.

Two points jumped out at me after reading this speech, and they are related. The first is that this seems to be the final admission that our current jobs crisis (elevated unemployment rate, millions out of work, employment-population ratio stuck at 2009 levels) isn’t going anywhere. Now I understand that (at this point) there are insurmountable political obstacles to doing more on the unemployment front, but given the severity of the problem, it seemed odd how little space the unemployed were given in Obama’s speech.

The second thought that popped into my head while reading the speech is that Obama would have been a fantastic President had the global economy not imploded in 2008. He has a good sense of where our country needs to move in order to stay competitive globally over the next century, and given an economy at full employment, lower public debt figures (the debt skyrocketed mainly because of the recession), and more political capital, Obama could have pushed us forward in an extremely beneficial way.

The flip side of that is that I think Obama’s management of the more immediate unemployment crisis has been poor. Granted, it is impossible to separate the President’s ideal policy from reality because he hasn’t been able to get anything passed on the jobs front since 2010 due to political opposition–however, it’s my sense (reinforced by the speech today) that Obama’s instinct is to think about the economy structurally and long-term; both traits that would have lead him to be more amenable to the debt-reduction pivot in 2010 and less inclined to waste political capital helping out the unemployed. The irony here is that today’s unemployment crisis becomes tomorrow’s structural problem, as the long-term unemployed drop out of the labor force or face eroding skill-sets (hysteresis) that will further strain our social security and vocational training institutions.

So, while I don’t necessarily disagree with any of the policies that Obama is laying the groundwork for in his speech, I definitely don’t think they should be prioritized over assisting the unemployed in the near-term. But, such is the political reality of a world where Republicans threaten to shut down the government if President Obama refuses to de-fund his signature legislative achievement, or the GOP threatens to blow-up the American economy by refusing to raise the debt-ceiling unless the President agrees to arbitrary and unnecessary cuts to Medicare.

 

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