Don’t look now, but Barack Obama has a lasting economic doctrine, one that he will present to the American people Tuesday night in the first State of the Union address of his second term. It’s a doctrine, oddly enough, that has been hiding in plain sight all along, disguised by an economic crises that spawned a half-dozen diversions. Remember “Recovery Summer”? Remember “the New Era of Responsibility”? Remember the “car in the ditch”? Remember “the New Foundations for Growth and Prosperity”? You can scratch those. He’s back to first principles.
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If you are looking for an urtext to decode Obama’s words Tuesday, you need to go back to 2005, to an unnoticed commencement address at a Division III liberal-arts college in Galesburg, Ill. On June 4, 2005, Obama would lay out the theory of middle-class stagnation in America, a story of globalization and new technology that he believed required a federal response. “In reality,” he warned the graduating seniors of Knox College, “the rules have changed.”
It started with technology and automation that rendered entire occupations obsolete. When was the last time anybody here stood in line for the bank teller instead of going to the ATM, or talked to a switchboard operator? Then it continued when companies like Maytag were able to pick up and move their factories to some underdeveloped country where workers were a lot cheaper than they are in the United States … Not only are those Maytag employees competing with Chinese and Indian and Indonesian and Mexican workers, you are too. Today, accounting firms are e-mailing your tax returns to workers in India who will figure them out and send them back to you as fast as any worker in Illinois or Indiana could.
Before the economic collapse of 2008, the “stimulus” of 2009, the Wall Street reform of 2010, the debt-ceiling nightmare of 2011 and the tax increases of 2013, these were the forces Obama identified as the greatest threats to America’s future: increased competition from overseas and technological change, both of which he said were lowering the earning power of most Americans. At points along the way, as he went from Senator to President, he tried to return to this theme, but it mostly got lost in the static. The economic collapse, and the chaos of responding to it, overwhelmed him and the country. In the public’s eye, he became the President of big stimulus and John Maynard Keynes, the guy who said we need to restart growth by opening the Treasury. The Republicans became the party of less spending, less government and smaller deficits.
It was only in the 2012 election cycle that Obama found his footing again. In the most important speech of that cycle, Obama’s remarks on the economy in Osawatomie, Kans., on Dec. 6, 2011, Obama found the refrain that would carry him to re-election. “Long before the recession hit, hard work stopped paying off for too many people,” he said. “Fewer and fewer of the folks who contributed to the success of our economy actually benefited from that success. Those at the very top grew wealthier from their incomes and their investments — wealthier than ever before. But everybody else struggled with costs that were growing and paychecks that weren’t.” Six years later, he was still talking about the same two forces crimping the middle of the country — increased competition from overseas and technological change. He made his campaign an effort to paint Mitt Romney — one of “those at the very top” — and claimed to have a plan to fix the growing economic strain. Romney made his campaign about Obama’s spending record and failure to fully revive the economy. Romney lost.
In recent weeks, Republicans have started to make amends. In the House, Eric Cantor has begun to tell his colleagues that the politics of spending will not be enough to revive the Grand Old Party. “Over the last 20 years, the world has changed,” Cantor said in a major speech last week at AEI. “It used to be that one could make a career out of working for one company. Today, the average worker stays at his or her job for barely four years. Median income in 2010 was about the same as it was in 1997.”
Cantor was trying to turn the page on the old debate of recession and recovery, taxes and spending. He was trying to refocus on the debate on the suffering felt in the U.S. back in 2005, when globalization and new technology were taking their toll on the Maytag plant Obama talked about at Knox college. This is probably good news for the country, and not because it means liberals are winning the argument. Rather, the argument is shifting to more productive terrain. “The traditional dynamic of the two parties is kind of off point,” explains Robert Shapiro, a former economist for Bill Clinton who has informally offered advice to the White House. Under this theory, the key to jump-starting the economy is not just more spending to juice consumption — as many Democrats believe — or more tax cuts and lower deficits to free private enterprise — as many Republicans believe. What Cantor and Obama are getting at is a deeper issue: because of globalization and technology, economic growth no longer means prosperity for the middle class of the country. To borrow a hackneyed phrase, the middle class must first be retooled to take advantage of those gains.
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At this point, the two men diverge, even though they basically agree. Both believe that something must be done about education, rising health care costs, rising energy costs and the need for more investment in innovation to increase American competitiveness. Both go about it in different ways. They disagree about the structures of their reforms, the price tags and how much government debt should be taken on in the process. But at least they are having the same conversation, for the first time in three years.
Which brings us back to Obama’s State of the Union address tonight. He will lay out his vision for retooling the middle class, growing the economy from the middle out, as he likes to say. This will include “investments” in education, in energy, in infrastructure and in manufacturing. He will dare the Republicans not to stand for his applause lines. (One thing about running a $1 billion presidential campaign: it gives you a lot of confidence that your polling operation understands the American people.) Nothing will change overnight. The next few months will still be ugly in Washington. The disagreements remain real and deep. But the more lasting impact of his speech will likely be in cementing his own ideological vision for the country. He has won the debate he helped start in 2005. Now he just has to see if he can deliver on that victory’s promise.