Growing from the middle out: the US economy in Obama’s second term

The US president needs to focus not just on employment per se but on creating good jobs.

The US economy has made a remarkable turnaround since 2008, moving from losing 800,000 jobs per month in the winter of 2009, to adding over 150,000 jobs per month over a two-year period. This shift from massive job losses to steady job gains occurred because of the decisive actions of policymakers who implemented a combination of monetary and fiscal policies in 2008 and 2009.

But while the economy has been in recovery since June 2009, the level of output continues to be significantly below potential, and as a result unemployment, especially long-term unemployment, remains unacceptably high. In his campaign, Obama made the case that the economy "grows from the middle out". Now, as president, he gets to work with Congress anew to realise that vision.

While the economics are fairly clear – and leading economists tend to be in broad agreement about this agenda – the politics are much more complex. The Democrats made significant victories in November’s election, keeping the presidency and increasing their seats in the Senate; however, the election also put Republicans in control of the US House of Representatives for the next two years.

It’s worth noting that while many of the policies implemented in response to the recession had a history of bipartisan support, Washington’s highly polarised political environment has meant that support for these efforts is now almost exclusively among Democrats. If he wants to see stronger improvements in the labour market, Obama will have to spend the next two years mitigating this gridlock and finding common ground.

Looking beyond the immediate problem of the fiscal cliff, Republican leaders in the House are unlikely to have any appetite for expansionary fiscal policy. Yet the president made the argument during the campaign that we ‘grow from the middle out’ – he now has to make this concept real, and lay out the specific policies that will accomplish this goal. He needs to focus not just on employment per se but on creating good jobs, with decent pay and benefits, and on the economic wellbeing of families, ensuring that every job is a good, pro-family job, and that families have the support they need.

Nearly half of all US workers do not have the right to take a sick day when they or a family member is ill, which creates enormous stress and anxiety for families. The typical US family paying for childcare spends about 13 per cent of their total family income on that care; families that need to pay for elderly care find that can be very expensive as well. Increasing funding for childcare and home health aids and other supports so that ageing Americans can live independently would not only help to support employment but would, in effect, boost the incomes of families who struggle to afford care. Similarly, focusing on policies that allow workers to balance work and family would show that the Obama administration truly understands what it means for families now that women are more typically than not also a family breadwinner.

While these issues are not currently at the top of the agenda, the president could begin to use the power of the bully pulpit to focus on increasing the net income of families, alongside policies to boost job creation and reduce unemployment, as this is the first step towards raising living standards more generally. These issues are ones that resonate especially strongly with women and Latino voters, although surveys show that the agenda around work and family resonates with conservative voters as well.

Another way to make real the idea of middle-out economics is to focus attention on America’s capacity to be a global leader in innovation and production. Over his first term, Obama put manufacturing and boosting exports at the top of his agenda, and the fact that he was unwilling to allow the US auto industry to die was a key component of his re-election campaign. Rebuilding US manufacturing should remain a key plank of our national investment strategy, and this includes making sure that any corporate tax reform follows the agenda that the president has already laid out, discouraging offshoring, encouraging domestic production, and stopping tax advantages for the use of debt over equity.

Critical to this strategy is tapping into the foundation laid by the American Recovery and Reinvestment Act in green technologies, such as through the production of components for solar and wind power generation as well as innovations in battery and other technologies. While there are certainly political hurdles, the president can make the compelling argument that these investments will improve US economic competitiveness and grow the economy over the long term, which resonates with the public. Furthermore, the administration could pursue a competitive dollar strategy, which would make US exports more affordable and would not necessarily require congressional action.

With President Obama winning a second term, he has a mandate to build on the successful policies of the first term. Putting the middle class at the core of what makes the economy grow, as he did during the campaign, would be a good place to start. Americans re-elected Obama because they believe he will do a better job bringing them a strong economy and – in no small part – because he recognises that a strong economy starts with them.

Heather Boushey is a visiting fellow at IPPR and senior economist at the Centre for American Progress in Washington DC. A longer version of this article appears in the latest edition of IPPR’s journal Juncture.

Barack Obama delivers a speech on the economy at the Daimler Detroit Diesel engine plant. Photograph: Getty Images.

Heather Boushey is a Visiting Fellow at IPPR and senior economist at the Centre for American Progress in Washington DC

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Unconvinced by Ken Loach’s benefits story? That says more about Britain than the film does

The director has clashed with a film critic about his representation of the welfare state in I, Daniel Blake.

I, Daniel Blake, Ken Loach’s new film, has kicked off a row between the director and The Sunday Times’ film critic, Camilla Long.

Published on Sunday, the review – which called the film a “povvo safari for middle-class do-gooders” – has led to Loach and some audience members rowing with Long online.

Long also describes the film – which is an unforgiving drama about the cruelty of welfare bureaucracy – as “misery porn for smug Londoners”.

Her contention is that it is “condescending” and “patronising” to benefits claimants, partly because it will mainly be seen by affluent audiences, rather than “the lowest part of society” – so acts as a vehicle for middle-class guilt rather than an authentic reflection of people’s lives.

I’ve seen the film, and there are parts that jar. A reference to the Bedroom Tax feels shoe-horned in, as if screenwriter Paul Laverty remembered last-minute to tick that box on his welfare scandal checklist. And an onlooker outside the Jobcentre’s rant about the Bullingdon Club, Etonians and Iain Duncan Smith also feels forced. (But to me, these parts only stood out because the rest of the script is convincing – often punishingly so.)

A critic is free to tear into a film they didn’t enjoy. But the problem with Long’s review is the problem with the way Britain in general looks at the benefits system: disbelief.

For example, Long calls it “a maddening computer error” and “a mysterious glitch” that Daniel Blake – a 59-year-old carpenter who has been signed off from work by his doctor after a heart attack – is denied his disability benefit.

Actually it’s because he’s been found “fit to work” after an agonising tick-box phone assessment by an anonymous adviser, who is neither a nurse nor a doctor. This is a notorious problem with work capability assessments under a welfare system constantly undergoing cuts and shake-ups by successive governments.

Both the Personal Independence Payment (which replaced the Disability Living Allowance in 2013 under the coalition) and Employment and Support Allowance (which replaced the Incapacity Benefit in 2007 under New Labour) have seen backlogs and delays in providing financial support to claimants, and work capability tests have repeatedly been under fire for being intrusive, inappropriate, or just wrong. Funding for those in the “work-related activity group” who claim ESA – in which you work if you are deemed able to during continual interviews with an adviser – also suffered a 30 per cent cut in last year’s budget.

Also, when people claiming ESA believe they have wrongly been found “fit for work” and appeal – as Blake does in the film – more than half of decisions are overturned when they reach a tribunal.

It’s a system that puts cost-cutting above people’s welfare; Jobcentre staff are even monitored individually in terms of how many sanctions they impose (Blake’s friend Katie is sanctioned in the film), making them feel as if they are working to targets.

The situation for disabled, sick or broke people claiming welfare is unbelievable in this country, which is perhaps why it’s so difficult for us – or for some watching Loach’s portrayal of the cruel system – to believe it at all. At best, it’s because we would prefer to close our eyes to a system that we hope we never have to grapple with. At worst, it’s because we don’t believe people when they say they cannot work, and demonise them as “shirkers” or “scroungers”.

By all means question Loach’s cinematic devices, but don’t question the point of telling the story at all – and the story itself. After all, it’s the very inability of people who rely on the state to have their voices heard that means they are always hit the hardest.

Anoosh Chakelian is deputy web editor at the New Statesman.