by Christian Dorsey, Economic Policy Institute
President Obama passed the first 100 day mark this week with generally positive, or at least patient reviews from the media, which has focused largely on his decisive handling the country's economic crisis. By signing the $787 billion stimulus bill and adopting other initiatives to restore a floor to the falling housing market, Obama provided tangible relief to millions of Americans who have lost, or are at risk of losing their jobs or their homes. At a time when comparisons to the Great Depression have become all too frequent, there's a lot to be said for that sort of response.
But it's important to note that the Obama Administration's economic policy to date has been one of economic crisis management and not one that will achieve the deep structural change needed to provide sustained support to the average working American, whose earning power and job security have been eroding for decades. To make good on his campaign mantra of change, Obama still needs to create the framework for a progressive economy that will help Americans enjoy the fruits of their labor and reverse a trend of economic cycles defined by asset accumulation bubbles that have rewarded powerful corporate interests at the expense of the average worker.
A lot of lip service has been paid in recent months to that average worker, yet most American workers were losing ground long before the current recession, suffering reduced earnings power even during periods of rapid economic growth. In 2007, the tail end of a seven-year growth cycle, some 26.4% of all U.S. workers earned poverty-level wages. The real incomes of middle-class families were lower at the end of the latest business cycle than they were when it started in 2000. That marks the first time since the Census Bureau began tracking this data in the 1940s, that real earnings power declined over the course of a business cycle, and provides sobering evidence that prosperity is eluding most workers even during times of strong growth in productivity. The Obama Administration should be commended for moving swiftly and aggressively to end the current recession but now it needs to take steps to ensure that all Americans will benefit from the recovery.
That will require a sweeping change in a 30-year-trend of deregulating markets, which has proven to help powerful corporate interests claim bigger slices of our national pie. There are also substantial and achievable policy changes that can be implemented with bold action from the President and Congress that will lead to a progressive economy. Contrary to our current economic system,which leaves many workers out of the growth equation, our approach is for growth that is sustainable and broadly shared. Our vision links workers' increased productivity with enhanced living standards while they are working as well as after they retire. It means strengthening the social safety net to keep people out of poverty when jobs are not available to all. To achieve this vision, we need and a vibrant economy characterized by innovation and growth.
The architecture of a progressive economy is built on the foundation of policy that empowers workers to equitably share in the income gains they help produce. Laws supporting workers who choose to organize are essential tools in this effort.
Unions provide workers with a number of clear advantages, including a premium in wages and benefits that are especially significant for minority workers. But they also benefit management. Job security for workers translates into reduced turnover, more predictable costs, and less employee volatility. An organized work force can lead to greater productivity as well as higher wages, a classic "win-win" scenario.
In addition to seeking to regain the millions of jobs lost in during this recession, we must also use the tools and resources of government to promote job creation. The goal of the stimulus act is to create 3.5 million jobs, but that is less than half of what is needed just to return to December 2007 levels of unemployment -- and those levels were already too high. The Obama administration should commit to a full employment strategy, and this will require substantial investment in a public jobs program. Lowering interest rates, the typical policy tool for creating jobs, has been rendered ineffective as those rates are currently close to zero.
And yet, at a time that so many people who have jobs are living in poverty, creating more jobs is not in itself enough to truly build a progressive economy. Those jobs must allow workers to earn adequate wages. EPI proposes that as a minimum, wages be at least 50% of the hourly wage for private, non-supervisory workers--and provide benefits including access to health care. Industries built around energy efficiency and renewable energy provide a unique opportunity to add an engine to the economy that will sustain job growth that can be broadly shared.
Americans are coming to terms with the insecurity they face in retirement with a system that subjects them to so much market risk. The Obama administration should seek to capture revenue lost from 401(k) tax breaks and fund a public retirement system that, when combined with equal contributions from employees and employers, goes a long way to ensuring Americans have adequate income in retirement.
A big component of any progressive agenda is justice. Government's responsibility is to make sure it distributes resources and opportunities fairly. Trillions have been loaned or leveraged to help failing financial institutions and soften the fall for their investors, yet ordinary folks have seen no comparable government intervention despite their staggering losses.
The Obama budget, passed by Congress to the tune about $3.5 billion, plans for investments in education, health care and energy, which are all necessary first steps in creating a progressive economic agenda. But much more work remains to achieve comprehensive immigration reform, trade policy that promotes domestic manufacturing and supports workers, and a public investment program that endures beyond the stimulus.
As part of a progressive economic agenda, Obama must ensure adequate revenues for necessary expansion in federal spending. In the near-term, that means spending what is required to soften the brunt of this long and deep recession. Longer term, , it will require new tax policies such as imposing a financial transactions tax, social security taxes on higher incomes, and maintaining the estate tax at least at current levels.
Reviewing the President's first 100 days can be a useful way of gauging his early accomplishments. But the passing grades he has earned so far in managing the crisis he inherited should not take away focus from his longer-term agenda. At a time of short news cycles and even shorter attention spans, it can be easy to forget that the economic contraction we are now experiencing was thirty years in the making. President Obama is guaranteed only 1361 more days. We've all got to get to work.