The Most Important Economic Speech of His Presidency

The President's speech today in Osawatomie, Kansas -- where Teddy Roosevelt gave his "New Nationalism" speech in 1910 -- is the most important economic speech of his presidency in terms of connecting the dots, laying out the reasons behind our economic and political crises, and asserting a willingness to take on the powerful and the privileged that have gamed the system to their advantage.

Here are the highlights (and, if you'll pardon me, my annotations):

For most Americans, the basic bargain that made this country great has eroded. Long before the recession hit, hard work stopped paying off for too many people. Fewer and fewer of the folks who contributed to the success of our economy actually benefitted from that success. Those at the very top grew wealthier from their incomes and investments than ever before. But everyone else struggled with costs that were growing and paychecks that weren't -- and too many families found themselves racking up more and more debt just to keep up.

He's absolutely right -- and it's the first time he or any other president has clearly stated the long-term structural problem that's been widening the gap between the very top and everyone else for thirty years -- the breaking of the basic bargain linking pay to productivity gains.

For many years, credit cards and home equity loans papered over the harsh realities of this new economy. But in 2008, the house of cards collapsed.

Exactly. But the first papering over was when large numbers of women went into paid work, starting the in the late 1970s and 1980s, in order to prop up family incomes that were stagnating or dropping because male wages were under siege -- from globalization, technological change, and the decline of unions. Only when this coping mechanism was exhausted, and when housing prices started to climb, did Americans shift to credit cards and home equity loans as a means of papering over the new harsh reality of an economy that was working for a minority at the top but not for most of the middle class.

We all know the story by now: Mortgages sold to people who couldn't afford them, or sometimes even understand them. Banks and investors allowed to keep packaging the risk and selling it off. Huge bets -- and huge bonuses -- made with other people's money on the line. Regulators who were supposed to warn us about the dangers of all this, but looked the other way or didn't have the authority to look at all.

It was wrong. It combined the breathtaking greed of a few with irresponsibility across the system. And it plunged our economy and the world into a crisis from which we are still fighting to recover. It claimed the jobs, homes, and the basic security of millions -- innocent, hard-working Americans who had met their responsibilities, but were still left holding the bag.

Precisely -- and it's about time he used the term "wrong" to describe Wall Street's antics, and the abject failure of regulators (led by Alan Greenspan and the Fed) to stop what was going on. But these "wrongs" were only the proximate cause of the economic crisis. The underlying cause was, as the President said before, the breaking of the basic bargain linking pay to productivity.

Ever since, there has been a raging debate over the best way to restore growth and prosperity; balance and fairness. Throughout the country, it has sparked protests and political movements -- from the Tea Party to the people who have been occupying the streets of New York and other cities. It's left Washington in a near-constant state of gridlock. And it's been the topic of heated and sometimes colorful discussion among the men and women who are running for president.

But this isn't just another political debate. This is the defining issue of our time. This is a make or break moment for the middle class, and all those who are fighting to get into the middle class. At stake is whether this will be a country where working people can earn enough to raise a family, build a modest savings, own a home, and secure their retirement.

Right again. It is the defining issue of our time. But I wish he wouldn't lump the Tea Party in with the Occupiers. The former hates government; the latter focuses blame on Wall Street and corporate greed -- just where the President did a moment ago.

Now, in the midst of this debate, there are some who seem to be suffering from a kind of collective amnesia. After all that's happened, after the worst economic crisis since the Great Depression, they want to return to the same practices that got us into this mess. In fact, they want to go back to the same policies that have stacked the deck against middle-class Americans for too many years. Their philosophy is simple: we are better off when everyone is left to fend for themselves and play by their own rules.

He might have been a bit stronger here. The "they" who are suffering collective amnesia include many of the privileged and powerful who have gained enormous wealth by using their political muscle to entrench their privilege and power. In other words, it's not simply or even mainly amnesia. It's a clear and concerted strategy.

Well, I'm here to say they are wrong. I'm here to reaffirm my deep conviction that we are greater together than we are on our own. I believe that this country succeeds when everyone gets a fair shot, when everyone does their fair share, and when everyone plays by the same rules. Those aren't Democratic or Republican values; 1% values or 99% values. They're American values, and we have to reclaim them.

Amen.

...

In 1910, Teddy Roosevelt came here, to Osawatomie, and laid out his vision for what he called a New Nationalism. "Our country," he said, "... means nothing unless it means the triumph of a real democracy... of an economic system under which each man shall be guaranteed the opportunity to show the best that there is in him."

Some background: In 1909, Herbert Croly, a young political philosopher and journalist, argued in his best-selling The Promise of American Life that the large American corporation should be regulated by the nation and directed toward national goals. "The constructive idea behind a policy of the recognition of the semi-monopolistic corporation is, of course, the idea that they can be converted into economic agents... for the national economic interest," Croly wrote. Teddy Roosevelt's New Nationalism embraced Croly's idea.

For this, Roosevelt was called a radical, a socialist, even a communist. But today, we are a richer nation and a stronger democracy because of what he fought for in his last campaign: an eight hour work day and a minimum wage for women; insurance for the unemployed, the elderly, and those with disabilities; political reform and a progressive income tax.

Today, over one hundred years later, our economy has gone through another transformation. Over the last few decades, huge advances in technology have allowed businesses to do more with less, and made it easier for them to set up shop and hire workers anywhere in the world. And many of you know firsthand the painful disruptions this has caused for a lot of Americans.

Factories where people thought they would retire suddenly picked up and went overseas, where the workers were cheaper. Steel mills that needed 1,000 employees are now able to do the same work with 100, so that layoffs were too often permanent, not just a temporary part of the business cycle. These changes didn't just affect blue-collar workers. If you were a bank teller or a phone operator or a travel agent, you saw many in your profession replaced by ATMs or the internet. Today, even higher-skilled jobs like accountants and middle management can be outsourced to countries like China and India. And if you're someone whose job can be done cheaper by a computer or someone in another country, you don't have a lot of leverage with your employer when it comes to asking for better wages and benefits -- especially since fewer Americans today are part of a union.

Now, just as there was in Teddy Roosevelt's time, there's been a certain crowd in Washington for the last few decades who respond to this economic challenge with the same old tune. "The market will take care of everything," they tell us. If only we cut more regulations and cut more taxes -- especially for the wealthy -- our economy will grow stronger. Sure, there will be winners and losers. But if the winners do really well, jobs and prosperity will eventually trickle down to everyone else. And even if prosperity doesn't trickle down, they argue, that's the price of liberty.

It's a simple theory -- one that speaks to our rugged individualism and healthy skepticism of too much government. It fits well on a bumper sticker. Here's the problem: It doesn't work. It's never worked. It didn't work when it was tried in the decade before the Great Depression. It's not what led to the incredible post-war boom of the 50s and 60s. And it didn't work when we tried it during the last decade.

Obama is advocating Croly's proposal that large corporations be regulated for the nation's good. But he's updating Croly. The next paragraphs are important.

Remember that in those years, in 2001 and 2003, Congress passed two of the most expensive tax cuts for the wealthy in history, and what did they get us? The slowest job growth in half a century. Massive deficits that have made it much harder to pay for the investments that built this country and provided the basic security that helped millions of Americans reach and stay in the middle class -- things like education and infrastructure; science and technology; Medicare and Social Security.

Remember that in those years, thanks to some of the same folks who are running Congress now, we had weak regulation and little oversight, and what did that get us? Insurance companies that jacked up people's premiums with impunity, and denied care to the patients who were sick. Mortgage lenders that tricked families into buying homes they couldn't afford. A financial sector where irresponsibility and lack of basic oversight nearly destroyed our entire economy.

We simply cannot return to this brand of your-on-your-own economics if we're serious about rebuilding the middle class in this country. We know that it doesn't result in a strong economy. It results in an economy that invests too little in its people and its future. It doesn't result in a prosperity that trickles down. It results in a prosperity that's enjoyed by fewer and fewer of our citizens.

Look at the statistics. In the last few decades, the average income of the top one percent has gone up by more than 250%, to $1.2 million per year. For the top one hundredth of one percent, the average income is now $27 million per year. The typical CEO who used to earn about 30 times more than his or her workers now earns 110 times more. And yet, over the last decade, the incomes of most Americans have actually fallen by about six percent.

The very first time the President has emphasized this grotesque trend. Now listen for how he connects this with the deterioration of our economy and democracy:

This kind of inequality -- a level we haven't seen since the Great Depression -- hurts us all. When middle-class families can no longer afford to buy the goods and services that businesses are selling, it drags down the entire economy, from top to bottom. America was built on the idea of broad-based prosperity -- that's why a CEO like Henry Ford made it his mission to pay his workers enough so that they could buy the cars they made. It's also why a recent study showed that countries with less inequality tend to have stronger and steadier economic growth over the long run.

Inequality also distorts our democracy. It gives an outsized voice to the few who can afford high-priced lobbyists and unlimited campaign contributions, and runs the risk of selling out our democracy to the highest bidder. And it leaves everyone else rightly suspicious that the system in Washington is rigged against them -- that our elected representatives aren't looking out for the interests of most Americans.

More fundamentally, this kind of gaping inequality gives lie to the promise at the very heart of America: that this is the place where you can make it if you try. We tell people that in this country, even if you're born with nothing, hard work can get you into the middle class; and that your children will have the chance to do even better than you. That's why immigrants from around the world flocked to our shores.

And what it's done to equal opportunity, and how it's eroded upward mobility:

And yet, over the last few decades, the rungs on the ladder of opportunity have grown farther and farther apart, and the middle class has shrunk. A few years after World War II, a child who was born into poverty had a slightly better than 50-50 chance of becoming middle class as an adult. By 1980, that chance fell to around 40%. And if the trend of rising inequality over the last few decades continues, it's estimated that a child born today will only have a 1 in 3 chance of making it to the middle class.

It's heartbreaking enough that there are millions of working families in this country who are now forced to take their children to food banks for a decent meal. But the idea that those children might not have a chance to climb out of that situation and back into the middle class, no matter how hard they work? That's inexcusable. It's wrong. It flies in the face of everything we stand for.

What should we do about this? Not turn to protectionism or become neo-Luddites. Nor turn to some version of government planning.

Fortunately, that's not a future we have to accept. Because there's another view about how we build a strong middle class in this country -- a view that's truer to our history; a vision that's been embraced by people of both parties for more than two hundred years.

It's not a view that we should somehow turn back technology or put up walls around America. It's not a view that says we should punish profit or success or pretend that government knows how to fix all society's problems. It's a view that says in America, we are greater together -- when everyone engages in fair play, everyone gets a fair shot, everyone does their fair share.

So what does that mean for restoring middle-class security in today's economy?

It starts by making sure that everyone in America gets a fair shot at success. The truth is, we'll never be able to compete with other countries when it comes to who's best at letting their businesses pay the lowest wages or pollute as much as they want. That's a race to the bottom that we can't win -- and shouldn't want to win. Those countries don't have a strong middle-class. They don't have our standard of living.

In 1910, Teddy Roosevelt came here, to Osawatomie, and laid out his vision for what he called a New Nationalism. ...

The fact is, this crisis has left a deficit of trust between Main Street and Wall Street. And major banks that were rescued by the taxpayers have an obligation to go the extra mile in helping to close that deficit. At minimum, they should be remedying past mortgage abuses that led to the financial crisis, and working to keep responsible homeowners in their home. We're going to keep pushing them to provide more time for unemployed homeowners to look for work without having to worry about immediately losing their house.

I wish the Obama administration had made this a condition for the banks receiving bailouts.

But there's far more to the speech. Read it in full. It lays out the basis for what could be the platform Obama will run on in 2012 -- increasing taxes on the rich, investing in the rest us, requiring corporations and Wall Street banks that reap benefits from being in America create good jobs for Americans, and protecting our democracy from being corrupted by money -- a new New Nationalism.

Here, finally, is the Barack Obama many of us thought we had elected in 2008. Since then we've had a president who has only reluctantly stood up to the moneyed interests Teddy Roosevelt and his cousin Franklin stood up to.

Hopefully Obama will carry this message through 2012, and gain a mandate to use his second term to take on the growing inequities and game-rigging practices that have been undermining the American economy and American democracy for years.

Robert Reich is the author of Aftershock: The Next Economy and America's Future, now in bookstores. This post originally appeared at RobertReich.org.

 

Follow Robert Reich on Twitter: www.twitter.com/RBReich

Comments

[pjmauigirl]

02:22 AM on 01/24/2012

Yes, let's tax the rich some more so the government can get bigger and more efficient at wasting even more of our money.

There is over ONE BILLION DOLLARS of unpaid taxes owed by government employees. As one of the 50% who pay the taxes that fund their salaries, I object.

As a matter of fact I help pay your salary and cushy retirement up there at Berkeley, professor, and I object to your politics. I help fund scholarships for UC students as part of my own child's UC tuition increase, yet I have sold my home to be able to afford to educate my own children.

Perhaps it's impossible to see it if you're paid with taxpayer dollars, but: THE GOVERNMENT ISN'T THE SOLUTION, IT IS THE PROBLEM.

You know, plenty of us in the 50% are getting really tired of supporting all this insanity in state and national government. When we stop, then what?

As for the issues, you need to look beneath the obvious to see that we are in huge trouble. Could it be the left leaning educators, the OWS, the RepubloDems, et al are just unwitting tools????

[Marc Lewis]

11:12 AM on 12/12/2011

And why now? I can tell you in one; OWS. By putting these very issues before the American electorate it has created an atmosphere in which the President (as well as other members of Congress) feel secure in proposing these changes. The polls have shown that even when people do not support OWS, they agree with OWS's message. He is certainly making it all inclusive by adding the Tea Party and distancing it from a 1% vs. 99% problem but for all of that it is still the OWS message. I have to say that OWS is succeeding beyond my wildest dreams in getting the issues on the table and in only four months! Now it is just a matter of keeping it before the people and not letting up.

[carvingre]

04:39 PM on 12/09/2011

I recently watched a documentary outlining the French revolution. Chillingly similar to what's going on today.

[bluevistas]

10:53 PM on 12/08/2011

we've heard this all before, and then O became Pres and did the opposite, sadly...

[Fountain head]

02:32 PM on 12/08/2011

Just what we need, another cheerleader for Obama as the White House occupant again encouraes divisiveness while politicking rather than identifying and actively seeking solutions to problems as 'our first post-partisan' president.

[GuiltyUndertaker]

04:48 PM on 12/08/2011

It was the wealthy that divided this nation. This speech sounds like an attempt to heal divisions in our nation. We progressives are worried that he and the Democrats won't follow through.

[Fountain head]

06:59 PM on 12/09/2011

But immediate in your response is the accusation of 'the wealthy'. Progressivism as forward thinking is fine, but economic history is eerily short of examples where demonizing a class of people and/or declaring war on capital served positive economic purpose. It is unconvincing to dress up divisive, accusatory intent that slants in that direction as 'progressive'.

[katherine10]

01:08 PM on 12/08/2011

Good grief! talk about amnisia and denial , Robert. This president is largely ressponsible for this economy due to his massive spending in the first three years and punishing the business community with thousands of new regulations and tax uncertainy causing layoffs by the millions.
His class warfare and blaming anyone but himself has caused chaos and riots. The tax cuts by Bush went to everyone in all brackets not "to the rich".
I live in a nice neighborhood and since Obama's class warfare began robberies are rampant and those who listen to him are simply breaking in and taking what they want from those who are working their heads off to. maintain a home..Obama is preaching take from those who do succeed and give to those who are do not. I see nothing to admire in Obama, he is divisive and unpresidential.He takes responsibility for nothing..

[carvingre]

04:49 PM on 12/09/2011

Don't read your idealogy into his words. Obama has been trying to clean up Bush's mess. Can you imagine where we would be if Bush got his way with SS??? The problem is Congress not negotiating deals in the public interest. Since 2008 'public interest' has meant helping people to keep their house and get a job so they can pay their obligations and eat. Congress isn't doing that because of the GOTP obstructionists.
You must admit it was dumb to lower taxes during two raging wars then have to borrow from China. Alternate universe.

[Kalar Walters]

11:53 AM on 12/08/2011

Obama won't have an ice cube's chance in hell in his next term if we don't get some Republicans out of the House and Senate....the radical/fanatical ones that want all or nothing...their way.

[MLOZ1]

11:01 AM on 12/08/2011

DEMAGOGY!!! Thats the right definition for Obama's speeches.
Please not another four years of this...I would like to call upon the good thinking Americans.
Where are all the promises of his inaugural speech, and the other ones before; when he was a candidate? Obama is a DEMAGOGUE.

[GuiltyUndertaker]

04:50 PM on 12/08/2011

And you're a speller. But you're right that we need a new president. Obama's liberal credentials have been revoked. We need someone who doesn't merely talk like a liberal, but acts like one.

[mcgeenate]

08:45 AM on 12/08/2011

Haven't you had more than enough Obama bashing from the right so, why are we doing from the left and so called progressives. So I guess hasn't done a thing or nearly enough his first three years in office especially with outstanding congress he has had since January? And what did the democratic congress do during his first two years other than show how independant (independantly stupid) they were with their "progressives" and "blue dogs." And exactly where were then and who did you try and influence? Remember Bob, you served in the Clinton Administration and rather than think a lot of the legislation that passed were your ideas, I still would like to believe a lot was shoved down your throats. I wonder had Obama not spent so much time making it obvious he was attempting to work with republicans even to the point of compromising willingly, what would be being said today about "this angry black man?"

[GuiltyUndertaker]

04:54 PM on 12/08/2011

Progressive bash him because he has reneged on the promises he made (or to which he alluded) as a candidate. We understand that the GOP is throwing banana peels in his path, but why the heck did he even want to make Republicans like him in the first place? Doesn't he realize he's African-American, and, the because of that, the GOP will NEVER put up with him? Obama wasted so much political capital in his first year in office. He didnt need bipartisanship. He needed to get things done. He needed to use the bully pulpit and ignore the Republicans because he should have known they would act like children.

[patpowers1995]

08:19 AM on 12/08/2011

So if this speech becomes the basis for the president's platform in 2012, and we re-elect him because of it, what's to prevent the president of 2013 from being like the president we elected in 2009, who turned his back on the platform that got him elected in 2008? Is this just another set of convenient lies, like most of his 2008 platform?

[Kalar Walters]

11:57 AM on 12/08/2011

I don't think Obama 'turned his back.' I think he under-estimated what he was up against...total and complete stonewalling by Republicans and the cementing of that wall with the election of fanatical Tea partiers in 2010....losing control of the House. Prior to that he had promised to make every effort to arrive at bi-partisan solutions. Surprise! The Republicans entrenched themselves to a degree I have never seen in my lifetime ...and I've been around a while.

[garywildd]

05:44 AM on 12/08/2011

Mr. Reich, you're wearing rose-colored glasses. This speech is long on analysis and short on solutions. He didn't get very specific at all. This is the same pied piper act that duped me into voting for him: all the right noises and none of the right solutions. You caught a big mistake - giving aid to banks with no strings attached. Another one was the ARRA - too little, too late, too superficial. The devil is in the details, and that's where Professor Obama runs aground. Let's try Professor Gingrich this time. Or tell you what, if Trump ran for President I'd vote for him in an instant.

[daikon]

04:06 AM on 12/08/2011

Mr. Reich, I am normally a fan, but this is proably the worst blog entry of yours I have ever read. It's as if you've drunk the Kool-ade and suddenly seen the light. You seem to accept this campaign rhetoric as if it were a serious statement of economic policy. You are not a naive person, so I am very disappointed.

You gave a rousing speech at LA OWS, and yet now you praise a speech that essentially claims that OWS is irrelevant and troped by nationalism and the need for national unity. In Obama's speech there is no 1% vs. the 99%. Plutocracy doesn't exist. There is only the 100%, and those who consciously exploit and commit fraud have "amnesia." Mr. Reich, we don't need to wait for new laws to prosecute guilty banksters. We have powerful laws already, but Obama refuses to use them. He also refuses to talk about the urgent need for a second big stimulus and the creation of a new WPA. His "grand" austerity plan will kill far more jobs than he creates. This was nothing but a phony campaign speech.

[Wesley Holbrook]

12:45 AM on 12/08/2011

Yeah, we know that the system is rigged...dirty money=dirty politics and vice-versa...Most of the money is concentrated in the hands of the few, no matter what part of the world you live in, but, enjoy it while you can, Jesus is returning soon (He was a socialist back then; he fed 5,000, he healed and charged no fee, He gave His all). He still says that hardly a rich man shall enter the kingdom of heaven, even today...deal with it, but don't hide behind your false show of piety to be seen among men, when it counts for nothing in the eyes of God. He knows who His followers are. There will be some rich but for the most part, not most, not many, and life on this side of eternal life is but a fleeting moment, a most sobering thought...

[DoubleDonn]

12:31 AM on 12/08/2011

Strictly telepromter bloviation - and, as usual, Robert Reich is enthralled. This series of misstatements and misrepresentations, when analyzed and parsed carefully, gives one serious concern for the next 11 months. Since Obama was channeling Teddy Roosevelt, it is too bad that he missed the statement from TR, "The first requisite of a good citizen in this republic of ours is that he shall be able and willing to pull his own weight." This might make him reflect on the 47% who pay no income tax. It might make him wonder about an approach to retirement saving that says we will count on the rich (that magical 1%) to pay the bills so the rest of us (that important but improvident 99%) can relax knowing that Obama's Kleptocrats are extracting our retirements, our health care, and our Hawaii trip from this fountain of benefits called the rich. Or perhaps Obama missed this one from a president who earned his Nobel, "Probably the greatest harm done by vast wealth is the harm that we of moderate means do ourselves when we let the vices of envy and hatred enter deep into our own natures." TR fully anticipated the demagoguery that might tempt beyond endurance a president of weak character. It took over a century but we have one such with his divisive call to envy. Sadly, Robert Reich seems to be taken in by this. Let's hope that the American voters aren't so gullible.

[Har44]

03:10 AM on 12/08/2011

That seems to be the only Republican solution: Have those living in poverty and those living just above it and who can't afford to pay for health insurance pay an income tax that they can't afford while preserving the Bush tax cuts on the obsenely wealthy. It reminds me of the story of the poor widow woman who dropped a small coin in the collection box while the rich man made a big show of all the excess money he was contributing.

[garywildd]

05:56 AM on 12/08/2011

Just because Obama doesn't have the guts to thrash the Kings of Mean, aka Republicans, doesn't let them off the hook. Reagan's math-free economic fantasies led us to disaster, and Greenspan's blindfolded steering wrecked the banking system. The solution CANNOT BE more Reaganomics and less regulation. No one who believes that belongs in any government.

[malheureux]

12:15 AM on 12/08/2011

The focus should be:
1. On getting the money out of politics through issue-oriented, publicly-financed elections.
2. On transforming supply-side economics (aka "trickling-down the wealth".)
3. On transforming "consumerism" through an economy that first addresses "needs", not "wants".

It was not Teddy Roosevelt but FDR that asked Congress for "A Second Bill of Rights" ("State of
the Union", 1944), that would ensure decent housing, healthcare, education and nutrition for
ALL Americans.
That should be Obama' agenda.

[daikon]

04:13 AM on 12/08/2011

Spot on! Fan! Obama didn't address any of your 3 points. He often criticizes FDR. I think he feels closer to TR, the Repub. Obama is himself a Republocrat, so he will never do the things you mention unless there is a widespread national movement to put pressure on him and reclaim the Dem party for the 99%. Right now the Dem leadership has been bought by the plutocracy.