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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Chuka Umunna: Why tolerance is not enough

Against the Trumpification of politics.

It’s still spring, yet 2016 already stands out as one of the ugliest years in modern British political history. It was fantastic to see Londoners choosing hope over fear in May, electing Sadiq Khan as our first Muslim mayor. But David Cameron, having shamelessly endorsed Zac Goldsmith’s dog-whistle campaign tactics, owes those young Muslims who have been put off politics by the slurs hurled at Khan an explanation. How does racial profiling and sectarian scaremongering fit into his One Nation vision for Britain?

Meanwhile, Boris Johnson, one of the best bets to succeed Cameron as our next prime minister, embarrassed Britain on the world stage with a racially charged allusion to Barack Obama’s Kenyan heritage. And my own party has been grappling with a swath of deeply disturbing revelations regarding the attitudes held by some on the left towards Israel and Jewish people. Sowing discord by stigmatising or scapegoating a single faith group or community is profoundly at odds with the British tradition of “tolerance”, but we can’t ignore that this year’s events are part of a rising trend of friction and factionalism.

Last year’s general election should have been a wake-up call. The political and cultural divides between people living in the north and south and urban and rural areas – as well as between working-class and metropolitan sensibilities – appear starker than ever. In May’s devolved elections, Scottish, Welsh and Northern Irish politics became yet more distinct – giving the impression of a kingdom coming apart at the seams. All the while, more and more voices in our national politics seek to pin the blame for the challenges facing our country on a single section of society, whether immigrants, Muslims or another group.

This trend stretches beyond our borders. From Ukip, the French Front National and Austria’s Freedom Party to Podemos in Spain and Italy’s Five Star Movement, new populist parties of the right and left are on the rise across Europe. In the United States, Bernie Sanders is tapping into the energy of Occupy Wall Street, while Donald Trump has emerged as the heir to the Tea Party: a poster boy for division and recrimination.

Trump’s rise should be a warning for us Brits. The New York Times commentator David Brooks has described his success as less indicative of the emergence of a new school of thought, or movement, and more of dissatisfaction with the status quo. Trump’s campaign has tapped into a complex cocktail of grievances, from the loss of manufacturing jobs in a globalised economy to rising inequality and raw anger felt by many white working-class Americans at demographic and cultural changes.

In the run-up to last year’s general election, as I travelled around the country, I was confronted time and time again with the reality that in the UK – just like in the US – people are afraid and angry because the world is changing in ways they fear are beyond their control. Where once they had believed that, if they worked hard, they would get ahead, too many Britons now feel that the system is rigged in favour of those born into opportunity and that those in power have abandoned them to a broken future. What it means to be British seems to have shifted around them, triggering a crisis of solidarity.

We are at a crossroads and may face nothing less than the Trumpification of British politics. In an uncertain and changing world, it is all too easy to imagine that our problems are caused by those who are different from us.

If we wish to follow the fine example set by Londoners on 5 May and choose unity and empathy over division and blame, we must accept that simply “tolerating” one another will no longer do. There is an accusation built into the very word: what you are doing is “other” or “wrong”. As Britain has become more diverse, we have come to know each other less. This makes it harder to understand how people from different walks of life feel about the big issues.

I am a Labour member because I believe, as it says on our membership cards, that, by the strength of our common endeavour, we achieve more together than we do alone. In order to develop the bonds of trust required for this to become a reality, and for our communities to flourish and our democracy to deliver for everyone, we must build a society in which people from all backgrounds actually get to know one another and lead interconnected lives. In this sense, “One Nation” – the land over which all parties seek purchase – should become more than a platitude. It should become a way of life.

Chuka Umunna is Labour MP for Streatham.

This article first appeared in the 26 May 2016 issue of the New Statesman, The Brexit odd squad