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

Photo: Justin Tallis/Getty Images
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If Jeremy Corbyn does win, the Greens should shut up shop

If self-described socialists continue to organise outside of the Labour party, they risk depriving the left's main outlet of both talent and voters, warns Michael Chessum.

It could all be rash complacency, but for much of left thoughts have already begun to focus on the reality of a Corbyn-led Labour Party. In the Labour left, the air is swirling with new projects – to back Corbyn up as leader, to organise the membership against parts of the PLP if necessary, to bring Labour into social movements and social movements into Labour. But outside Labour, too, the wider left is waking up to discover the entirely different reality that could be posed by a sharp left turn in leadership. In the Green Party, and especially among those on the left of the party, there is increasing pressure to find a formal working arrangement with Corbyn’s Labour, much of which is reflected in Caroline Lucas’s open letter in the Independent last week. An electoral pact is, apparently, already on the table.

Lucas’s call for an electoral pact is a pretty honest gesture, and will not be entirely uncontroversial in her own party; it is certainly worth much more than, as some more cynical onlookers in Labour have put it, “please don’t run against me in Brighton Pavillion”. It could also be significant in terms of electoral arithmetic: after boundary changes, and in any tight election, Labour will need the 3.8 per cent of the vote that the Greens got at the last election.  But while Lucas and other leftwingers in the Green Party are at least acknowledging the issue, there is a danger that they will avoid a more fundamental question: if Corbyn wins, does it really make sense for self-described socialists in the Green Party to continue a separate existence outside of Labour at all?

Corbyn represents the undeniable arrival of a wider political trend. Across Europe, democratic socialism is undergoing a split: yesterday’s “realists”, who argue for an accommodation with neo-liberal economics and the austerity politics that follows it like clockwork, are on one side; on the other is an assortment of socialists and social democrats who argue for something else. Mass anti-austerity politics has not been a one-party affair in the UK: it was built from the ground up by students, workers and community campaigns; it was road-tested in Scotland; and it has been formulated into policy from a variety of angles, as well as by the Corbyn campaign itself. But now, in the face of the realities presented by five more years in opposition, the vital political expression of the anti-austerity movement seems to have come to fruition in the Labour Party.

This fact will leave one of the largest sections of the organised left – the Green left – disorientated and unsure of what to do. Some socialists and leftwingers in the Green Party are there on the basis of a genuine conviction that the green movement, rather than the labour movement, is their political home. But for the vast bulk of those drawn to the Green left – many of them freshly recruited from recent social movements, others exiles from Labour under Blair – the purpose of the Green left is premised largely on the idea that a credible party-political alternative was needed, and that an anti-austerity surge would be impossible inside the Labour Party. This premise is now ebbing away.

The race is now on for the true believers to convince their periphery of the virtues of remaining in the Green Party after Corbyn wins. Many may yet be convinced, and the Labour left should not be complacent about recruiting a sudden tide of departing Greens.  But for those who joined because they wanted to intervene into mainstream politics from the left, there should be no doubt as to where the big fights will now happen, and where those committed to having them should go.

The incorporation of elements of the radical left’s core constituency into the Greens was always a peculiarity of recent British history. Had it become a sustainable arrangement and grown into a faint British Syriza, it would have made the Green Party of England and Wales unique in Europe, where ecologist and green parties usually sit distinctly and uneasily next to their far-left counterparts.

Much of the uneasiness that characterises the relationship between green parties and radical left groupings in other countries is about ideas, but much of it is also about tribalism – the simple fact that they have separate organisations which need to be different, and which breed differences in approach as often as they reflect them. If either the Green left or the Labour left are not careful, this tribalism will replicate itself, weakening everyone and dividing the left for no particularly coherent political reason.

That is why it is so significant that figures as senior as Caroline Lucas are already making overtures to Corbyn’s Labour. However, there is a danger that behind the positive gestures lie a serious of less friendly assumptions: that any electoral pact is temporary, is designed to build and promote the existence of the two separate parties, and would end upon the introduction of a proportional voting system – a move which, although positive in itself, would further entrench the fault lines between the Green and Labour lefts.

There are numerous ways that this could be overcome which would avoid the Greens simply dissolving themselves or quietly surrendering their politics. If it carried majority support in the party, the Green Party could reach the same arrangement with Labour that the Co-operative Party has: it would have its own structures, and would run Green-Labour candidates in places where it won the selection inside the local Labour Party. If there is no majority for such an arrangement, socialist Greens who want a higher degree of unity with Labour could form a faction, first within the Greens, and, if they continued to lose the argument, they could break away to form a platform in Labour.

As the seemingly impossible becomes a reality, there will be all kinds of realignments in the political space that the Labour left and Green left both claim to occupy – not to mention a potential split on Labour’s right wing. The best hope for a healthy realignment of the British left lies in an honest exchange of ideas; a newly democratised and pluralistic Labour Party which embraces – rather than excludes – political energy formerly to its left; and a willingness on the part of external political forces to orientate themselves towards Labour as the political expression of a mass movement. Those forces should involve the left wing of the Green Party.