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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The Tory-DUP deal has left Scotland and Wales seething

It is quite something to threaten the Northern Irish peace process and set the various nations of the UK at loggerheads with merely one act.

Politics in the UK is rarely quite this crude, or this blatant. The deal agreed between the Conservatives and Northern Ireland's Democratic Unionist Party has – finally – been delivered. But both the deal and much of the opposition to it come with barely even the pretence of principled behaviour.

The Conservatives are looking to shore up their parliamentary and broader political position after a nightmare month. The DUP deal gives the Tories some parliamentary security, and some political breathing space. It is not yet clear what they as a party will do with this – whether, for instance, there will be an attempt to seek new leadership for the party now that the immediate parliamentary position has been secured.

But while some stability has been achieved, the deal does not provide the Tories with much additional strength. Indeed, the DUP deal emphasises their weakness. To finalise the agreement the government has had to throw money at Northern Ireland and align with a deeply socially conservative political force. At a stroke, the last of what remained of the entire Cameron project – the Conservative’s rebuilt reputation as the better party for the economy and fiscal stability, and their development as a much more socially inclusive and liberal party – has been thrown overboard.

Read more: Theresa May's magic money tree is growing in Northern Ireland

For the DUP, the reasoning behind the deal is as obvious as it is for the Conservatives. The DUP has maximised the leverage that the parliamentary arithmetic gives it. As a socially conservative and unionist party, it has absolutely no wish to see Jeremy Corbyn in Downing Street. But it has kept the Conservatives waiting, and used the current position to get as good a deal as possible. Why should we expect it to do anything else? Still, it is hardly seemly for votes to be bought quite so blatantly.

The politics behind much of the criticism of the deal has been equally obvious. Welsh First Minister Carwyn Jones – representing not only the Labour party, but also a nation whose relative needs are at least as great as those of the six counties – abandoned his normally restrained tone to describe the deal as a "bung" for Northern Ireland. Scotland’s First Minister Nicola Sturgeon was also sharply critical of the deal’s lack of concern for financial fairness across the UK. In doing so, she rather blithely ignored the fact that the Barnett Formula, out of which Scotland has long done rather well, never had much to do with fairness anyway. But we could hardly expect the Scottish National Party First Minister to do anything but criticise both the Conservatives and the current functioning of the UK.

Beyond the depressingly predictable short-term politics, the long-term consequences of the Tory-DUP deal are much less foreseeable. It is quite something to threaten the integrity of the Northern Irish peace process and set the various nations of the UK at loggerheads with merely one act. Perhaps everything will work out OK. But it is concerning that, for the current government, short-term political survival appears all-important, even at potential cost to the long-term stability and integrity of the state.

But one thing is clear. The political unity of the UK is breaking down. British party politics is in retreat, possibly even existential decay. This not to say that political parties as a whole are in decline. But the political ties that bind across the UK are.

The DUP deal comes after the second general election in a row where four different parties have come first in the four nations of the UK, something which had never happened before 2015. But perhaps even more significantly, the 2017 election was one where the campaigns across the four nations were perhaps less connected than ever before.

Of course, Northern Ireland’s party and electoral politics have long been largely separate from those on the mainland. But Ulster Unionist MPs long took the Tory whip at Westminster. Even after that practice ceased in the 1970s, some vestigial links between the parties remained, while there were also loose ties between the Social Democratic and Labour Party and Labour. But in 2017, both these Northern Irish parties had their last Commons representation eliminated.

In Scotland, 2017 saw the SNP lose some ground; the main unionist parties are, it seems, back in the game. But even to stage their partial comeback, the unionist parties had to fight – albeit with some success – on the SNP’s turf, focusing the general election campaign in Scotland heavily around the issue of a potential second independence referendum.

Even in Wales, Labour’s 26th successive general election victory was achieved in a very different way to the previous 25. The party campaigned almost exclusively as Welsh Labour. The main face and voice of the campaign was Carwyn Jones, with Jeremy Corbyn almost invisible in official campaign materials. Immediately post-election, Conservatives responded to their failure by calling for the creation of a clear Welsh Conservative leader.

Read more: Did Carwyn Jones win Wales for Labour  - or Jeremy Corbyn?

Yet these four increasingly separate political arenas still exist within one state. The UK was always an odd entity: what James Mitchell astutely termed a "state of unions", with the minority nations grafted on in distinct and even contradictory ways to the English core. The politics of the four nations are drifting apart, yet circumstances will still sometimes mean that they have to intersect. In the current instance, the parliamentary arithmetic means the Tories having to work with a party that celebrates a form of "Britishness" viewed increasingly with baffled incomprehension, if not outright revulsion, by the majority of Conservatives, even, on the British mainland. In turn, the Tories and other parties, as well as the news-media, are having to deal with sudden relevance of a party whose concerns and traditions they understand very little of.

Expect more of this incomprehension, not less, in the post-2017 general election world. 

Roger Scully is Professor of Political Science in the Wales Governance Centre at Cardiff University.

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