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Four Things Obama Should Say About Inequality in the State of the Union | The Nation

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George Zornick

George Zornick

Action and dysfunction in the Beltway swamp. E-mail tips to george@thenation.com

Four Things Obama Should Say About Inequality in the State of the Union

Obama State of the Union 2013

President Barack Obama, flanked by Vice President Joe Biden and House Speaker John Boehner, delivering his State of the Union address  last year, February 12, 2013. (AP Photo/Charles Dharapak, Pool)

President Obama will deliver his fifth State of the Union address Tuesday night, and it’s arguably his last chance to make a real impact in that forum: a year from now the midterm elections will have concluded and his final Congress will be set, and in 2016 the press will care more about the primary elections underway than anything Obama says.

The White House seems to appreciate that fact, and Obama will reportedly try to “pump some vitality into a lackluster second term” by taking on income inequality and the lagging economy as a defining theme of his speech.

That’s certainly a weighty topic, so how should Obama approach it? What should he call for?

Obama should go big. Early reports of the president’s speech are already distressing some progressives. Apparently, Obama is going to avoid tackling economic inequality head on, and will instead speak in terms of “paths of opportunity” for lower- and middle-class Americans.

The policy proposals that have leaked out seem small-bore as well: Obama will reportedly announce, for example, some executive actions on things like job-training programs.

But the most effective State of the Union addresses—think Lyndon Johnson’s call for an “unending war on poverty,” or Bill Clinton’s declaration that “the era of big government is over”—go big on a bold new idea. That’s what many progressives want to see tomorrow night.

Economist Dean Baker told The Nation that Obama should come right out and say that the country should embrace large-scale deficit spending to boost demand in the economy, and thus maximize employment and reduce inequality. Obama should acknowledge that “Republicans will never go along with this,” but make the case for urgent action anyhow.

“I think it’s important to outline the case that we need to get back to full employment,” Baker said. (He and Jared Bernstein have a lengthy policy examination of this topic.) “This is what he should have done back in 2009. Explain to people why we are where we are.”

Granted that’s a dramatic “ask” from Obama—but for Baker, that’s the point. “The guy’s not running for re-election, so I don’t see the downside. Republicans will be running around saying he’s a big spender, but who gives a fuck?” Baker said. “Why doesn’t he say that? People are really suffering out there, because what, [Obama’s] opinion polls will go down a half a percent [if he takes this approach]?”

There are midterm elections looming just months away, but Baker noted that if Obama doesn’t call for aggressive action on reducing unemployment, he likely handcuffs down-ticket Democrats from doing so, lest they open themselves up to criticism for demanding something that “even President Obama isn’t calling for.”

Demand an end to “too big to fail.” Even though the Dodd-Frank Wall Street Reform and Consumer Protection Act took some steps to mitigate the damage from the collapse of a huge financial institution, the problem of “too big to fail” still remains. It’s a sword hanging over any progress on income inequality—data shows that recessions caused by banking crises are really hard to recover from. The crash and slow recovery often exacerbates inequality: between 2009 and 2012, income for the bottom 99 percent of Americans increased 0.4 percent while the top 0.1 percent saw income gains 45 percent.

At MSNBC, Timothy Noah convincingly argues Obama should address this problem during the speech:

A better solution would be to prevent US banks from becoming so big that their failure could take down the entire economy. This could be achieved in a variety of ways: raising capital requirements, for instance, or restoring the Glass-Steagall separation of commercial from investment banks, or directly limiting a bank’s size relative to gross domestic product.

In his State of the Union speech, Obama should say that Dodd-Frank was a good first pass at a problem that has evolved over several decades. Perhaps he could compare it to the Civil Rights Act of 1957, which achieved modest progress on voting rights but is remembered today for opening the door to more sweeping laws passed during the decade that followed. Ending too big to fail, he could say, is financial reform’s most urgent piece of unfinished business.

Noah notes that Obama might see some clapping on the other side of the aisle after those imagined remarks—Senators John McCain and David Vitter have co-sponsored Democratic legislation to end “too big to fail.”

Put weight behind the minimum-wage push. We do know that Obama will make an aggressive call for increasing the minimum wage, which many progressives are heartened by.

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A minimum-wage hike is not only long overdue but would have a real effect on mitigating inequality. Between 1979 and 2009 the erosion of the minimum wage explained more than than half (57 percent) of expansion of the wage gap between median-wage workers and workers at the tenth percentile, according to the Economic Policy Institute.

But some progressives want Obama to show he’s serious by announcing an executive order designed to raise the pay of federal contractors. It would be a tangible step towards improving the lot of low-wage workers, and would fit perfectly with Obama’s theme of taking executive action to make a difference right now.

Lay off the TPP. Progressives will be particularly frustrated if Obama pushes hard for fast-track approval of the Trans-Pacific Partnership. There’s ample economic theory to show that trade deals increase inequality in developed countries, and so if Obama mentions the TPP in an address ostensibly tackling income inequality, many progressives inside and outside Congress will have a hard time swallowing it.

“You cannot credibly talk about addressing inequality, and say, ‘Oh, by the way, here’s another trade deal,’ ” Representative Keith Ellison told Politico this week. “He’s opening himself up for charges of hypocrisy.”

Take Action: Tell President Obama to Give Federal Contract Workers a Raise

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