Obama Economy Speech: Why The President's Plan Won't Get Past Republicans

 @LauraMatt on July 24 2013 2:05 PM

President Barack Obama sought to change the narrative on Capitol Hill and the nation on Wednesday, with a much-anticipated economic speech at Knox College in Illinois, the first in a series of speeches he wants to give about his vision for rebuilding the economy.

Stepping out ahead of what is shaping up to be a heated debt-ceiling showdown in the fall, Obama spoke of the progress made and the challenges ahead, and offered his solutions, based on building out from the middle class -- a concept that has stuck with the president since his first term in office.

“When middle-class families have less to spend, businesses have fewer customers,” Obama said. “When wealth concentrates at the very top, it can inflate unstable bubbles that threaten the economy. ... That’s why reversing these trends must be Washington’s highest priority. It’s certainly my highest priority. Unfortunately, over the past couple of years in particular, Washington hasn’t just ignored the problem; too often, it’s made things worse.”

Obama wants to do these things to help strengthen the middle class:

-- Promote new initiatives so that manufacturers can bring additional jobs back home and create jobs in the energy sector;

-- Have high-quality pre-school for every 4-year-old across the nation;

-- Work on his own to remove red tape for responsible families who want a mortgage but can’t get one;

-- Tackle the rising cost of higher education, and helping to get people out of poverty; and

-- Implement the Affordable Care Act.

Obama senior advisor Dan Pfeiffer revealed on Sunday that job security, education, homeownership, healthcare, and saving will form the cornerstone of these speeches. “They will include new ideas and new pushes for ideas he has discussed before,” he wrote in a post. “They’ll outline steps Congress can take, steps he’ll take on his own, and steps the private sector can take that benefit us all. The point is to chart a course for where America needs to go --not just in the next three months or even the next three years, but a steady, persistent effort over the long term to restore this country’s basic bargain for the middle class.”

But Republicans are showing reluctance to many of Obama’s proposals. They have been doing so for a long time, in fact. At the moment, congressional Republicans are focused on gutting the Affordable Care Act, commonly called Obamacare, which they have tried unsuccessfully to repeal more than 30 times and now want to defund; they have no intention of raising the debt ceiling or eliminating it altogether; they also don’t want to hear about raising any taxes. What they want is the spending cuts promised to them in the deal for raising taxes on upper income brackets earlier this year, and it appears they are willing to do anything to get it, even shut down the government if Obamacare gets one dime.

“Well, welcome to the conversation, Mr. President, we’ve never left it,” Boehner said at a press conference on Tuesday. “We’ve been focused on jobs for the last two and half years -- actually, longer than that -- but the two and half years we’ve been in the majority.”

If Obama was serious about helping the economy, Boehner said, he wouldn’t be taking the podium instead of reaching out and working with Republicans. So the trust deficit between the two sides continues. “This is all about a big setup that’s coming in this speech,” he added. “The president wants to raise taxes so he can do more ‘stimulus’ spending. And the fact is, it’s his sequester and if we’re going to get rid of his sequester, we’re going to have to look for smarter spending cuts in order to do that.”

Two key parts of the president’s second-term agenda, gun control and immigration reform, have either been destroyed or stunted, but he’s refusing to back down on the issue of the economy, which is still recovering slowly.

With a deficit that the Congressional Budget Office projects to fluctuate between 2.4 percent and 3.8 percent of gross domestic product over the next decade, there are more pressing issues than reining in the deficit, according to some economists -- such as helping Americans return to work. The nation’s unemployment rate remains steady at 7.6 percent. But when part-time employees and those who have stopped looking for work are factored in, the real unemployment numbers are in the double digits.

“I think it’s a more pressing issue than the things Washington has spent most of the last year discussing,” said Michael Strain, an economist at the conservative-leaning American Enterprise Institute. “I hope the president has some ideas and policies and some thoughts to share with the country about how to put Americans back to work.”

But Strain isn’t optimistic that Congress will work with the president and across party lines to pass any significant pieces of legislation. “External events could force the hand of the government,” he said, “but these guys aren’t playing nicely together and that’s somewhat discouraging.”

Still, Strain thinks there are policy solutions that both Democrats and Republicans can get behind to start making some real changes: reforming the unemployment system; bring in more high-skilled immigrants, whether through comprehensive immigration reform or a separate jobs plan; reduce barriers for potential entrepreneurs; and even temporarily eliminating capital-gain taxes on new business investments, to help potential entrepreneurs attract capital.

Like Strain, Lance Roberts, chief economist at Street Talk Advisors, believes both parties working together can solve some of the problems. Over the next three years, said Roberts, economic growth will still be pretty much sluggish as long as the policies now in place remain or new ones don't lead to further economic restraints. 

For him, there’s no doubt federal bailouts and other programs under the Obama administration prevented an economic depression, but getting people into full-time employment must be the focus now. That would lead to increased consumer confidence and spending.

But the president alone isn’t to blame, Roberts said, adding decades of bad decisions that begun under President Reagan play a role. “We are just in the back end cycle of a long policy of bad fiscal decisions and increasing debt and running deficits to no end,” he said. “So now we are dealing with the deleterious effects on the economy of those previous decisions.”

The key, though, is getting Americans to a place where they can spend money again. “Consumption is what we need to drive economic growth,” Roberts said. 

Join the Discussion