State of the Union: Right on Wages, Wrong on Trade

Today, after four years of economic growth, corporate profits and stock prices have rarely been higher, and those at the top have never done better. But average wages have barely budged. Inequality has deepened. Upward mobility has stalled. The cold, hard fact is that even in the midst of recovery, too many Americans are working more than ever just to get by--let alone get ahead. And too many still aren't working at all.

But Tuesday night was not the first time that he explained the problem in the right way.

He did precisely that six years ago--speaking specifically about inequality and declaring that government had an ability and a responsibility to address it aggressively and unapologetically.

Obama's ability to identify the crisis, and his willingness to speak in blunter terms than his political opponents about its repercussions, got him elected president. By a landslide.

Now, after a year of wrangling with an uncooperative Congress and at the start of a critical mid-term election year, Obama is trying to renew the political calculus that convinced Americans that he was right leader for the country--and that it was right to provide him with the solid Democratic majorities in the House and Senate that would allow him to turn rhetoric into action.

As he prepared what could well be the most important State of the Union address of his presidency, most polls suggested that the American people were less confident in Obama, and less inclined to give him the Congress he needs to govern in the final years of a second presidential term.

So can this speech restore the political fortunes of Obama and his party?

It's going to be difficult, not just because second terms are always challenging, and not just because his political foes have no qualms about gridlocking government if they think it will benefit their electoral ambitions.

There is also the reality that, while he has returned to popular themes, and displayed his usual grasp of the issues that must be addressed, the president's State of the Union message was muddled. Like other presidents before him, Obama sacrificed the opportunity tofocus like a laser beam for the option of reading a laundry list. And some of the items on that laundry list undermined rather than enhanced his "year of action" theme.

That was especially true when, against the pleas of the progressive base he must energize, Obama devoted a section of his speech to promoting a free-trade agenda that is as unpopular as it is flawed.

So it was that, what might have been a politically transformational moment, ended up as something less than that.

To be sure, Obama got a lot right.

He told Congress, bluntly, that he would veto a new sanctions bill that might threaten negotiations to limit Iran's nuclear program. "For the sake of our national security, we must give diplomacy a chance to succeed," said Obama.

He spoke up for sound environmental and energy policy:

The shift to a cleaner energy economy won't happen overnight, and it will require tough choices along the way. But the debate is settled. Climate change is a fact. And when our children's children look us in the eye and ask if we did all we could to leave them a safer, more stable world, with new sources of energy, I want us to be able to say yes, we did.

He renewed the call for comprehensive immigration reform, saying that "[if] we are serious about economic growth, it is time to heed the call of business leaders, labor leaders, faith leaders, and law enforcement--and fix our broken immigration system."

He spoke, in detail and convincingly, for the extension of long-term unemployment benefits that expired at the end of last year. "Congress," he demanded, with appropriate passion, "give these hardworking, responsible Americans that chance. They need our help, but more important, this country needs them in the game."

And he said the right thing, particularly on the issue of raising the minimum wage:

Today, the federal minimum wage is worth about twenty percent less than it was when Ronald Reagan first stood here. [Iowa Senator] Tom Harkin and [California Congressman] George Miller have a bill to fix that by lifting the minimum wage to $10.10. It's easy to remember: ten-ten. This will help families. It will give businesses customers with more money to spend. It doesn't involve any new bureaucratic program. So join the rest of the country. Say yes. Give America a raise.

Going big on the minimum wage offers a measure of the president's seriousness when it comes to making income inequality an issue in 2014.

It's a winning move politically: the president was spot-on when he said, "Americans overwhelmingly agree that no one who works full time should ever have to raise a family in poverty." Aiming to get the minimum wage over $10 an hour--in several steps over several years--is far from radical. Indeed, if the goal is to assure that Americans who put in forty-hour weeks can climb out of poverty, a $15-an-hour wage is closer to the mark. But breaking the double-digit barrier has meaning, practically and politically, and focusing on it frames the 2014 debate in the right way.

But the president used previous State of the Union addresses to talk about increasing the minimum wage. In a "year of action," good words must be linked with good deeds.

Obama recognizes that if he hopes to rally the American people to put pressure on a dysfunctional Congress to begin raising wages--and to get serious about increasing support for manufacturing, investing in infrastructure and generally being useful--his actions must be as bold as his statements. So the White House announced Tuesday morning that Obama would issue an executive order to increase the wages of new federal contract workers to $10.10 an hour. That's a big deal. According to the National Employment Law Project, three in four workers in service-industry federal contract jobs earn less than $10 per hour--and survey research confirms that the overwhelmingly majority of them have trouble paying their bills.

With his executive order, Obama aided contract workers. He sent an important signal to private-sector employers, especially those in the fast-food and retail sectors where workers have been organizing for better wages. And he did something else. To the immense frustration of Republicans in the House and Senate, he declared, "Wherever and whenever I can take steps without legislation to expand opportunity for more American families, that's what I'm going to do."

Making those commitments--to fight for a big hike in the federal minimum wage and to use exacutive orders to act on behalf of workers who do not have enough champions in Congress--was a show of strength.

That provided Obama with an opening to change the discourse.

Unfortunately, he narrowed that opening by putting too much time and energy into promoting a free-trade agenda about which most Democrats in Congress have raised objections. There was nothing robust or exciting about Obama's free-trade pitch. There was something entirely predictable, almost routinized about it. But like George W. Bush and Bill Clinton before him, Obama embraced an orthodoxy that no longer makes economic or political sense.

After arguing for "new trade partnerships with Europe and the Asia-Pacific," Obama told Congress, "We need to work together on tools like bipartisan trade promotion authority."

It is no secret that the president wants to cut the deals that are required to establish the Trans-Pacific Partnership, a sweeping new "NAFTA on steroids" trade pact with eleven Asian and Latin American countries. Nor is it any secret that he would like to clear the way for that agreement by getting Congress to give him the fast-track trade promotion authority that allows negotiations to go forward without congressional oversight or amendments that might address labor rights, human rights, environmental and development concerns.

The problem is that the constituencies Obama is hoping to rally in support of initiatives to address income inequality have come to associate multilateral arrangements such as the North American Free Trade Agreement with the collapse of industries, the shuttering of factories and the elimination of hundreds of thousands of well-paid jobs that once sustained middle-class families. The loss of those jobs--in combination with the related weakening of industrial unions and the depression of wages--is well understood to have contributed mightily to the growth of income inequality.

By whom?

By candidate Barack Obama.

In February, 2008, Obama was on his way to defeating Hillary Clinton in the race for the Democratic presidential nomination. The pair would square off in Wisconsin, and Obama was determined to win on the basis of superior economic stances. So he went to a General Motors plant in Janesville, a community that had already suffered more than its share of downsizing, outsourcing and offshoring. (And that would suffer even more when, in the waning days of George W. Bush's presidency, GM initiated the closure of the plant where Obama spoke.)

"We are not standing on the brink of recession due to forces beyond our control," Obama told the assembled workers. "It was a failure of leadership and imagination in Washington--the culmination of decades of decisions that were made or put off without regard to the realities of a global economy and the growing inequality it's produced."

Obama traced the roots of that growing inequality to "a Washington where decades of trade deals like NAFTA and China have been signed with plenty of protections for corporations and their profits, but none for our environment or our workers who've seen factories shut their doors and millions of jobs disappear; workers whose right to organize and unionize has been under assault for the last eight years."

Obama made the right connections on that winter day in Wisconsin six years ago, anticipating the pile of studies that tell us free trade is not working. The Peterson Institute for International Economics attributes close to 40 percent of the growth in US wage inequality to trade policies of recent decades. The Economic Policy Institute recently published an analysis headlined: "China trade drives down US wages and benefits and eliminates good jobs for US workers." The US Bureau of Labor Statistics confirms that two-thirds of displaced manufacturing workers who found new jobs in 2012 were hired at substantially lower wages--with most experiencing a a 20 percent or greater cut.

Noting that even supporters of past free-trade pacts now acknowledge the role they have played in widening the gap between rich and poor, Public Citizen Global Trade Watch director Lori Wallach reminds us that "economists of all stripes [now] agree that US trade policy has been one of the major contributors to growing US income inequality."

That's not a new concept. It's the one that Barack Obama talked about when he was winning the confidence of Democrats as a candidate in 2008. He distinguished himself from Hillary Clinton by unequivocally stating that "when I am President, I will not sign another trade agreement unless it has protections for our environment and protections for American workers."

Now Barack Obama is president. And he is trying once more to win the confidence of Americans, to get them engaged in a serious battle to renew what he described in 2008 as "the promise of America--that our prosperity can and must be the tide that lifts every boat; that we rise or fall as one nation; that our economy is strongest when our middle-class grows and opportunity is spread as widely as possible. And when it's not--when opportunity is uneven or unequal--it is our responsibility to restore balance, and fairness, and keep that promise alive for the next generation. That is the responsibility we face right now, and that is the responsibility I intend to meet as President of the United States."

Obama was right six years ago. A president can do a great deal to restore balance and fairness in America--and around the world. He is taking some important steps, on the minimum wage and a host of other issues. But he has to recognize that he cannot restore balance and fairness by proposing new free-trade deals that extend the worst practices of old free-trade deals. To build the confidence that is necessary, and the coalitions that are possible, Obama should in his State of the Union address have done what he did as a candidate and acknowledge "the realities of a global economy and the growing inequality it's produced."

He didn't quite get there Tuesday night.

And it will make it harder to achieve the "year of action" that the president is right to say that America desperately needs.