Obama Makes the Case for Government

Jan 25, 2012Jeff Madrick

The president didn't go as far as he needed to, but he began to articulate an argument that the American people need to hear.



The president's State of the Union speech last night was not a progressive's delight. But it straightforwardly and strongly put forth a case for government that the president has heretofore not made. Perhaps America is again ready to listen after the dominance of an anti-government narrative for so long.

Last night, the president covered a lot of territory, and in fact almost all the important bases. He made several unfortunate nods to the right, including proudly boasting of his new offshore oil drilling plans and a renewed offer to use Social Security and Medicare as negotiating tools in order to raise taxes on the wealthy and cut taxes for the rest. He did not suggest that perhaps we could live with this deficit until the economy righted itself. He certainly did not suggest new stimulus, which is what we need. But the overall impact of the speech was to make a case for government.

He took on the loss of manufacturing jobs as his first item of business, after some deliberately patriotic claims about how the world is much safer today. This was important. Most mainstream economists, including many who lean Democratic, have little taste for government interference in the markets to create more manufacturing jobs. They say declining manufacturing is only natural. But Obama rightly said he would use the tax code to penalize those who send jobs overseas and reward those who bring them home. He will set up a task force on unfair trade practices. He called China out for such practices. This was pretty tough talk. Granted, he didn't call for less currency manipulation but that would have been pretty insensitive in a State of the Union address.

He made proposals regarding education, infrastructure, housing, and energy, calling for investment in clean energy as well as dirty energy like fracking and offshore drilling. But he also said in a direct attack on Republicans that we have subsidized oil too long.

He also made a deliberate, explicit case for government regulation in general -- over drilling, on Wall Street, everywhere it was needed. Aside from making the tax system more progressive, his case for regulation was perhaps his most important ideological claim for a strong government. But his case for government -- from tax subsidies to infrastructure investment to higher taxes on the wealthy to a new attack on financial fraud -- was unmistakable.

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Inequality was high on his list of problems in America. He called for a millionaire's tax. He repeated that America must work for all. He criticized Wall Street with some pretty nasty language, willing to anger more than a few donors there who still think they are doing God's business.

Many are now pointing out that the political climate has changed, less talk of deficits and more talk of inequality. Bravo Occupy Wall Street. They are even talking about inequality at Davos, sensitivity reaching the upper strata who breathe only the fumes of self-regard but now realize even they are jeopardized by the distortions created in many free market economies.

But in the end, the American economy needs the stimulus mentioned above, and the president avoided the issue. Unfortunately, the economy is not as willing to ignore sources of weakness. He did not mention the eurozone crisis, either, or other reasons for concern. But he did say he would present a new mortgage relief scheme. Other than that, is a continuation of the payroll tax cuts enough? And doesn't it now begin to undermine Social Security?

As I said, this was no progressive's delight. He wants those who make $250,000 or less to be spared of any tax increase. At some point, taxes will have to rise somewhat for the middle class if America is to do what is necessary. But in the end, Obama was running for re-election. It was in many ways an us-versus-them speech. Either you are with me or you are with them, them being the irresponsible rich blessed with a tax system so favorable that even America, where we are told (I don't believe this) everyone dreams of being rich, is sick and tired of it. The election will be fought on those terms and I think Obama is on target.

Now we await some details and some real legislative proposals. How good will the mortgage relief plan be? What will an energy policy look like? Will he offer a new infrastructure program? Will he hang tough on his message, in the end?

My view is that Obama should put up his programs as soon as possible, even if a few are politically difficult, and let the Republicans shoot them down if they must. Then he can go to the public and tell them it is the Republican opposition that is holding the nation back. And he would be right.

Yes, we need a lot more than the president is willing to do. He is still above all a moderate politician. But he has a workable plan to be reelected. And let me board the cliché train: do you really want one of the opposition to be president? Let me answer: No, you don't. Even in only four years, irreparable damage can be done to the nation. Look what Reagan did in his first term.

Roosevelt Institute Senior Fellow Jeff Madrick is the author of Age of Greed.

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