For those of us who believe government can be a positive force in the lives of working Americans, President Barack Obama’s State of the Union address was less than heartening. He took one step forward in vowing to use his executive authority to raise the hourly wages of workers employed by companies with federal contracts, but took two steps back in signaling his narrow vision of an activist government. “Tonight, I ask more of America’s business leaders to… do what you can to raise your employees’ wages,” he said.
Indeed, the current crisis, simply put, is that there are more people looking for jobs—good-paying or otherwise—than there are jobs to be had. This leads to what economists call a weakening of “aggregate demand,” which means people have less money to spend on products and services that businesses sell, which leads to poor sales and weaker hiring on the part of businesses, which in turn leads to even weaker demand. Most economists have been arguing since 2008 that Congress must flex its fiscal muscle and issue a massive jobs bill in addition to the initial stimulus. That consensus still stands.
In fairness, Obama called on Congress to raise the federal minimum wage and to pass transportation and waterways bills that would ensure work for about 3 million construction workers, but overall, the president was mindful that Washington, especially Congressional Republicans, has no appetite for spending, even if it’s on historically nonpartisan matters such as research, infrastructure and education. The Republicans really do believe that free markets can perform better than government despite the plain-to-see fact that it doesn’t.
If John Boehner’s reaction to Obama’s decision to raise the minimum wage of federal-contract workers is any indication, the Republican leadership is taking the bait. The House Speaker said that paying workers more actually hurts them, because wage requirements increases costs for businesses. Aside from the fact this claim has been debunked time and again, Boehner was, in essence, taking a stand against workers. In this climate, that’s deadly.
Even so, there were signs of hope that fiscal policy is not completely off the table. I don’t mean that Obama hinted at it. Not at all. What I suggest is that the president has settled on a political strategy that could eventually lead to a debate on greater federal stimulus. Of course, debating something isn’t the same as acting on it. This president entered the White House under extraordinary circumstances and if he were able to leave office having legitimized a debate over expanded fiscal policy, he will have succeeded in moving the political center away from the right and back to where it belongs: the actual center.
Obama’s strategy can be seen in two distinctions he made during his address. First, that he’d explore the limits of his constitutional authority to act when Congress fails to act. This is what most news outfits have been reporting, and this is what most pundits are going to ponder for a while: the legal, political and practical implications of Obama’s go-it-alone strategy. But more important is the second distinction, which Slate’s William Saletan first pointed out with welcomed clarity: between capitalism and the American work ethic.
“That’s the debate ahead,” Saletan wrote. “Can the free market be trusted to lift working families out of poverty? If not, should the government step in? Ultimately, do most Americans believe more in capitalism or in labor? Do they see government as a threat to freedom or as an ally of honest work?… For more than 30 years, Republicans prevailed in that debate because people had lost faith in government. But what happens if they lose faith in the economy? When the free market stops serving the work ethic, look out.”
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