Obama's shaky middle-class lifeboat

Yesterday's speech from Barack Obama, and the criticism of it, show just how fraught America's efforts are to boost its economically critical middle class.

In the wake of US President Barack Obama’s State of the Union address, it's clear America is so far incapable of arresting the decline of its middle class.

In the hour-long speech, the first SOTU of his second term as the 44th president of the United States, Obama said it’s his generation’s task to "re-ignite the true engine of America’s economic growth: a rising, thriving middle class.”

But the renowned orator only really hit his trademark high notes around minute 56 when addressing the America’s depressing levels of gun violence.

It’s a reflection of the fact that the state of said union is, at the moment, somewhat tenuous.

Obama’s obvious, ongoing frustration with the congressional battle over the budget, with mandatory budget cuts set to kick in on March 1, was palpable.

"These sudden, harsh, arbitrary cuts would jeopardise our military readiness, they'd devastate priorities like education and energy and medical research. They would certainly slow our recovery and cost us hundreds of thousands of jobs,” he said to the joint congressional session.

"The greatest nation on earth cannot keep conducting its business by drifting from one manufactured crisis to the next.”

That last line received a good response from the lawmaking crowd. While the SOTU is an address to the nation, it’s delivered before a room half filled with people who hate the speaker.

Obama’s antagonists are also instructed by their party only to applaud and/or stand for a select number of topic and proposals. Media organisations monitor the audience for applause breaks, bipartisan applause, full standing ovations and laughs. The less there are the better it is thought to be for the Republicans; as if voters are actually swayed by such garbage or readers could care less.

This is another reason Obama couldn’t hit those lofty rhetorical heights. It’s the weirdest crowd a president is ever likely to encounter. For the record, his numbers were 79, 45, 16 and 4, respectively.

But back to the fraught definition of, and building of, the middle class. If there’s a single policy proposal from Obama’s first SOTU speech of his second term last night (US time) that’s gaining the most attention, it’s his plan to raise the federal minimum wage to $9 an hour from $7.50 an hour.

"We know our economy’s stronger when we reward an honest day’s work with honest wages,” Obama said. "But today, a full-time worker making the minimum wage earns $14,500 a year. Even with the tax relief we’ve put in place, a family with two kids that earns the minimum wage still lives below the poverty line. That's wrong.”

Indeed it is. But rising Republican star Senator Marco Rubio, a Cuban American charged with mounting the conservative counterargument, contested that the minimum wage is a misguided way to approach growth.

"I support people making more than $9,” the Florida senator told CBS Broadcasting the following morning. "The problem is.... Minimum wage laws have never worked in terms of having the middle class have more prosperity.”

There’s a valid argument that wage hikes would create fewer spenders by making some $7.50 an hour positions uneconomic. But Rubio’s comments highlight how America is losing touch with where its middle class lies and how to rekindle its fortunes. Who the hell mentioned the middle class at $9 an hour? This is the working poor, the working impoverished.

Obama’s compelling observations on America’s biggest economic problem – education – also show how the system is woefully failing to help the middle class by failing to train students for careers that actually exist today.

"Now at schools like P-TECH in Brooklyn, a collaboration between New York public schools and City University of New York and IBM, students will graduate with a high school diploma and an associate’s degree in computers or engineering,” Obama said with a much-needed sense of hope and optimism. "We need to give every American student opportunities like this.”

They do, but technology is changing the face of the American economy and jobs market and how American themselves are poorly placed to benefit from it.

Middle-income jobs for the middle class are less likely to be forthcoming from these new institutions that make up America’s great growth and innovation sector.

Worse still, America’s rekindling manufacturing sector is producing jobs that require skills that Americans don’t really have in great numbers. The US technology sector has the exact same problem (Can America step up to a manufacturing renaissance? January 9). And the middle class, both the upper and lower parts of it, will continue to suffer for it.

In time, rather than rather than ‘millionaires/billionaires versus the 99 per cent’, income inequality should come to be spoken of as the splintering of the middle class into higher income earners and lower income earners. That is, unless Obama, or more likely his successor, can make sure more Americans end up in the former category than the latter.

Meanwhile, results from a Pew Research Centre survey six months ago indicate less than half the US population still consider themselves to be middle class.

Just 64 per cent agreed with the statement "hard work pays off,” which means one third don’t. That’s terribly sad. In 1999, towards the end of Bill Clinton’s second term, 74 per cent agreed with that same statement. Obama, with his feelings about the attitude of Americans towards an honest day’s work, is on to something.

The president would clearly love to do something about it with a new raft of spending promises, but they weren’t there. In fact, the structure of some proposals shows scaremongering that Obama is still a big-spending president is woefully misplaced.

Notice the structure of the P-TECH example – an American public school and a public university partnering with the very private IBM.

The president also launched three manufacturing hubs where the Departments of Defence and Energy would partner with businesses, and a ‘Partnership to Rebuild America’ and mentioned 70,000 structurally deficient bridges that need to be tended to.

A centre-left American politician might be inclined to make these programs wholly government run and funded. But with America’s total debt surpassing $US16 trillion in the weeks leading up to his victory over Republican Mitt Romney in November, Obama is forced to use business as a crutch to re-educate and rebuild his country.

Throw in the minimum wage hike, a cost met by business, and it’s plain to see how limited Obama is just months into his second and final term in office.

Alexander Liddington-Cox is Business Spectator’s North America Correspondent.

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