Will Obama’s words on inequality be backed by deeds?

The city of Washington, D.C., stands as a rebuke to the notion of America as a land of equal social and economic opportunity. In the shadow of the nation’s great memorials to the struggle for political democracy, and just a few minutes away from some of the most affluent suburban communities in the nation, lies a city with many neighborhoods and residents who are largely shut out of the American dream.

Nineteen percent of the D.C. population (including 29 percent of children) is currently classified as impoverished by the federal government, though this figure does not factor in the high cost of living in the Washington area. And in any case the government’s official measure of poverty was designed more than half a century ago according to a crude and outdated formula that assumed households would spend one-third of their budgets on food.

In response to this problem, the Obama administration has developed a more accurate assessment of poverty — the Supplemental Poverty Measure — that attempts to correct for many well-known technical and substantive issues with the official measure. In another sign of President Barack Obama’s sensitivity to the problem, he chose to deliver a major policy speech on poverty and inequality last week at THEARC, a combination theater and community center in southeast Washington, off the beaten track of the city’s political class.

Sensitivity to poverty is commendable, but achieving effective results is what ultimately matters. Poverty has undoubtedly risen, not fallen, since Obama took office in 2009 (15.0 percent in 2012, compared with 13.2 percent in 2008 — an increase of 6.7 million people). Available studies, many of which were cited by the president in his speech, indicate that the trend of the top 1 percent capturing the lion’s share of income has continued unabated during his tenure. Nor is there any reason to suppose that social mobility — the traditional American answer to levels of income inequality that are high by international standards — has risen in the past five years. Indeed, as the president noted, “it is harder today for a child born here in America to improve her station in life than it is for children in most of our wealthy allies — countries like Canada or Germany or France.”

The good intentions and, in some important cases, good policies of the Obama presidency in addressing poverty and inequality have simply been overwhelmed by a much larger force: the near-cataclysmic economic crisis of 2008 and 2009 and the slow, painful and relatively jobless recovery.

Equally painful, and not fully appreciated, is the devastating practical impact of the Supreme Court’s 2012 ruling on the most progressive aspect of the Affordable Care Act: expanding coverage via Medicaid to persons below 138 percent of the federal poverty line. The court’s ruling allowed the states to decide Medicaid expansion for themselves. To date, only two southern states, the border states of Arkansas and Kentucky, have expanded Medicaid (though Obama ally Terry McAuliffe was just elected governor of Virginia on a platform of Medicaid expansion). Low-income families in the most regressive region of the nation stand to miss out on what was supposed to be the president’s greatest advance for social justice.

In that context, it is easy to be cynical about Obama’s effort to refocus his domestic agenda on poverty and inequality. Critics might argue that he’s simply giving liberal supporters like the Center for American Progress (the host of the speech) something to feel good about. The major policy measures he discussed as possible antidotes to rising inequality, such as a higher minimum wage and support for labor organizing, are themselves inadequate to arrest the trend — and even these limited steps are unlikely to be adopted by Congress. House Republicans are determined to gut the remaining federal social protections, such as the Supplemental Nutrition Assistance Program (otherwise known as food stamps), rather than take proactive steps to reduce inequality and restore social mobility.

The president spoke like a leader who fully recognized this impasse. Nonetheless, his remarks were quite forceful in calling inequality the “defining challenge of our time.” As liberal pundits like Paul Krugman immediately noted, the substance of Obama’s diagnosis of inequality also was more thorough and far-reaching than that in previous statements, placing the blame not just on skill deficits but on public policies that have punished the poor and working class over a period of decades. The president even cited my own favorite illustration of how a rising tide has not lifted all boats by pointing to the shocking disparity between the increase in productivity of American workers since 1979 and their pitiful increase in wages over that same period.

What will come of this move by Obama? Obviously, if this was just a one-time speech, then it was largely pointless. But if, as the president promised, he truly intends to keep hammering away at this theme over the remainder of his term, he might just succeed in moving the conversation (if not policy itself) beyond Washington’s typical complacency on the issue.

There are two possible and compatible ways that Obama’s focus on economic inequality could make a tangible difference. One model is from the last two years of the Clinton presidency. With the economy of the late 1990s chugging along, the Clinton administration began paying attention to the problems of “doubly burdened” communities that continued to be excluded from rising prosperity, highlighted by a tour of impoverished communities by Clinton in the summer of 1999. His attention helped the development of fairly progressive legislation, including the New Markets Tax Credit program (passed in 2000), which aimed to steer investment to high-poverty areas by providing a tax credit to investors in community development entities in distressed areas. Over $36 billion in tax credits have been authorized since the program’s inception.

As unemployment ticks downward and the economy picks up steam, it’s possible that Obama too will revive these issues as well as the political will to better finance some of his own ideas, such as the Choice Neighborhood and Promise Neighborhood initiatives. These programs are solid conceptually. Choice Neighborhood funds public housing redevelopment but requires communities to undertake it in the context of a community economic development strategy. The program also restores the “one-for-one” replacement requirement, so that there is no net loss of low-income housing units. Promise Neighborhood seeks to provide wraparound, integrated services to children and their families to help offset the disadvantages of poverty. However, both programs been funded only to a pitiful level to date, with awards going to a small fraction of the communities that have applied for them. The Obama administration also plans to designate 20 communities “Promise Zone” recipients to support comprehensive economic change — better than nothing, but not terribly significant in a nation of nearly 400 metropolitan areas.

A second, bolder approach for Obama would be to criticize more deeply not just inequality but the political climate that produced it. As frank as his speech was on the trends, he didn’t blame anyone in particular. The speech decried “trickle-down economics,” but said too little about the interests that promoted it. It was a far cry from the economic populism of Franklin Delano Roosevelt’s New Deal speeches, which contained not only memorable punch lines (“I welcome their hatred”) but a fairly deep historical analysis of the tension between money (read: capitalism) and democracy in American history. 

Instead of simply trumpeting his own programs, the second-term Obama could bolster his legacy by being the president who stands up and says the system is broken, and broken beyond the capacity of even a well-intentioned and intelligent president to correct. Decades of public policy tilted to the well-off have heightened both economic and political inequalities, as well as facilitated the rise of an intransigent Republican Party. Obama did briefly hit on this last point in last week’s speech but did not explore its logical implication: Reversing the process will require more than just a few more liberal programs from Washington — it will require a long-term strategy to tilt the balance of political power back in favor of the middle and working classes.

If Obama said that much, he might actually win plaudits for telling it like it is. He might truly open the door to a much bigger discussion about not only the trend of inequality but its deeper political and economic causes. And that discussion might open the door to consideration of a broader array of policy options, including a variety of ownership-based policies that focus not just on income growth but also on household wealth. Political power generally tracks economic power, and hence any serious effort to curb the political influence of the wealthiest must start with finding practical ways to spread the wealth around, from local and regionally scaled democratic enterprises to individual saving and asset plans. State and federal policies can help in the formation of employee-owned firms and other innovative ownership models, and also take initial steps to the creation of citizen “stakeholder” funds to provide everyone with a meaningful asset base.

Equally important, Obama might use the remainder of his presidency to challenge the moral understanding of conservative opponents of redistribution. Conservative and libertarian ideology subscribes to a strong version of the view that people are entitled to almost all of their pretax market income, and therefore that progressive taxation programs are a kind of theft, or at best a necessary moral evil that should be minimized.

Obama pointed to an alternative view in his (in)famous “You didn’t build that” speech during the 2012 campaign. His argument pointed to a conception of the modern economy as a vast system of social cooperation in which everyone’s income and productivity is tied to everyone else’s. The ability to earn an income thus depends fundamentally, not incidentally, on the existence of government and its investments in (for instance) infrastructure, technological development and an educated populace. Some such conceptual understanding is essential to rebut the straightforward — but painfully naive — “everyday libertarianism” repeatedly invoked by Republicans.

Whether one is a mainstream liberal, an Occupy activist or anywhere in between, the fact is that achieving meaningful redistribution in the near or long term will be nearly impossible while many or most Americans subscribe to the “it’s mine, hands off” view of economic rewards and taxation. That’s an argument most mainstream Democrats have hesitated to engage, with the consequence that progressive pocketbook politics has been on the back foot for a generation. This president has the power, the capability and the opportunity to take that argument head on — and lay the moral groundwork for a serious, sustained effort to tackle runaway inequality at its roots, in and out of Washington. Clear thinking about fundamental moral issues plays to Obama’s strong suit — and to the reorientation that will be required over the long term to meaningfully redress inequality.