“The Defining Challenge Of Our Time”

That’s how, in yesterday’s speech, Obama described America’s growing inequality:

The full speech can be viewed here. Ezra raves, calling it “perhaps the single best economic speech of his presidency”:

That’s in part because it exists for no other reason than to lay out Obama’s view of the economy. His other speeches on the subject have been about passing legislation, defining campaign themes, or positioning himself against Republicans. But Obama’s done running for office. He’s not getting anything through this Congress. And he’s not negotiating with John Boehner. This is just what he thinks.

I’m afraid I wasn’t as blown away, for some of the reasons John Cassidy notes:

In talking about the causes of rising inequality, he made the usual references to global competition and technological change, but without adding anything fresh. In laying out his policy prescriptions, he talked about promoting a “growth agenda,” which also sounded familiar: reforming the corporate tax code, eliminating loopholes, and using some of the money saved to invest in things like infrastructure and scientific research. As he has before, he came out in favor of strengthening the labor laws and raising the minimum wage. (By how much he didn’t say.) He spoke of improving educational standards, making pre-school programs more widely available, and pursuing a trade agenda that “works for the middle class.”

Most of these policies are individually worthwhile. But with the possible exception of a big hike in the minimum wage—a little one wouldn’t have much impact—they are mainly small-bore measures. Even if every one of them were enacted, which isn’t going to happen, it’s by no means clear that they would halt, much less reverse, the over-all trends that Obama highlighted.

Perhaps it’s best to see the speech as an attempt to generate a deeper understanding of the forces driving not a good inequality, but a potentially destructive one, restraining mobility and creating two separate nations out of one. Yglesias heard little in the speech about addressing unemployment:

The biggest applause line of the speech was about raising the minimum wage, which is great, but also doesn’t help you very much if your current wage is $0. Delivering a stemwinder about the need for Janet Yellen to raise the growth rate of nominal income in the United States might not have been very smart, but yadda-yaddaing past mass unemployment is odd.

The people suffering the most in this country aren’t the people’s whose wages are stagnating, it’s the people who don’t have any wages at all. And the biggest thing stopping the people whose wages are stagnating from demanding a raise is that there are all these unemployed people out there who’d love to have their crappy low-paying jobs.

Derek Thompson’s related points:

Social Security and Medicare, two of the most popular government programs today, work on the theory that there is a virtue to universalism. Obamacare is, well, slightly popular at the moment, but it works on the same principle. On jobs, however, it cannot be said the U.S. government has seriously considered universal (or, at least, full) employment anything near to a priority. We simply gave up early. It’s good and right to talk about income inequality for American workers. But when 20 million people are unemployed or marginally attached to the labor force, you’re going to have an awful income inequality crisis, no matter what your minimum and median wages look like.

Daniel Gross is pessimistic:

Obama—and other people who focus on Washington—are missing the forest for the thicket of policies. The real problem is that companies in the U.S. do not pay enough, and that they have conditioned themselves (and their investors, and board, and employees, and politicians) not to raise wages even as their profits and cash holdings rise to record levels. Consider that corporate profits have soared from $1.2 trillion in 2009 to about $2 trillion this year, and that between the end of 2006 and mid-2013, corporate America’s cash holdings rose from $850 billion to $1.48 trillion. And yet the response to this remarkable turnaround has been effectively to reduce wages. Median household income in 2012 was below where it was in 1999, and has risen in only five of the last 12 years (PDF).

This is not a problem that can be corroded by a higher minimum wage, or stronger unions, or universal pre-K. Rather, it would require a wholesale change of heart among America’s business class. They’d have to start taking pride in offering higher wages each year—rather than, say, offering higher dividends or stock buybacks each year. They’ve have to make it part of their strategic mission to aspire to pay above the median, and thus help drag wages up.

Amy Davidson talks to Robert Putnam, who is more upbeat:

From Putnam’s perspective, “any of those things is helpful”—including solutions outside of government—“but most important is a national understanding of the problem by ordinary people.” He compared the present moment, statistically and politically, to the Progressive Era, which also had a convergence of wealth, inequality, and a sense that the country had somehow become corrupt.

“And then, in about ten years, America fixed those problems,” Putnam said. “Child-labor laws, support for mothers, not to mention regulation of business, clean food. Government did it, in the face of a prevailing ideology of laissez-faire—social Darwinism, as it was called.” What made the difference was a moral shift: “People said, ‘This is not the way it should be. This is not America.’ ” He thought it was happening again. So where in that ten-year pattern might we be? Putnam wasn’t sure, but hoped it could be speeded up.