There’s a plethora of analysis, criticism, praise, and commentary in this AMs papers on the big speech last night, to which I have only a little to add. As usual, start with Wonkbook but as far as I could absorb, the general consensus is that the President laid out an ambitious, progressive agenda that will be a very heavy lift in Congress.
So here are a few random thoughts on the political economy of the domestic economic parts of the speech:
–Clearly, here was a democratic president thinking about what government can do to help solve the most important economic challenge we face: the persistent gap between economic growth and middle class prosperity and opportunity. President Obama was elected twice to address that issue—it is what he and the VP ran on and won on both times. In his first term, his major economic challenge was to first restore growth, and he was somewhat successful, though that growth is still too slow. I heard last night’s domestic agenda as re-growing the connective tissue that would once again deliver more of the growth to middle class and poor.
–Note that this is not obviously a “growth agenda.” This idea that our economy will grow faster and better and longer if the middle class gets a larger slice of the growth sounds right but I’ve not seen the evidence, and I’ve looked pretty hard for it (I’ve got a paper on this coming out soon). But there is no question that a recovery that is more broadly shared is more just, feels a lot better, and, if it persists, can begin to chip away at the true scourge of persistent inequality: diminished opportunity and mobility.
–A number of pieces this AM provide a useful reminder that we make too big a deal out of these speeches. True…and by sometime later today, I expect the denizens of this benighted burg to fall back to the squabbles and scrums at a much lower altitude than the President’s soaring rhetoric. But that doesn’t mean there’s nothing to see here folks, move along.
IMHO, the smart thing to do is to pull out one or two pieces (of the domestic economic agenda) and work them hard. I nominate the minimum wage increase and the “fix-it-now” infrastructure. The first may seem like a reach given this Congress but remember, the federal minimum will go up again someday, so we might as well start the fight, and don’t forget that the federal wage floor was last raised under GW Bush (and his dad signed on to an increase as well back in 1989)! Re the infrastructure, same thing: we’re going to address our deteriorating public goods problem at some point, and now makes sense on various levels (low borrowing costs, high unemployment). Also, R’s have historically supported this as well and for good reasons: a strong public infrastructure is an important input to businesses.
–Deficit reduction by itself is not an economic plan: Nine beautiful words, tightly summarizing a critical truth.
–Um, how ya gonna pay for all of this? Right…that is a tough one. But perhaps not as impossibly tough as you’re thinking. The minimum wage has no budgetary costs. We eventually have to pay for infrastructure and while the revenue has to come from somewhere, it doesn’t have to come from the income tax. Alternatives include federal gas taxes or figuring out ways for the infrastructure itself to spin off revenue—tolls, user fees—thus providing a source for investment returns for the public/private partnership the President mentioned. Universal pre-K really does seem to come awfully close to paying for itself–or better–in higher earnings and reduced social costs, but the payback is way down the road and federal politics heavily discounts the future, so that one’s a truly heavy, by truly worthy, lift.