President Barack Obama visited Osawatomie, Kansas last week to speak about the danger of the growing economic inequality in America and the threat this currently poses to the middle class and our country as a whole. I thought this was the most important speech of his Presidency thus far because it clearly illustrated the monumental challenges we face in dealing with a weak economy, high unemployment, and an eroding middle class. He emphatically connected the success of the middle class with the success of America and described how investments in education, infrastructure, and science and technology along with tax and financial industry reform are critical to our economic recovery. The speech was 55 minutes long, so I highlighted what I thought were his key points:
- Working hard in America used to guarantee a worker enough money to raise a family, build modest savings, own a modest home, and secure a retirement. This is no longer true.
- In the early 1900s, Theodore Roosevelt showed that the free market only works when there are sufficient rules that ensure free and fair competition. He stopped child labor, prohibited the sale of unsafe food and medicine, helped establish the 8-hour workday, created insurance for unemployed, elderly, and implemented a progressive income tax regime.
- "Trickle-down economics" has failed. It did not work in the 1920s, in the 1980s, nor in the past decade. Massive tax cuts for the wealthy in 2001 and 2003 did not "trickle down" as evidenced by declining incomes among the lower and middle class, and led to the slowest job growth in half a century.
- Income inequality has risen dramatically over past few decades with top incomes skyrocketing while incomes of most Americans has fallen by about 6%.
- A child born into poverty in the U.S. right after World War II had a significantly greater chance at making it into the middle class than a poor child today.
- We need a "race to the top" for good jobs that pay well and offer middle-class security. Businesses create those jobs in countries with a highly educated and skilled workforce, with advanced transportation and communication infrastructure, and with unfailing commitments to research and development. (One of the key points I learned while studying for my bachelor's degree in economics was that the development of new technology drives economic growth. We shoot ourselves in the foot when we do not invest enough in science and technology. Most companies are only concerned about the short-run and thus do not do long-term R&D.;)
- The best and brightest among America's college graduates will not gravitate towards the finance and banking industries if we no longer have an under-regulated economy that is built on bubbles and financial speculation. We need more people going into science and engineering. "We should be known for creating and selling products all around the world that are stamped with three proud words: Made in America."
- Companies establish factories in places with the best infrastructure to move products and workers, and telecomms infrastructure to communicate most efficiently. This is why we should be using the approximately one million unemployed construction workers to rebuild faulty roads and bridges (remember the Minneapolis bridge collapse!), improve and expand our mass transit systems and broadband Internet infrastructure, and to modernize schools. Other countries are doing this and are attracting high-tech businesses.
- The private sector will be the primary generator of good jobs; however, government is an essential catalyst. Investing in education and infrastructure was a bipartisan idea in the past. Example: FDR's G.I. Bill to educate war vets, Eisenhower's Interstate Highway System project and his massive investments in science and research that allowed the U.S. to technologically stay ahead of the U.S.S.R.
- We need to invest in education, infrastructure, and in research and technology in order to foster economic growth. This is the way out of the economic slump and the way to prosperity in the long term.
- Deficit reduction has already included $1 trillion in approved spending cuts, but requires tax reform to close the gap. We can't keep taxes at historical lows while investing to improve our economy.
- Tax rates for the rich are extremely low today. "Today, thanks to loopholes and shelters, a quarter of all millionaires now pay lower tax rates than millions of you, millions of middle-class families. Some billionaires have a tax rate as low as 1 percent." It is simply immoral for a middle class worker like a nurse or teacher to pay higher tax rate than those making millions each year.
- Financial industry reforms are already being implemented: "If you’re a big bank or risky financial institution, you now have to write out a “living will” that details exactly how you’ll pay the bills if you fail, so that taxpayers are never again on the hook for Wall Street’s mistakes. There are also limits on the size of banks and new abilities for regulators to dismantle a firm that is going under. The new law bans banks from making risky bets with their customers’ deposits, and it takes away big bonuses and paydays from failed CEOs, while giving shareholders a say on executive salaries."
- Obama quoted Andy Grove, the legendary former CEO of Intel, who said, “There is another obligation I feel personally, given that everything I’ve achieved in my career, and a lot of what Intel has achieved … were made possible by a climate of democracy, an economic climate and investment climate provided by the United States.”
I have not agreed with everything President Obama has done over the past three years and I admit at times, I've been disappointed with aspects of his performance. I felt like he wasn't doing enough to help who he affectionately calls "Main Street" America and that he often capitulated to the other side even when they had no real interest in striking a bargain with him, rather than showing leadership on key issues. Some day, if I have time, I'll write a post about some of the areas where I think President Obama failed. However, I think in other areas he has performed very well. This President was sworn into office during the greatest crisis in America in over three generations. Not all of FDR's New Deal programs during the Great Depression were successful and he fought tooth and nail with his opponents in trying to implement reforms that ultimately helped alleviate suffering and heal the economy. President Obama's speech in Osawatomie finally shows to me that he understands the core of the economic problems America faces and that he's finally not afraid to say what needs to be said. I hope he has the courage to do what needs to be done. Frankly, most of what needs to be done to improve our situation cannot be done right now because of how extremely far right the Republican Party has moved in the past few years. The few Republican politicians in Congress who used to be at least partially inclined towards moderation from time to time no longer can afford to do so when threatened by a virulent, dogmatic, and uncompromising Tea Party base. So in order for President Obama to succeed in implementing some of the most important reforms, a significant change needs to happen in the composition of the U.S. Congress and in the attitude of most Americans... the 99 percent. Citizens need to place pressure on their representatives to truly begin representing the interests of America as a whole rather than just those at the top.
For those interested, here's the speech in its entirety: