Inequality: the Obama Legacy

The State of the Union speech really had two messages:

1. We are faced with three years of a lame duck. President Obama will not try to work with Congress and has no illusions of accomplishing much that is significant. He has not rethought Obamacare, the NSA, tax policy, energy policy, or anything else that is holding back the economy. We can probably live with that domestically; unfortunately, President Putin, Xi Jinping, and Supreme Leader Ali Khamenei of Iran also understand his powerlessness.

2. The theme of income inequality will dominate President Obama’s rhetoric, in a virtuous feedback loop with the media and the Left. The political challenge for conservatives is to preserve and enhance those institutions which make America the world’s greatest “land of opportunity” while balancing personal responsibility and a “social safety net.” There is much practical experience on our side.

Some thoughts:

1. Unemployment is the primary problem.  The poverty rate among those with full time work is 3%; for those without it is 33%. The predominant emphasis needs to be on increasing full time employment. Many of President Obama’s policy positions – on energy, on taxes, on Obamacare, on the minimum wage – work against job creation.

2. Progress has been made since Lyndon Johnson started the “War on Poverty” 50 years ago. The official poverty rate has been reduced from 19% to 15%. (Other measures show more improvement.)  For seniors, Social Security and Medicare have helped reduce it from 35% to 9%.  Opportunity has been spread more broadly with better access to education at k-12 and college levels. Racial and gender discrimination has been reduced. However, in the aggregate the ability to climb the economic ladder has remained about the same over decades. It is still hard to get off of the bottom rung and the top rung is not very crowded.

3. The largest correlation with poverty is single parent families. When the “War on Poverty” began some 93% of babies were born into two parent families; now it is about 60%. The poverty rate for single parent families is about 37%; for two parent families it is about 7%.  Rick Santorum had it right with his advice to get an education, get a job, and get married before having kids. A leader with Obama’s following could do a lot of good if he preached a bit of tough love. Good policy; bad politics; won’t happen.

4. It is a blinding flash of the (politically unspeakable) obvious that the presence of 11 million low-skilled illegal immigrants exerts a substantial downward pressure on the economic well-being of lower and lower-middle class Americans. Given enough time the growth of the economy will absorb most of the impact, but it is a significant part of the reason that the poor are where they are and the unconstrained influx must be stopped.

5. If the public is to support a government safety net, it must contain only a minimal amount of corruption. President Obama’s decision in 2012 to amend, by executive order, the work requirement of President Clinton’s 1996 Welfare Reform Act went badly in the wrong direction. Ditto the loosened requirements that have seen food stamps hover around 47 million recipients – about twice the level of a decade ago. Ditto the honor system for Obamacare subsidies.

6. For the young American, it is not enough to get a college degree. Stories abound about the 15% of US cab drivers that have a college degree and the reality that about half of recent college graduates are not employed in jobs requiring a degree. The simple answer? Not only does more education still correlate highly with lower unemployment and higher wages, but prospects are vastly better for healthcare workers, teachers, and natural resource professionals than for artists and humanities majors. Opportunity is not only for IT workers.

Outside of Washington – and particularly at the individual level – the inequality problem is manageable. Would that politicians were rewarded for doing what really helps rather than for soaring speeches which are calculated to divide.


This week’s video demonstrates the contrast between the receptions given by rank and file military to President Bush and President Obama. People risking their lives like to believe that their leaders are in it to win.