Raising the Minimum Wage — The Right Way

Ever since President Obama took office I’ve periodically wished I had the ability to call the White House get him on the phone and say “Hey, you’re not doing it right!”  Let me be clear—I don’t mean he hasn’t done the right thing—just that he’s too often done the right thing the wrong way.

For example, like many economists and advocates for working families, including Paul Krugman and Robert Reich, I thought the President’s economic stimulus package was way long on help for the “Too Big to Fail” banks and other Wall Street institutions and way short on dollars for infrastructure projects, support for education and job training, and other programs that would have helped the working families who inhabit the nation’s Main Streets.

Same thing with health care reform.  Yes, it needed to be done. But he did it wrong.  Instead of a system that guarantees health insurers millions of new customers, does little to rein-in costs, and gives anti-reform advocates the ammo they need to scare small and medium sized businesses into opposing the plan, he could have done something simple: Medicare for all, or at least for all of us over the age of 55. Not only would this approach have made Medicare solvent by bringing younger, healthier people into the system, it would have given the government immense power to negotiate lower costs with providers.

Unfortunately, the same principle applies to the President’s proposed minimum wage increase.  It’s the right thing to do, but nine dollars an hour? Really?  At least in this instance Mr. Obama’s not alone in being wrong.  Predictably, the Republicans and their bosses in the business community, led by the U.S. Chamber of Commerce, the National Federation of Independent Business, and the National Restaurant Association, became apoplectic seconds after the words “raise the minimum wage” rolled off the President’s tongue during the State of the Union address.

Their reaction was as predictable as the specious claims they make about the cataclysmic effect giving the folks at the bottom of the economic ladder a boost will have on the economy.  Business leaders wail and gnash their teeth any and every time raising the minimum wage is proposed, including back in 2006 when labor led the successful effort to win voter approval of an Ohio Constitutional amendment that both raised the wage and indexed it to inflation.

The fact that their dire prognostications have never come to pass—last time I checked people are still doing business in Ohio despite the onerous burden of having to pay workers a whopping $7.85 an hour, and Costco is thriving despite paying starting employees more than $10 an hour –apparently doesn’t matter to them or to the members of the media who give their ludicrous contentions credence by repeating them.

Unfortunately, President Obama’s proposal was every bit as predictable in nature and scope as the arguments against it.  Raising the minimum wage $1.75 is fine as far as it goes—which isn’t far enough.  Had the President and his advisors really given the issue some thought they could have crafted a plan that would have both insulated the administration from criticism and gone a long way toward addressing the income inequality that plagues the working class and the middle class and has the U.S. economy stuck in neutral.

Here’s the deal.  Part A:  raise the minimum wage to $9 per hour for the vast majority of employers.  Their protestations to the contrary, it won’t bankrupt them or force them to cut jobs.  Especially when they begin ringing up the additional sales Part B of the plan generates: raising the wage to $15 per hour for full time and $11 per hour for part-time workers employed by the nation’s largest companies.

There’s little doubt that companies like Wal-Mart will attempt to avoid paying the higher wage by eliminating full-time employees or turning to temp services for workers.  To stop them, the law must include provisions that prevent employers from moving workers from full-time to part-time status and that classify temps as employees of the corporation using them.  Those two provisions would help ensure that companies comply with the letter and spirit of the law.

Which firms would qualify as “large” under the plan?  Those that directly employ 100,000 or more and average 80 workers per location.  Under this definition franchise operations like McDonalds and most other fast food chains would be exempt.  In addition, the increase would have little or no impact on large employers like IBM, UPS, FedEx and others who already pay above the proposed new minimum.

The plan would affect retailers like Wal-Mart, Target, Macy’s, Kroger’s, Home Depot, and Lowe’s along with America’s biggest banks—the folks responsible for the 2008 economic implosion would.  (Here’s an important side note: although most people equate low wages with retail, bank employees are grossly underpaid, and financial institutions are infamous for aggressively opposing union organizing drives.)

Using Wal-Mart as an example and assuming that 40% of the company’s 2.1 million workers are full time, their aggregate annual wages would climb from $17.4 billion to $26.2 billion.  Annual wages for the retail giant’s 1.2 million part-timers would jump by nearly $5 billion, from $12.5 billion to $17.2 billion.  In all, the increases would pump an additional $14 billion into the hands of Wal-Mart workers every year.

Imagine the staggeringly positive impact this one policy would have on the economy when the wages of the more than 3.5 million people who work for America’s other large corporations are factored in.  Billions of dollars will be spent on homes, cars, clothes, food, dining out, movies, electronics, and other goods.  People who now live paycheck to paycheck will actually be able to save and plan for the future. In short, millions of working families will have an opportunity to grab a piece of what has become a fading American Dream.

The increases would also help reduce the deficit—something Republicans should love.  Higher wages will generate more income and sales tax revenue.  As salaries rise, so will the flow of dollars into Social Security and Medicare, especially when tens of thousands of workers are no longer eligible for the Earned Income Tax Credit because they’re earning a living wage.  Finally, government spending will fall because the legions of low-wage workers at Wal-Mart and other firms that now receive government benefits will no longer need them.

But instead of a bold plan that could end decades of wage stagnation, we get a small across-the- board increase that simply won’t get the job done.  Someone get me the number for the White House.  I need to call Barack and tell him he’s doing the right thing the wrong way.

Again.

Leo Jennings

The White Vote in 2012 & the Obama Coalition

I’ve had it with “the white working class.”  Not the actually existing part of the working class that is white, which is composed of complex and interesting people most of whom don’t vote like I think they should, but rather the fictional character who got so much attention during this year’s election campaign.

The fictional character is a white guy who works in a decrepit factory or drives a truck.  He drinks boilermakers (not wine and never a latte) and is good at bowling rather than golf.  Depending on political point of view, he is a “culturally confused but good-hearted racist” or a “salt-of-the-earth real American who loves God and guns and hates both gays and Wall-Street bankers.”

As a demographic category that divides white voters without bachelor’s degrees from those who have that “middle-class” credential, the “white working class” concept makes sense to me, but only if its use fulfills two conditions that the political media apparently cannot manage:

• First, that we always keep in mind that “white working class” is a demographic category that clumps together more than 45 million voters who share two characteristics and only two – race, as conventionally defined, and the absence of a bachelor’s degree.  The category includes women and men of all religions (and varying levels of religious commitment) and regions. They come from big cities, suburbs, small towns, and isolated shacks in all parts of the country.  It includes Bill Gates and other fabulously rich people who never completed bachelor’s degrees, and it leaves out the many factory workers, truck drivers, waitresses, and retail clerks who did. That is, like all concepts, “white working class” is a convenience for getting a hold on the big picture, but it grossly simplifies a much more complex and varied social reality.  We need to constantly remind ourselves that there is not now, never has been, and never could be a “typical” white working-class person.
• Second, that as a demographic category for the purposes of electoral analysis, “white working class” is valuable only as part of a comprehensive discussion of the white vote in U.S. elections.

I’ve made the first point before, more than once.  Here let me concentrate on the second by detailing my conclusions about how the concept has played out in the 2012 presidential election.

After much pre-election discussion of how the “white working-class” would vote, the major news media who commissioned the massive election-day exit poll have not reported on their websites how this group actually voted.  In fact, the websites listing that information — voter-category by voter-category, state by state — in 2012 have less than 1/10^th the information that CNN had (and still has) on its web site for 2008.   But here’s what I can report based on what is available on Fox News, CNN, and the New York Times, plus some numbers from reporters who have access to the poll’s internals – most importantly, “The Obama Coalition in the 2012 Election and Beyond” by Ruy Teixeira and John Halpin.

• Class in itself had almost no impact on how people voted for president in 2012.  The middle class (folks of all shades and colors with at least a bachelor’s degree) voted 50/48 for President Obama, and the somewhat larger group of voters with no bachelor’s degree, the working class, voted 51/47 for the President.  Thus, because the middle and working classes voted basically the same, class by itself did not matter.
• Race, on the other hand, makes a huge difference in how people vote.  Nonwhites (Black, Hispanic/Latino, Asian and Other) voted a little more than 80% for Obama while only 39% of whites did that – a difference of more than 40 percentage points.  Both the middle class and the working class gave Obama slight majorities based primarily on nonwhite voters who offset his 20-point loss among whites.
• Among whites, the white working class is far from unique in giving Mitt Romney substantial majorities.  Nationally, working-class whites gave Obama only 36% of their vote, but middle-class whites, though slightly more favorable at 42%, also gave Romney a large majority.  Other demographics within the white vote show similar patterns.  Though there are important differences among white voters, most white demographics vote strongly Republican.  For example:
  • Women gave Obama a 55% majority, but not white women, who voted 56/42 for Romney.  White men, on the other hand, were even more strongly for Romney (62/35).  The gender gap is actually bigger among Blacks and Latinos than it is among whites.  Black women voted 9 points more for Obama than their male counterparts; Latino women, 11 points more, and white women, 7 points more.
  • Obama won a bare majority among Catholics (50/48), but lost white Catholics by 19 points – which, however, is a lot better than he did among white Protestants who he lost by 39 points.  On the other hand, Obama won substantial majorities among whites who self-identified as non-Christian or as having no religion.
  • Obama also famously won big (60/37) among young people aged 18-29, but the majority of whites in this age group voted for Romney (51/44).  On the other hand, no other white age group gave Obama more than 39% of their vote.
  • Where whites live matters a lot.  There were no exit polls in some states this year, and so far there is no breakdown of voters by both race and education (as there was in previous years).  From what we have, however, it is clear that the national white vote of 39% for the President hides a lot of variation – whites in Vermont and Alabama vote very differently (66% vs. 15% for Obama in 2012), as do whites in Iowa and Missouri (51% vs. 32% for Obama).  Likewise, whites in large and medium-sized metropolitan areas (250,000 and above) vote more Democratic than whites in the small-town and rural areas of the same states.

Though shrinking as a proportion of the population and thus of the electorate, whites are still a very large majority (72% of the 2012 electorate), and the 39% of us who voted for President Obama provided the bulk of his votes in 2012 (36 million vs. 29 million from nonwhites). But our voices would not have been heard without strong turnouts (against formidable efforts at voter suppression) and lopsided votes for Obama among nonwhites.  On the other hand, their voices would have been drowned out – and worse – without us.  That’s what a multiracial coalition looks like.  Though its weakest link, the white working class is a significant portion of the coalition, and not just in the Midwest battlegrounds.  Of Obama’s 65 million votes in 2012, 30% came from whites with bachelor’s degrees and 25% (more than 16 million) came from those without them.

Part of the reason progressive Democrats have focused on the white working class over the past decade is that among whites, they are much more likely to benefit from progressive economic programs than middle-class whites – programs like universal health care, enhancements of earned income and child tax credits, infrastructure spending, green manufacturing, and unemployment benefits and food stamps.  This has not worked yet to produce more white working-class voters for Dems, at least not at a national level, but the logic is good because all these programs disproportionately benefit working-class Blacks, Latinos, and Asians as well.  And that basic approach, as qualified and compromised as it has played out in practice, is working so far politically, if not economically.  As Teixeira and Halpin conclude:

President Obama and his progressive allies have successfully stitched together a new coalition in American politics, not by gravitating toward the right or downplaying the party’s diversity in favor of white voters.  Rather, they did it by uniting disparate constituencies – including an important segment of the white working class – behind a populist, progressive vision of middle-class economics and social advancement for all people regardless of race, gender, ethnicity, religion, or sexual orientation.

I find the Democrats’ obsessive use of “middle class” irritating, and I’m not sure they’ve articulated anything I want to call “a populist, progressive vision” (as opposed to some of their actual programs), but it is worth appreciating the enormous accomplishment, however fragile and flawed, of what Teixeira and Halpin call “a multiracial, multiethnic, cross-class coalition” that put Barack Obama in the White House for a second term.

Jack Metzgar

Chicago Working-Class Studies

Jobs and the “Fiscal Cliff”

My relief that Mitt Romney was not going to be our president, with a Republican Senate along with the House of Representatives, barely lasted through Tuesday night.  By my lights, a lot of terrible stuff and a completely wrong direction in our policy and politics have just been avoided.  Whew!  But after months of both Republicans and Democrats talking about the lack of jobs being produced by our lackluster economy, with political reporters, operatives, and pundits hanging on the next unemployment report as if it might be vitally important for the future of the republic — by the end of the week our 8% official unemployment rate (and Romney’s oft-repeated “23 million unemployed and underemployed workers”) was again just one of those inconvenient realities that we’re going to have to live with.

President Obama’s victory speech Tuesday night looked ahead to his second term and promised to focus on “reducing our deficit” along with some other things (“reforming our tax code, fixing our immigration system, freeing ourselves from foreign oil”), with no mention of getting our economy growing at a rate that can reduce our debilitating unemployment and the damage it is doing to all of our lives, some of us much more than others.  Then, as the Wall Street Journal headlined two days later, “Political Focus Shifts to ‘Fiscal Cliff’,” and it’s all about budgets and the need for “shared sacrifice” and a “balanced approach” to easing the economy farther downhill rather than going off a cliff.

The fiscal cliff is not just about deficits.  It’s about jobs – jobs in an economy where there are not nearly enough of them for everybody who wants and needs them.  If the spending cuts and tax increases currently scheduled to take effect January 1^st actually would take effect and then remain in place for all of 2013, it would reduce the federal deficit, at least at first, by more than $600 billion – that is, “cutting the deficit in half,” as the President once promised.  But it would also throw us back into recession and eliminate more than 4 million jobs.

Jobs and deficits are related.  Federal budget deficits (spending more than you take in in taxes) fuel economic growth and create jobs.  Likewise, stronger, faster economic growth creates jobs and, thereby, reduces federal budget deficits.  Without the annual $1 trillion deficits the federal government has been running since President Obama took office, we would still be in the Great Recession – or worse.  Right now, we need those deficits.  Cut them substantially, and you reduce economic growth and kill jobs.

Even though some Republicans deny it and almost no Democrats will say it, all the political players, including what is euphemistically called “the business community,” know these basic principles of macroeconomics.  They know that rapidly cutting the deficit in half – whether by cutting spending, increasing taxes, or some combination of the two in a so-called “balanced approach” – will send the economy back into its 2008-09 tailspin.  That’s why all the political players fear the fiscal cliff, and that widespread fear is also why we will not go over it.

But how we avoid the fiscal cliff matters.  And just avoiding it will at best leave us where we are, with a stagnant economy growing at 2% a year and with an official unemployment rate near 7% as far as the eye can see.  We also need to stimulate the economy immediately, get it growing fast enough so that it is creating 300,000 or 400,000 jobs a month (versus the recent trend of 150,000 a month).  This will increase the deficit in 2013, but it will also do more to cut the deficit in the long run than any spending cut or tax increase could do.

For a guide on how to avoid the fiscal cliff, see the Economic Policy Institute’s September policy brief, “A fiscal obstacle course, not a cliff” by Josh Bivens and Andrew Fieldhouse.  It’s very wonky and can be hard to follow in spots, but it’s only 13 pages of text.  And it has a wonderful table on page 7 that lists the various laws that expire at the end of this year and shows both how much each expiration will reduce the deficit AND how many jobs it will kill.  The fiscal cliff is not just the Bush tax cuts – which will lop $64 billion off the 2013 deficit if only the high-income cuts expire, but will also cut 102,000 jobs.  The cliff also includes Obama’s special recession-fighting unemployment compensation program (whose expiration will reduce the deficit by only $39 billion but will eliminate 448,000 jobs) and the expiration of the payroll tax cut (which will reduce the deficit by $115 billion but at the cost of killing more than one million jobs).

Bivens and Fieldhouse use these calculations to show how a jobs-sensitive strict cost-benefit analysis would lead to renewing (and even enhancing) federal government spending programs rather than renewing any of the tax cuts, while also showing that tax cuts targeted to lower- and middle-income workers create more jobs than those going to the wealthy and other high-income earners.  Tax increases do kill jobs, just as Republicans always say, but cuts in government social spending kill many, many more.

There is a lot of complicated economics here, and the politics of avoiding the fiscal cliff may be even more complicated.  I sympathize with the President and Congressional Democrats for having to work through these daunting problems while dealing with House Republicans.  But the President started on the wrong foot Tuesday night by focusing on “reducing our deficit.”  That’s a job killer if you do it now and if you do it the wrong way.  With an economy growing at 2% (at best) and an unemployment rate hovering around 8%, the very last thing we need now is to reduce our deficit.  Rather, first we need to preserve our deficit and the jobs it is supporting.  And then we need the President’s American Jobs Act with its increased spending for infrastructure and for state and local governments to hire and rehire “teachers, cops, and firefighters” – namely, the stuff he campaigned on, the promise of “Forward.” Reducing our deficit and a long-term plan for managing our accumulating national debt are for later, not now.  Right now we need jobs, millions of them.  And we need our newly elected President paying attention to that in a way he has not since February of 2009.

Jack Metzgar

Chicago Working-Class Studies

Obama Will Cruze to Victory

“And the winner is…”

(Drum roll—sound of envelope being ripped open.)

“…Barack Obama.”

I’m going to be honest about this: when it comes to predicting the outcome of the 2012 presidential contest I’ve been downright Romneyan.  It’s not something I’m proud of, but unlike the GOP nominee who can’t remember what he believed an hour ago, I haven’t developed a case of Romnesia or tried to Etch-a-Sketch my shifting prognostications out of existence. What hasn’t changed is my belief that the outcome of the presidential contest in Ohio would determine who would occupy the White House for the next four years.

A little over a year ago—and months before he had sewn up the GOP nomination–I believed Romney was on a clear path to victory in the Buckeye state.  He was the least buffoonish character in the cast of clowns that was seeking the Republican nod, he was and would continue to be awash in campaign cash, and his record as a Senate candidate and governor of Massachusetts would enable him to move from the far right-wing toward the center after he secured the nomination.

Other factors also pointed to a Romney win. Though recovering, the economy was weak, unemployment was uncomfortably high, and President Obama was being blamed—his job approval rating was hovering at 42%.   The Democratic Party’s dispirited and disillusioned base had not turned out in 2010, enabling the GOP to capture every statewide office.  White working-class males who had never been enthralled with Mr. Obama remained skeptical if not downright hostile, and the state’s conservatives were eagerly awaiting the opportunity to toss him out of office. Ohio was, in my opinion, ripe for the taking.

Obviously, my opinion has changed. Since mid-summer I’ve been calling the race for the President and, despite some trepidation caused by his lackluster performance in the first debate and the public’s and the media’s willingness to give Romney a pass for being the most disingenuous and dissembling candidate to ever seek the presidency, I am confident Mr. Obama will win Ohio tomorrow on his way to racking up a comfortable margin of victory in the Electoral College.

Why do I now believe that Mr. Obama will prevail in a contest he could easily have lost?

Regardless of the billion dollars spent by the candidates, political parties, and Super PACs to air more than 1,000,000 TV ads, President Obama will win Ohio and the White House because he thought it was a good idea to save the domestic auto industry and Mitt Romney did not.

The President will win because his commitment to an industry that employs one in eight Ohioans has strengthened both the state’s economy and his standing among working-class voters. This issue has provided voters with an unobstructed view of the difference between the two candidates, their credibility, and the effect each man’s philosophy of government could have on the future of our nation.

The auto rescue demonstrates that government can exert a positive impact on the economy.  Unlike TARP and the President’s overall stimulus plan, which primarily benefited Wall Street, the auto rescue paid off for Main Street, especially Main Streets across Ohio.  It preserved good-paying, blue collar manufacturing jobs, enabled GM and Chrysler to invest nearly one billion dollars in new plants and equipment, and positioned the companies to compete effectively in the global marketplace.

Yes, there was pain involved.  The thousands of union members who lost their jobs, the car dealers who were forced to close, and the Delphi retirees whose pensions shrunk will tell you just how much.  But it’s also important to note that the auto rescue forced fat cat members of the 1% to join the working families who make up the 99% in paying the price for mistakes made by corporate America.  Along with being fundamentally fair, the substantial “haircut” that bond-holders and other investors were forced to take was an essential element of the financial restructuring that put the two auto companies on the road to recovery and literally saved millions of jobs.

In the end, the auto rescue bolstered Mr. Obama’s electoral prospects because it produced tangible results for American workers—the type of tangible results that have yet to be generated by the larger stimulus plan or health care reform.  The type of results Romney and the Republicans can’t lie about or distort.  The results are as real as the paychecks that millions of workers receive each week, as real as the thousands of Chevy Cruzes that roll off the Lordstown assembly line each week, as real the pride workers feel when they read that the car they make is the best-selling model in America.

Unfortunately for Mr. Romney, everything that’s wrong with his politics, his campaign, and his philosophy was encapsulated in his stance on the auto rescue as expressed in these 84 words from an op-ed he wrote for the New York Times:

Let Detroit Go Bankrupt

If General Motors, Ford and Chrysler get the bailout that their chief executives asked for yesterday, you can kiss the American automotive industry goodbye. It won’t go overnight, but its demise will be virtually guaranteed.

Without that bailout, Detroit will need to drastically restructure itself. With it, the automakers will stay the course — the suicidal course of declining market shares, insurmountable labor and retiree burdens, technology atrophy, product inferiority and never-ending job losses. Detroit needs a turnaround, not a check.

Clearly, Mr. Romney was dead and demonstrably wrong.  That inconvenient truth and the fact that the op-ed can be read by anyone who visits the Times’s website hasn’t prevented Mr. Romney from attempting to flip-flop on this issue as he has on so many others, including abortion, health care, the environment, and gay rights.

But no matter how he twisted and turned, no matter how much he lied, he couldn’t get out from under the op-ed.  He could never gain traction in Ohio where voters–white working class voters in particular–were living the success of the President’s plan.

How did Mr. Romeny deal with his inability to pull ahead in the state he had to win?

He simply told bigger lies in TV and radio spots that claimed Chrysler was moving production of its Jeep models to China and GM was shipping jobs and capital overseas.  The ads were so misleading and offensive that Chrysler and GM officials vehemently denounced them, the media finally held him accountable for dissembling, and the public reacted with anger and revulsion.

Predictably, his poll numbers started to slip.  Romney had finally been hoisted on the petard of his own mistruths.

Tomorrow, the man who rescued the domestic auto industry will defeat the man who wanted to let it die and then lied about it.  That says a lot about Ohio voters.  Confronted, at last, with the undistorted, incontrovertible truth, they are poised to reward a President who did the right thing with four more years in the White House.

Now that we know who will win, the big question—the one that will obviously be discussed once the dust of the election clears—is what Mr. Obama will do with the opportunity Ohioans are about to give him.  Will he, as he did with the auto rescue, focus on investing in Main Street by making sure that working-class families have a real chance to grab their piece of the American Dream or will he revert to Wall Street-centered policies that undermined his credibility, dampened the enthusiasm of the Democratic base, and placed his prospects for reelection in jeopardy?

I have a prediction, but I’m not ready to make it public just yet…

Leo Jennings

“Job Creators” and “Capitalists Like Me”

It’s one thing when one of the world’s wealthiest capitalists argues that he is not being taxed fairly because he is not being taxed enough, as Warren Buffett did last August.  But it’s quite another when a wealthy capitalist explains why the kind of gross inequality of income the U.S. now has is actually bad for business.  That’s what Nick Hanauer did in a TED University talk last month about “job creators”:  “In a capitalist economy, the true job creators are consumers, the middle class. And taxing the rich to make investments that grow the middle class, is the single smartest thing we can do for the middle class, the poor and the rich [emphasis added].”

Hanauer is a super-wealthy venture capitalist who was an early investor in Amazon.com and founded a couple of internet start-ups that were bought by Overstock.com and Microsoft – the latter for a tidy $6.4 billion.  In his TED talk he denied being a “job creator,” and with directness, humor, and plain-spoken common sense, he attacked the notion that folks like him create jobs.  It’s only 6 minutes long, but it sparked an internet fury when TED refused to post the speech on its web site, as it ordinarily does.  Time Magazine’s links-rich retrospective of the controversy that forced TED to post the speech can bring you up-to-date if you didn’t know about it.

Certifiably successful capitalists (and Buffett and Hanauer make Republican Presidential Nominee Mitt Romney’s $250-million net wealth look mediocre) arguing that they should be taxed more is the classic man-bites-dog story that is supposed to attract journalists.  In both cases Buffett and Hanauer did eventually get a fair amount of attention, but only because they are savvy entrepreneurs who made extraordinary efforts to get that attention.  Once attended to, however, they are treated as outliers, interesting personalities, eccentric curiosities – sort of like men who bite dogs – rather than initiating discussion about the issues they tried to raise.

Who or what creates jobs?  How could our tax system be fairer – and simpler?  And what is the connection between jobs and taxes?  These are big issues that should be at the center of the political debate in this year’s election, as the two mainstream political parties have very different answers to them.

First, there is a sense in which capitalists – whether investors, owners, or top management – do create jobs.  They make decisions to start or expand businesses that require new employees.  The question is why they decide to start or expand businesses.  Is it because they have a lot of spare money, or is it because they think they can sell lots more of the product or service they provide, thereby making a handsome profit?  In general, both spare money and profit opportunities based on potential consumer demand are necessary.  But what is more necessary at any given time varies in specific economic circumstances, and the question becomes an empirical one about our current circumstance.   Here’s where facts and figures matter, and we are fortunate to have an extremely clear set of them to answer these questions.

There is lots and lots of spare money in the hands of rich people and corporations, so much that they don’t know what to do with it all, and there’s not enough in the hands of workers and consumers.  This could be a temporary situation based on the continuing slow growth of the Great Recession, but the well-documented huge and growing inequality of income in the U.S. clearly suggests that there is a long-term and worsening problem of insufficient consumer demand.  When the top 10% get about half of all income, with the top 1% getting the lion’s share of that, the bottom 90% does not have sufficient income to provide the consumer demand that would provide enough profitable opportunities for capitalists to use their spare money to expand businesses and, thereby, create jobs.  This is what Nick Hanauer means when he says “the true job creators are consumers,” not “capitalists like me.”

The Republican economic program – whether Mitt Romney’s, the Ryan Plan that was passed in the House of Representatives more than once, or the approach of GOP state governors such as Wisconsin’s Scott Walker – responds to a diagnosis of the problem that will not stand empirical scrutiny.  Reducing taxes on corporations and wealthy individuals assumes that capitalist “job creators” are not creating enough jobs because they do not have enough spare money, which is clearly not the case.  Massive, if largely unspecified, cuts in government spending at all levels will further reduce total demand (the sum of consumer, investor and government spending) and, thereby, economic growth.  The combination of cutting these taxes and government spending will further worsen income inequality, making the insufficiency of consumer demand even worse – initiating a new and potentially “greater” recession, as it has in England.

The Democratic economic program – from President Obama’s weak and late-arriving American Jobs Act plus the tax plan in his 2013 Budget to the full-throated Congressional Progressive Caucus’s People’s Budget – increases taxes on top earners and increases government spending for a wide variety of activities that would increase the number of jobs and, thereby, overall consumer spending power.  It assumes that rich people and corporations have enough spare money and that workers and consumers need more.

These are startlingly different directions.  They cannot both be right, and compromise between them, besides being very difficult, would likely involve dilution not correction.  But these are the choices we face this year as American voters.  Both facts and logic favor the Democrats, but that will matter only if they, and especially the President, have the wit and courage to insist on explaining them to so-called “low-information voters.”  So far the President has favored gimmicks like the Buffett Rule rather than clear explanations of why a thorough redistribution of wealth and income is necessary and in the common good.  The President and other Democrats need to make their economic case clearly and boldly.  They should not wait for the occasional capitalist superstar to bite a dog.

Jack Metzgar

Chicago Working-Class Studies

 

 

Right-To-Work Laws and Working-Class Voters: Another Teachable Moment

As a professor, I am always interested in teachable moments. When it became apparent in late 2010 that Ohio Governor John Kasich planned to introduce legislation depriving public sector workers of basic bargaining rights, I told reporters that it was a teachable moment about the role of public sector workers. After all, they were the ones who made all other work possible.

Both organized labor and community groups quickly embraced the idea that Ohio Senate Bill 5 could be a teachable moment.  They launched a hugely successful campaign to put a referendum on the bill, Issue 2, on the November ballot, and then led the fight to persuade voters to oppose the issue and overturn the bill.  Kasich’s attack and the forceful response to it may make it possible for Obama to win Ohio in 2012,  despite economic conditions and 2010 election results that would seem to prime the state to swing to the right this time.

Another teachable moment has arrived now that Republicans have introduced Right-to-Work legislation in New Hampshire and passed it in Indiana.  Similar legislation may be on the way in Michigan, Minnesota, and Ohio. Such moves may well undermine the historic white working-class support of Republicans, and that could bode well for Obama’s re-election.

RTW legislation differs from past Republican attacks on unions. As labor historian Joseph McCartin has recently chronicled, while courting union endorsements and union voters, Republicans have pursued strategies that, over the last 30 years, have quietly undermined administrative agencies and government policies that facilitated the formation of unions.  The result has been the erosion and marginalization of organized labor and its ability to raise wages, improve workplace safety and health, and advance representative democracy not only in the workplace but in the body politic.

The current RTW legislation is a direct attack on organized labor and its ability to represent the economic and political interests of both the rank and file and those non-union workers whose wages and benefits are enhanced by employers to avoid unionization. No doubt, the role of unions in building and rebuilding economic security and the middle class, advancing workplace rights, and promoting political democracy will be a central part of the curriculum for this teachable moment.

All the current Republican candidates have refused opportunities to speak to union leaders.  Instead, they have signed on to the anti-labor agenda, including RTW legislation, proposed by conservative corporations, business groups, and donors.  Together with their other economic proposals, they have established a Republican brand that embraces and even celebrates a distorted sense of morality and inequality of income, wealth, and power.

But as Governors Kasich and Walker have found out, “as you sow so shall you reap.”  The fight against RTW proposals and their supporters will be particularly fierce in the battleground states, especially the Rust Belt swing states of Wisconsin, Ohio, Michigan, and Minnesota.  Political analysts Ruy Teixeira and John Halpin consider those states crucial to Democratic chances in 2012. In addition, RTW initiatives have now put projected GOP states with relatively small labor movements, such as New Hampshire and Indiana, into play for 2012.

If RTW legislation inspires union members to support Obama in November, their family members are likely to follow suit. In New Hampshire & Indiana, about 10% of voters belong to unions, but union households make up about 20% of voters. This is smaller than in the Rust Belt battlegrounds, where 26% to 34% of voters belong to union households, but that 20% may still make a difference. Further, the effect of the anti-union push could also cross state borders by galvanizing labor and community activists from safe Democratic States into neighboring states in the 2012 election.  Supporters in Illinois, Michigan, Ohio, and even Washington State organized phone banks to support the fight against the Indiana RTW bill.

Republicans also forget that their attacks on unions can turn off long-time Republican voters.  In Ohio, the demonization of teachers as part of Issue 2 moved many Republican educators toward the Democrats.  Educators are now the single most unionized group of workers in the U.S., and many continue to react strongly to conservative attacks, both in states where they are being targeted and across the country.

Further, while conservatives may hope to undermine union political influence with RTW initiatives, they don’t understand the continuing power of unions to mobilize workers.  Kasich’s attack on public sector workers was overturned last year not because so many dollars flowed from unions into the Issue 2 campaign, though enough money was raised that We Are Ohio, the union-based organization that led the fight, is still spending the millions it has left.  What really mattered was the person-to-person, door-to-door effort.  Organizing, it turns out, still works.

All of this has not gone unnoticed by moderate Republicans, and many now believe that the party should not have taken this route.  Ross Douthat and Reihan Salam have argued that the Republicans missed multiple opportunities to garner greater working-class and union support by crafting policies that, while socially conservative, would embrace “limited government pragmatism” that met the needs and aspirations of working people. They see many Republicans as having confused being “pro-market with being pro-business,” and failing to make a distinction between policies that “foster dependency and those that foster independence and upward mobility.”  Rather than directly attacking the very existence of union, they encourage the development of new forms of unionism that are better suited for the new economy and enhance employment opportunities and economic advancement.

Importantly, the Republicans seem to have confused anti-labor policy with real economic policy. Rather than pursue the kinds of moderate revisions suggested by Douthat and Salam, Republican leaders, cheered on by conservative corporate donors and lobbyists, have launched an attack on labor unions that may well lead to the reelection of President Obama and further weaken an already divided Republican Party.  Consequently Republicans, especially Michigan Governor Rick Synder and Governor Kasich, are not publically supporting initiatives by conservative groups, such as the effort by Ohioans for Workplace Freedom to put a RTW referendum on ballots this November. In the current conservative political environment, their silence is deafening.

John Russo, Center for Working-Class Studies

The Diversity of the White Working Class

The recent firestorm of debate stirred by Thomas Edsall’s New York Times report of a behind-the-scenes plan by “Democratic operatives” to “explicitly abandon the white working class” reveals more about the degraded state of political journalism than it does about either Democratic operatives or the working class.

Edsall is a highly respected member of the political punditry who has made a good living covering and analyzing American politics for more than 30 years.  So you’d think he’d know that three items in his lead paragraph are spectacularly false:

• The “Democratic operatives” referred to as hatching the abandonment plan, Ruy Teixeira and John Halpin, are not employed by the Democratic Party and are, in fact, part of a diverse group of independent Democratic analysts who are seeking to influence the party’s, and especially President Obama’s, 2012 election campaign.  They are influential, but their views are countered by many others, most of whom pay no attention whatsoever to a “working class.”
• Teixeira’s and Halpin’s new paper, The Path to 270: Demographics versus Economics in the 2012 Presidential Election, not only does not advocate that the Dems abandon the white working class, but systematically weighs the importance of the white working-class vote in the 12 most important battleground states in next year’s election.  Indeed, as Edsall must surely know, Teixeira, writing with various co-authors over the past decade, has done more than any other political analyst to call attention to the existence of a “working class” in our supposedly “middle-class society.”
• Finally, there is this howler:  “For decades, Democrats have suffered continuous and increasingly severe losses among white voters.”  How could Edsall not know how wrong that is? According to his own newspaper’s  comprehensive report of exit polls since 1972, while us white folks have been strongly Republican in presidential elections for decades, we are substantially less so than we used to be.  From 1972 through 1992, for example, whites voted for Democratic presidential candidates only 36% on average, but from 1996 through 2004 the average was 42%, and Obama got 43% in 2008.  Indeed, in the ten presidential elections from 1968 through 2004 white men (the most Republican of demographic groups) on average voted 35% for Dems, but gave Obama 41% of their vote in 2008. Continuous electoral losses for sure, but the opposite of “increasingly severe.”

These are all pretty big mistakes for a political pro.  Edsall’s misreading and mischaracterization of Teixeira and Halpin is probably willful – in order to argue against a straw man or, cable-news style, simply to get attention.   The confusion about white voters, on the other hand, is likely the result of sheer ignorance shared by many in his craft.

In their new study Teixeira and Halpin break down the projected 2012 electorate into three parts:

• People of color (blacks, Latinos, Asians & self-identified “others” of all classes), an increasingly large proportion of the electorate that should constitute 28% in 2012.  This group gave Obama 80% of their vote in 2008, thereby overcoming a 55 to 43% McCain majority among white voters.
• The white middle class (whites with at least a bachelor’s degree), also a growing portion of the electorate that should be 36% of all voters next year.  47% of this group voted for Obama in 2008.
• The white working class (whites without a bachelor’s degree), a declining group in the electorate that should also be 36% in 2012 – the first time in American history that these two groups of whites will make up equal proportions of voters.  In 2008 the white working class nationally gave Obama only 40% of its vote.

Teixeira and Halpin are optimistic about the long-term future of Democrats as we move toward a “majority minority” population by 2050, with people of color (the strongest Dem group) increasing their share of the electorate with each election cycle and the white working class (the strongest GOP group) decreasing its share.  Another demographic reason for optimism, according to Teixeira and Halpin, is that the “millennial” generation (people now aged 10 to 33) has been a strong Democratic group thus far and will also grow over the next several election cycles.  Whites aged 18 to 29 in 2008, for example, were the only white age group that gave Obama a majority – 54%, while whites aged 30 and up voted Dem in the 41-42% range.

While long-term demographics favor Democrats, stagnant economic growth and high unemployment go strongly against them in 2012.  Getting to 270 measures these demographics against economic conditions and Obama’s approval ratings in the 12 battleground states.  This is the part of their analysis that is the most complex and interesting, as each state is perversely unique in how these variables play out.  Michigan, for example, has one of the largest white working classes in the country (52% of the electorate in 2008), but they voted against the national trend, giving Obama a majority of their votes in 2008, but the white middle class in Michigan did not.  Today Michigan has one of the highest unemployment rates in the country (11.1%), but people in Michigan (all classes and colors combined) give Obama a well-above average job approval rating of 50%.

Going state by state and region by region, you get a different picture of the white working class and of the white vote in general.  It turns out that whites, including the white working class, are a lot more diverse politically than the national numbers indicate.  All national numbers – including everyday poll numbers — are distorted by just how one-sidedly Republican white voters are in the South.  Since 1980 white southerners have voted in the low 30s for Democratic presidential candidates, while white voters in the rest of the country have been trending up toward the high 40s.  Indeed, whites in the Northeast have given Dems a majority in the last four presidential elections, while whites in the Midwest and West voted 47% and 49% respectively for Obama.

For an extreme example of how diverse white working-class voters can be, consider this: in 2008, 57% of them voted for Obama in Massachusetts compared with only 9% in Alabama.   Besides Michigan and Massachusetts, 12 other states had white working-class majorities for Obama in 2008: Connecticut, Delaware, Maine, New Hampshire, Rhode Island, Vermont, Illinois, Iowa, Wisconsin, Hawaii, Oregon and Washington.

The broad patterns that Teixeira and Halpin assert do apply in most states, and the terms of their analysis are interesting and insightful in every state.  They do not do enough, in my view, to emphasize the diversity among white voters and especially among working-class whites – by state and region, by age, by religion, and by whether they are in a union household or not.  But their state-by-state analysis illustrates again and again what a wildly, quirkily diverse group working-class voters are.  And unlike the various pundits who have been commenting on their work, they never purport to guess at what “the white working class” thinks and feels because they know they’re not all Archie Bunker and his wife Edith and that some folks have been a-changin’ in the past 30 years.

Jack Metzgar, Chicago Center for Working-Class Studies

How Obama Can Win Ohio

Note: This week’s blog is a repost of John Russo’s column from Friday’s Opinionator blog at the New York Times.

The decisive referendum vote to repeal the bill that would limit collective bargaining by public sector unions has changed the political landscape in Ohio. Tuesday’s vote on Senate Bill 5 could and should be a harbinger for the 2012 presidential election. By mounting a direct assault on public sector workers and the unions who represent them, Gov. John R. Kasich of Ohio may have done more to help Barack Obama win re-election than anything Obama’s political team is likely to do over the next 12 months.

With Ohio’s continuing high unemployment rate (9.1%!, just like the rest of the U.S), it had seemed unlikely that President Obama could win Ohio, and without Ohio, he’d have difficulty getting re-elected. The same factors make re-election a challenge for Senator Sherrod Brown, an Ohio Democratic and one of the most pro-labor members of the Senate. But Kasich, the Republicans in the Ohio legislature and outside conservative financers and think tanks like the Buckeye Institute, may have done Obama and Brown a big favor.

Karl Rove described Senate Bill 5 as a much “more extensive reform” to public sector unions than was enacted in Wisconsin, in part because the Ohio version included firefighters and police officers. While the protests in Columbus were smaller and received less national attention than those in Madison, unions and community groups in Ohio organized a ballot initiative with 10,000 volunteers circulating petitions in all 88 counties. Over 1.3 million Ohioans — more than five times the number required to put the initiative on the ballot — signed the petitions.

Despite a large influx of money from conservative organizations like Citizens United, Freedom Works, and Restoring America, Ohio voters repealed Senate Bill 5 by an overwhelming 22 point margin — 39% yes, 61% no (a no vote was pro-union). Democrats and independents voted overwhelmingly against the measure, and, if pre-election polls are correct, 30% of Ohio Republicans also voted to reject Senate Bill 5.

This should be good news for Obama. While Ohio is notorious for swinging back and forth between supporting Republicans and Democrats, its 18 electoral votes are especially important for Republican candidates. It’s almost impossible for a Republican to win the presidential election without Ohio, and that means winning significant support among union household voters.

According to CNN exit polls from the last few elections, union household voters remain a strong presence in Ohio, even after more than three decades of de-industrialization. Twenty-eight percent of Ohio voters come from union households, compared with 23 percent nationally. In 2008, they underperformed for Obama, who won 56 percent of their votes in Ohio versus 59 percent from union households across the country. No similar data exists for the 2010 midterm election, but many labor leaders admit that Kasich beat the Democratic governor, Ted Strickland, in part because voters from community groups and union households either voted Republican or stayed home (essentially giving half a vote to Kasich).

If union households in Ohio lost their enthusiasm for Democratic candidates in recent years, Kasich’s actions, together with the national Republicans’ just-say-no politics and kill-Medicare initiatives (like the Paul Ryan budget), have made the Democrats look a lot better than they did in 2010.

It all comes down to math. In 2008, 2,933,388 Ohioans voted (or 51.5%) for Obama, 258,897 more than McCain won. If union households maintain their proportion of the electorate, and if just 1 percent more of them vote for Democrats, they can add 15,700 votes to the Democratic vote and subtract the same number from the Republicans – a swing of more than 31,000 votes. If Ohio’s union household voters increase their support for Democrats by 3 percent – that is, if they match the national average for union household voters – they would generate 47,100 additional votes for Obama, a swing of 94,200 votes. That alone could give the president Ohio’s electoral votes.

But because of Senate Bill 5, we might reasonably expect an even larger shift. A recent Quinnipiac poll suggests that the anger generated by the anti-union bill and the organizing fostered by the effort to overturn it has 70 percent of union household voters planning to support Obama and the Democrats in 2012. That translates into an increase of 219,829 votes for Obama, a swing of almost 440,000 votes. Put differently, a mobilized Ohio labor movement with 742,000 members, including many teachers, police officers, and firefighters who have often voted Republican, will be more likely to vote for Democrats in 2012.

This gives Obama the opportunity to score a big victory in Ohio, but that won’t happen solely on the basis of Senate Bill 5. The president must offer a positive economic vision and a program for economic change. The American Jobs Act – even if it must be pushed through piecemeal — is a good start, as are the president’s recent actions on mortgages and student loans.

Such positions will also help Senator Brown’s chances of re-election, but in 2012, in Ohio at least, the usual pattern of members of Congress benefiting from presidential coattails could be reversed. Brown’s solid support for organized labor, community groups and those who have been most hurt by the continuing economic crisis — positions that resonate with the millions of Ohio voters who overturned Senate Bill 5 — may help Obama more than anything Obama has done will help Brown.

None of this is guaranteed, of course. In order for the battle over Senate Bill 5 to influence the 2012 election, those who have organized so effectively to defend unions must continue to work together. Unions will have to keep educating members and reach out to those outside of the labor movement. They will also have to work closely with community and neighborhood groups like the Ohio Organizing Collaborative, which played a pivotal role in community organizing around Senate Bill 5.

None of that will be easy. Competing interests within and between organized labor and community organizations make the coalition very fragile. The A.F.L.-C.I.O. is relatively weak in Ohio, and some tensions exist between public and private sector unions. Meanwhile, Ohio Republicans are threatening to put parts of Senate Bill 5 through in a series of smaller bills next year. Without solidarity across labor organizations, the coalition that fought so well against one big bill could fracture. It may be that other issues won’t have the unifying effect of Senate Bill 5. After all, the same voters who overturned that bill approved a constitutional amendment barring the implementation of the individual insurance mandate of the Patient Protection and Affordable Health Care Act.

But if the organizers of the campaign against Senate Bill 5 can hold together and if the Obama campaign can tap into the anger and solidarity of that fight, Tuesday’s vote could turn out to be the turning point in the 2012 election.

 

John Russo, Center for Working-Class Studies

Empathizing with Capitalists

Once upon a time, in the 1970s, there probably was, as political conservatives and the business class claimed, a capital shortage.  Union power, rising wages, and a tax-and-spend “liberal consensus” had increased household incomes for three decades at the expense of profit rates, and this left businesses without sufficient capital to invest in all the profit-making opportunities provided by expansive consumer spending power.  This, so the story goes, was the root cause of the virulent 1970s inflation.  In the famous Keynesian formula for macroeconomic demand, there was too much spending power in the hands of consumers and government, and too little in the hands of investors.  Capitalists were short of cash, and the solution was clear: get them more, a lot more.

Short term this was accomplished through President Reagan’s tax cuts for the rich in the early 1980s.  But long term it required “breaking the back of the American standard of living,” as I remember Business Week bluntly arguing at the time.  This required limiting, eroding, and chipping away at a whole set of institutional structures built up since the 1940s around labor unions and government.

That mission has now been accomplished – and accomplished all too well.  We now have exactly the opposite problem: too little spending power in the hands of consumers and too much in the hands of investors.  Capitalists are said to be anxious as they sit on some $2 trillion in cash reserves, while real wages and household incomes decline.  There simply is not enough consumer demand to provide profit-making opportunities for capitalists, just the opposite of the 1970s.  The solution is again clear: get more money in the hands of consumers.  In the long run that means we need higher wages, much higher wages, but tax changes and stimulus programs can do a lot of good in the short term, and they are a good way to get started.

Just as in the 1970s the solution was to redistribute spending power from consumers to investors, we now need  redistribution in the other direction, from investors to consumers – not for the purpose of achieving a more equitable distribution of income (as desirable as that is) but, as in the ‘70s, to get the economy growing strongly again.  Raising taxes on top earners to fund job creation and raising wages for low earners is not just about “fair shares” (though it is very much about that, too).  It is necessary to reinvigorate our fat and weary form of capitalism.

The historical symmetry of these opposing problems and solutions is important because current Republican rhetoric about “job killers” and “job creators” assumes that there is always a capital shortage and, if that were true, throwing money at rich people might be part of the solution.  It’s important to realize that this idea once had a legitimate intellectual provenance, disputed to be sure but with a factual basis. That factual basis is gone and has been for quite a while.  With $2 trillion in corporate cash still sitting on the sidelines, it’s hard to argue that we need to overcome a capital shortage!

President Obama’s American Jobs Act implicitly recognized, at least on a temporary basis, that strong economic growth going forward depends on redistributing spending power from capital to labor, from investors to consumers.  For example, it included payroll tax cuts, extended unemployment compensation, and direct federal spending to reemploy teachers, cops, firefighters and construction workers – all paid for by taxing millionaires.  If it had passed, the Act would have increased economic growth by channeling spending power to workers and consumers who very much need it and would, therefore, spend most of it quickly, thereby stimulating other economic activity, leading to more jobs, more income, more consumer spending, and so on.

This is not an aberration.  Much of Obama’s program from the very beginning – the initial stimulus package, semi-universal health care, the Making Work Pay tax credit – has been redistributive in the right direction.   What is lacking is a clear Presidential explanation of the underlying problem – the long-term structural imbalance between investment capital and consumer spending.  Indeed, the President will not admit, even when badgered by Bill O’Reilly earlier this year, that he favors any redistribution of wealth.

Our President denies being a socialist, and I believe him.  For all I know, he may actually be philosophically opposed to the redistribution of income and wealth, seeing his own various redistributive programs as merely temporary expedients.  But someone in his administration understands that the U.S. economy needs more income in the hands of workers and consumers.  Even Business Week and the National Federation of Independent Businesses are beginning to understand it.  So do thousands of Americans occupying Wall Street and other public spaces around the country.  Explaining that – and pounding away at the need for increasing incomes in any way we can think of, as conservatives did with “the capital shortage” back in the day – might actually be more valuable than passing legislation.  Plus, such arguments increase the chances of passing the necessary legislation.

A stronger and more insistent focus on growing incomes in order to grow the economy, coming from the White House and Congressional Democrats, would draw attention to and bolster movements already underway to combat wage theft, pass living wage legislation, and help workers organize unions and other forms of workplace collective action.  All this not just to help poor unfortunate workers, but also to give our capitalists the boost they need.  Greatly increasing consumer demand is the only thing that can provide the myriad of investment opportunities that will save them from their current malaise.

Thus, far from “punishing” the rich and multinational corporations, reducing their cash hordes by increasing wages and average incomes is really for their own good.  I like this paternalistic empathy – especially in contrast to demonizing a whole class of people that I have almost no direct experience of – but I would not indulge that feel-good feeling if it weren’t also so clearly true and urgent.  The best way to give our capitalists a hand up and not a handout is to increase wages and average households’ incomes.

Jack Metzgar, Chicago Committee for Working-Class Studies

The Working Class and the Great Capitulator

When I began writing this piece its focus—and the act that earned Barack Obama the moniker “Great Capitulator”—was his decision to cave into Republican senators and Wall Street fat cats and withdraw his nomination of Elizabeth Warren to head the new Consumer Financial Protection Bureau.  The CFPB, conceived by Warren in 2007, was a key component of the Dodd-Frank financial reform bill and has been vilified by big money interests and their toadies in Congress from the moment it was proposed.

Professor Warren, who chaired the TARP Oversight Committee and was fiercely critical of the too-big-to-fail banks and brokerages that raked in billions in bailouts funded by working-class tax dollars, is widely recognized as the nation’s premier consumer advocate and most persuasive voice for reform of the financial and credit markets. Along with being an outspoken fighter for working-class families victimized by predatory lenders, Warren is the Leo Gottlieb Professor of Law at Harvard, where she has taught bankruptcy, contract, and commercial law since 1992.  By any measure she was, as Mr. Obama noted in announcing her appointment, the person most qualified to chair the CFPB.

Republicans and Wall Street shared that view, as was made obvious by their vehement opposition to her nomination.  The last thing they wanted was a loud and coherent voice for reform—especially because the only other regulators with enough guts and independence to speak truth to Wall Street’s power, the FDIC’s Sheila Bair and the SEC’s Mary Schapiro, no longer held their positions.  It seems Mr. Obama, who appears to cower in the shadow of Alan Greenspan and Robert Rubin, didn’t want to hear her voice either.

While his surrender on health care, his abandonment of the Employee Freedom of Choice Act, and his decision to “stimulate” the economy by directing more money to Wall Street than Main Street were all slaps in the face to working-class Americans, I was prepared to argue that allowing the GOP and the financial industry to kill Warren’s nomination was the most egregious of the cowardly acts that have characterized this presidency, because it ended any hope that the institutions who are blithely destroying the American Dream would finally be forced face a worthy adversary with a bully pulpit who knew how to use it.

Man, was I wrong.

I was wrong because the Faustian bargain Mr. Obama struck with John Boehner and the modern day Know Nothings who comprise the Tea Party in order to gain an extension of the nation’s debt ceiling makes his previous betrayals seem piddling.  And don’t be mistaken, the betrayal doesn’t lie in the fact that he caved on the issue of whether deficit reduction should be achieved via spending cuts alone or through a combination of cuts and revenue increases.  It lies in the fact that he engaged in the debate at all.

Rather than lending credence to the specious argument that the deficit is the most pressing economic problem facing the nation today, the president should have said that the best, the only way to deal with our long term fiscal dilemma is to grow our way out of it by doing what it takes to put people back to work.

He should have embraced the philosophy that has guided Democratic presidents for nearly 80 years: that tough economic times call for more spending, not less. Spending on infrastructure projects, the development of alternative energy sources, research and development, job training and education.  He should have demanded that we invest in America’s greatest asset: Americans.

Instead, by embracing the ridiculous notion that cutting trillions in spending is the cure-all for what ails the body politic, the Great Capitulator has all but guaranteed that the investment needed to fuel both recovery and deficit reduction will never be made.

Whether wittingly or unwittingly—and it’s hard to say for sure which because this administration has a penchant for committing tactical errors as well as for turning its back on its core constituency—Mr. Obama has now put himself in a rhetorical box that will make it impossible for him to credibly argue that the government should spend money to stimulate the economy, even as working-class families find themsevles staring into the barrel of double-dip recession.

While some may compare Mr. Obama’s decision to join the Republicans in attacking the deficit to Bill Clinton’s partnering with Newt Gingrich to substantially alter the welfare system, there is one very critical difference between the two: Mr. Clinton never abandoned the core Democratic principle that government had an essential role to play in making life better for the American people.

Mr. Obama, for reasons known only to him, has done exactly that.  He is now in league with idealogues whose real goal has nothing to do with reducing the deficit and everything to do with dismantling what’s left of the social safety net that has been woven by a succession of Democratic presidents and Congressional leaders since 1933.

In so doing, he has abandoned the constituency that played a key role in his 2008 victory and renounced the principles and philosophies that constituency holds dear. Throughout 2010, Working-Class Perspectives warned Democrats for ten months that they could not expect working-class support and that people would stay home. Guess what happened.

 

The Democrat operatives running the Obama reelection campaign calculate that the working class has no place to turn politically, and they are trying to gather narratives to place a positive spin on his capitulation.  No doubt, how the members of the working class, people of color, seniors, women, and union members react to this latest betrayal may well determine who occupies the Oval Office in January of 2013.

 

If it’s not Mr. Obama, the Great Capitulator will have no one to blame but himself.

 

Leo Jennings