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: Getty
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How the row over Jackie Walker triggered a full-blown war in Momentum

Jon Lansman, the organisation's founder, is coming under attack. 

The battle for control within Momentum, which has been brewing for some time, has begun in earnest.

In a sign of the growing unrest within the organisation – established as the continuation of Jeremy Corbyn’s first successful leadership bid, and instrumental in delivering in his re-election -  a critical pamphlet by the Alliance for Workers’ Liberty (AWL), a Trotskyite grouping, has made its way into the pages of the Times, with the “unelected” chiefs of Momentum slated for turning the organisation into a “bland blur”.

The issue of contention: between those who see Momentum as an organisation to engage new members of the Labour party, who have been motivated by Jeremy Corbyn but are not yet Corbynites.

One trade unionist from that tendency described what they see the problem as like this: “you have people who have joined to vote for Jeremy, they’re going to meetings, but they’re voting for the Progress candidates in selections, they’re voting for Eddie Izzard [who stood as an independent but Corbynsceptic candidate] in the NEC”.  

On the other are those who see a fightback by Labour’s right and centre as inevitable, and who are trying to actively create a party within a party for what they see as an inevitable purge. One activist of that opinion wryly described Momentum as “Noah’s Ark”.

For both sides, Momentum, now financially stable thanks to its membership, which now stands at over 20,000, is a great prize. And in the firing line for those who want to turn Momentum into a parallel line is Jon Lansman, the organisation’s founder.

Lansman, who came into politics as an aide to Tony Benn, is a figure of suspicion on parts of the broad left due to his decades-long commitment to the Labour party. His major opposition within Momentum and on its ruling executive comes from the AWL.

The removal of Jackie Walker as a vice-chair of Momentum after she said that Holocaust Memorial Day belittled victims of other genocides has boosted the AWL, although the AWL's Jill Mountford, who sits on Momentum's ruling executive, voted to remove Walker as vice-chair. (Walker remains on the NEC, as she has been elected by members). But despite that, the AWL, who have been critical of the process whereby Walker lost her post, have felt the benefit across the country.

Why? Because that battle has triggered a series of serious splits, not only in Momentum’s executive but its grassroots. A raft of local groups have thrown out the local leadership, mostly veterans of Corbyn’s campaign for the leadership, for what the friend of one defeated representative described as “people who believe the Canary [a pro-Corbyn politics website that is regularly accused of indulging and promoting conspiracy theories]”.

In a further series of reverses for the Lansmanite caucus, the North West, a Momentum stronghold since the organisation was founded just under a year ago, is slipping away from old allies of Lansman and towards the “new” left. As one insider put it, the transition is from longstanding members towards people who had been kicked out in the late 1980s and early 1990s by Neil Kinnock. The constituency party of Wallasey in particular is giving senior figures in Momentum headaches just as it is their opponents on the right of the party, with one lamenting that they have “lost control” of the group.

It now means that planned changes to Momentum’s structure, which the leadership had hoped to be rubberstamped by members, now face a fraught path to passage.

Adding to the organisation’s difficulties is the expected capture of James Schneider by the leader’s office. Schneider, who appears widely on television and radio as the public face of Momentum and is well-liked by journalists, has an offer on the table to join Jeremy Corbyn’s team at Westminster as a junior to Seumas Milne.

The move, while a coup for Corbyn, is one that Momentum – and some of Corbyn’s allies in the trade union movement – are keen to resist. Taking a job in the leader’s office would reduce still further the numbers of TV-friendly loyalists who can go on the airwaves and defend the leadership. There is frustration among the leader’s office that as well as Diane Abbott and John McDonnell, who are both considered to be both polished media performers and loyalists, TV bookers turn to Ken Livingstone, who is retired and unreliable, and Paul Mason, about whom opinions are divided within Momentum. Some regard Mason as a box office performer who needs a bigger role, others as a liability.

But all are agreed that Schneider’s expected departure will weaken the media presence of Corbyn loyalists and also damage Momentum. Schneider has spent much of his time not wrangling journalists but mediating in local branches and is regarded as instrumental in the places “where Momentum is working well” in the words of one trade unionist. (Cornwall is regarded as a particular example of what the organisation should be aiming towards)

It comes at a time when Momentum’s leadership is keen to focus both on its external campaigns but the struggle for control in the Labour party. Although Corbyn has never been stronger within the party, no Corbynite candidate has yet prevailed in a by-election, with the lack of available candidates at a council level regarded as part of the problem. Councilors face mandatory reselection as a matter of course, and the hope is that a bumper crop of pro-Corbyn local politicians will go on to form the bulk of the talent pool for vacant seats in future by-elections and in marginal seats at the general election.

But at present, a draining internal battle is sapping Momentum of much of its vitality. But Lansman retains two trump cards. The first is that as well as being the founder of the organisation, he is its de facto owner: the data from Jeremy Corbyn’s leadership campaigns, without which much of the organisation could not properly run, is owned by a limited company of which he is sole director. But “rolling it up and starting again” is very much the nuclear option, that would further delay the left’s hopes of consolidating its power base in the party.

The second trump card, however, is the tribalism of many of the key players at a local level, who will resist infiltration by groups to Labour’s left just as fiercely as many on the right. As one veteran of both Corbyn’s campaigns reflected: “If those who have spent 20 years attacking our party think they have waiting allies in the left of Labour, they are woefully mistaken”. 

Stephen Bush is special correspondent at the New Statesman. His daily briefing, Morning Call, provides a quick and essential guide to British politics.