Obama Pivots to Income Inequality

Today President Obama announced to an audience at the far-left Center for American Progress that he will spend the remainder of his term in office focusing on income inequality. He began by saying that middle-class Americans are struggling, and the American Dream is threatened. He is right. Statistics on the White House’s own web site indicate that since Obama took office, median family income has fallen, per capita income has dropped, and millions of Americans have been plunged into poverty. But Obama is like a weatherman: he takes no responsibility for the disasters he describes.

No one, not even a Democrat, would want to live in a country characterized by income equality. Obama, recognizing this, was quick to say that his concern is equal opportunity, not equality of outcomes. Yet his prescriptions were the same warmed-over liberal wish-list that we have heard in every State of the Union speech. Presumably for the last five years Obama has not been trying to stunt the economic development of the middle class or frustrate economic opportunity, yet that has been, empirically, the effect of his policies. Nowhere in Obama’s speech was there any acknowledgement that his policies have failed, or any willingness to re-think what policies will lead to economic growth and greater opportunity.

This is a large subject, and one to which we will return in the months and years to come. Here are a couple of very basic thoughts. First, If the goal is to enhance the wages of lower-skilled American workers, about whom Obama purports to care so much, there is an easy way to make progress toward that goal: stop importing tens of millions of low-skilled immigrants to compete with them and drive wages down. This is blindingly obvious, and yet Obama refuses to admit that the law of supply and demand applies to labor. Senator Jeff Sessions, a much smarter man than Barack Obama–it would be interesting to compare their IQs, but Obama’s records are sealed, for obvious reasons–responded eloquently to Obama’s speech:

It is shocking for the President to give a speech about income disparity and falling wages while pushing an immigration plan that will hammer American workers and widen the disparity. The Congressional Budget Office confirms the White House-backed plan would reduce wages, reduce per capita GNP, and increase unemployment. The President says people are worried that “the system is rigged,” and yet it is the President who has teamed up with a small cadre of CEOs to double the flow of immigrant workers when these exact same companies are laying off American workers in droves.

Wages for American workers are lower today than they were more than a decade ago, and take-home pay has fallen each year since the President came into office. A recent study demonstrated that all net job growth since 2000 has gone to immigrant workers while the number of U.S.-born Americans working has declined by 1.3 million.

The President’s policies also threaten college students who are about to enter a difficult economy. His plan would more than double the number of temporary foreign workers for wealthy tech companies. As Professor Ron Hira, a leading expert on H-1B visas, has noted, the visas are being used for “facilitating offshoring and providing employers with cheap, temporary labor—while reducing job opportunities for American high-tech workers in the process.”

Harvard professor Dr. George Borjas found that high levels of immigration between 1980 and 2000 caused the wages of lower-skilled American workers to drop nearly 8 percent. He also found current immigration levels have resulted in a $402 billion annual wage loss for workers but a $437 billion increase in profits for business owners.

It is time to have an open and honest conversation about our shrinking middle class and the consequences of our immigration policies on American workers and their wages. Unfortunately, that is not what we got from the President today.

The truth is that the policy formula favored by President Obama—more regulation, hostility to American energy, anti-growth taxation, surging debt, bigger government, more federal interference, government-run healthcare, and mindless immigration policies—are the cause, not the cure, for growing middle class distress.

Second, it is not hard to figure out that upward mobility requires economic growth. If companies are growing, they will hire more people and those who have not previously been prosperous will have a shot at success. On the other hand, if there is little or no growth, then there is little or no new hiring. You may be all right if you already have a good job; otherwise, you will be on the outside looking in. Does Barack Obama really not understand this? Perhaps not: his administration has deliberately choked off economic growth through Obamacare, ridiculously burdensome regulations, environmental and otherwise, “green” cronyism for political favorites, high taxes and so on. Bad government does, in fact, make a difference. Based once more on statistics from the White House’s web site, here are the average annual inflation-adjusted GDP growth percentages during the last five presidential administrations:

Ronald Reagan (1981-1988): 3.4%
George H.W. Bush (1989-1992): 2.2%
Bill Clinton (1993-2000): 3.9%
George W. Bush (2001-2008): 2.0%
Barack Obama (2009-2012): 0.8%

For Barack Obama to complain about wage stagnation and lack of upward mobility when economic growth has been essentially zero throughout his administration betrays either a lack of understanding of how the world works, or a cynicism so deep as to defy comprehension. As is so often the case with regard to Obama, we are left to wonder whether is despicable or clueless, or perhaps both.

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