Why History Matters: Obama Talks about Inequality

Ezra Klein of the Washington Post calls it "perhaps the single best economic speech of his presidency." The folks on Fox News were whining about "redistribution." Picking up a cab in Baltimore the next morning, the first thing the driver asked me was whether I saw the President's speech… He loved it. However one ranks it, Pres. Obama's speech on Wednesday nailed it, calling economic inequality the "defining challenge of our time."

He clearly articulated the history, much as we do at United for a Fair Economy, of how we built the middle class in America. Spoiler: It was not a product of unfettered markets and heroic bootstrapping. It was built through deliberate public investments, a broad tax system based on ability-to-pay, and rules-changes that created ladders of opportunity and which helped ensure that workers shared in the prosperity their labor made possible.

"Now, the premise that we’re all created equal is the opening line in the American story.  And while we don’t promise equal outcomes, we have strived to deliver equal opportunity -- the idea that success doesn’t depend on being born into wealth or privilege, it depends on effort and merit.  And with every chapter we’ve added to that story, we’ve worked hard to put those words into practice."

After citing a litany of public investments from Abraham Lincoln's administration to that of LBJ–land grant colleges, the eight hour day, busting up of monopolies, Social Security, the minimum wage, Medicare and Medicaid–he added:

"Together, we forged a New Deal, declared a War on Poverty in a great society.  We built a ladder of opportunity to climb, and stretched out a safety net beneath so that if we fell, it wouldn’t be too far, and we could bounce back.  And as a result, America built the largest middle class the world has ever known.  And for the three decades after World War II, it was the engine of our prosperity."

The President acknowledged that not all Americans benefitted. Racism and Jim Crow kept many down.

"The economy didn’t always work for everyone.  Racial discrimination locked millions out of poverty -- or out of opportunity.  Women were too often confined to a handful of often poorly paid professions.  And it was only through painstaking struggle that more women, and minorities, and Americans with disabilities began to win the right to more fairly and fully participate in the economy."

Then something changed.

The President did not talk about this in his speech, but as we have argued in our "State of the Dream" reports and The Color of Wealth, there is a connection between the civil rights victories, the War on Poverty, and the subsequent racialization of the very public investments that previously built the middle class. That is, once Blacks and others began to benefit from these public investments, conservatives were able to play upon White fears and demonize government. Public supports that once built the White middle class became "hand outs," and Reagan, during his 1976 presidential bid, introduced the world to the term "welfare queen."

Nonetheless, Pres. Obama acknowledged the tectonic shifts that took place in the US economy beginning in the 1970s, as government's active role in fostering a strong middle class started to shrink. In the president’s words, “starting in the late ‘70s, this social compact began to unravel.”

"As values of community broke down, and competitive pressure increased, businesses lobbied Washington to weaken unions and the value of the minimum wage.  As a trickle-down ideology became more prominent, taxes were slashed for the wealthiest, while investments in things that make us all richer, like schools and infrastructure, were allowed to wither.  And for a certain period of time, we could ignore this weakening economic foundation, in part because more families were relying on two earners as women entered the workforce.  We took on more debt financed by a juiced-up housing market.  But when the music stopped, and the crisis hit, millions of families were stripped of whatever cushion they had left.

...So the basic bargain at the heart of our economy has frayed.  In fact, this trend towards growing inequality is not unique to America’s market economy.  Across the developed world, inequality has increased.  Some of you may have seen just last week, the Pope himself spoke about this at eloquent length.  “How can it be,” he wrote, “that it is not a news item when an elderly homeless person dies of exposure, but it is news when the stock market loses two points?”

Then the President shifted from inequality to the erosion of social mobility, bringing us to where we are today as increasing inequality collides with decreasing social mobility.

"The idea that so many children are born into poverty in the wealthiest nation on Earth is heartbreaking enough.  But the idea that a child may never be able to escape that poverty because she lacks a decent education or health care, or a community that views her future as their own, that should offend all of us and it should compel us to action.  We are a better country than this.

So let me repeat:  The combined trends of increased inequality and decreasing mobility pose a fundamental threat to the American Dream, our way of life, and what we stand for around the globe."

In UFE's 2012 book, The Self-Made Myth, we quote former Genzyme CFO Jim Sherblom who, after speaking of the many ways public investments and an active government helped he and his wife succeed financially, acknowledged the dramatic shifts occurring since that will now shape the lives of his own children, "We are going to be a very different society with very different expectations about what is possible for a young, ambitious person who wants to do well in life..."

The President, in his speech goes on to talk about not just the moral injustice of it all, but the damaging consequences this inequality has on our economy, trust in each other and in our institutions, and our democracy, adding that, "The decades-long shifts in the economy have hurt all groups: poor and middle class; inner city and rural folks; men and women; and Americans of all races."

Armed with this deeper understanding, the next question is: What do we do about it? That's where the rubber meets the road. The President made a case for an important governmental role in rebuilding our frayed “ladders of opportunity.”

He threw his support behind the fast-food workers striking across the country for an increased minimum wage. He spoke about closing tax loopholes, education, Social Security, food stamps, and more. Speaking about the implementation of the Affordable Care Act, he also spoke of the necessity of closing the health coverage gap, quoting Dr. King, "Of all the forms of inequality, injustice in health care is the most shocking and inhumane.” This is a theme we'll be talking about in our upcoming State of the Dream report.

The full speech is worth a read, but one of the core take-aways is that history matters… as much or more than data points. One can quote unemployment statistics, but outside the context of history and that deeper understanding, people will just fill in the blanks with their own preconceived notions of why one group is more likely to be unemployed than another, or why wealth is piling up in the hands of the few.

Narrative and a deep understanding of how we got here is critical to understanding how we move forward. Or, as others would say, you can't know where you're going unless you know where you've been.

Now, onward to the next fight.


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