Obama's State Of The Union And Your Economic Reality

Feb 2, 2014
Originally published on February 3, 2014 7:20 am

In his State of the Union speech Tuesday, President Obama stepped up to a podium before Congress and the country and declared that the state of our union was strong.

"Here are the results of your efforts: The lowest unemployment rate in over five years; a rebounding housing market; a manufacturing sector that's adding jobs for the first time since the 1990s," the president said.

Critics quickly pointed out that of course things look better if you use 2009 — the lowest point in the economy — as a baseline. And even the president didn't keep the rose-tinted glasses on for long.

"Average wages have barely budged," he said. "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."

How accurate is Obama's portrait of the economy? Whatever the portrayal, there's still the matter of what's to be done, which Obama also referred to in his speech.

Assessing Obama's Assessment

Zanny Minton Beddoes with The Economist tells NPR's Arun Rath that the president isn't wrong in his optimism.

"I think the U.S. economy is recovering, and it's recovering more rapidly," Minton Beddoes says.

She points to housing sales and the GDP, which grew about 3.5 percent by the end of last year. Most economists agree that's the right amount for a healthy economy — not too fast, not too slow.

But as Obama noted, "there's a lot of very big challenges," Minton Beddoes says. Like having so many people unemployed for such a long time and growing income inequality.

These things aren't just products of the financial crisis, she says, but are instead part of larger changes taking place in the U.S. economy.

"A lot of the gains of the recovery that we've seen have gone to the people at the very top, particularly the top 1 percent," she says. "Ordinary people's incomes have not accelerated that much, and so it doesn't seem as though the economy is doing that well."

How Does It Feel?

However you look at the numbers, most Americans aren't quite sharing in the optimism.

"People are telling us in a lot of ways that they're struggling financially," says Carroll Doherty, director of political research for the Pew Research Center. Pew released a poll on Jan. 23 that surveyed Americans on their feeling about the economy.

"Fifty-seven percent in our poll say that their family incomes are not keeping up with cost of living," Doherty says.

And he says it's remarkable how long the negativity about the economy has lasted: "It's been years since there's been any real substantial improvement in people's feelings about the economy."

Over the last few years, Pew has been asking people where they stand economically: Since the start of the recession, more and more people are identifying as lower-middle or lower class.

"That went up from 25 percent about 6 years ago to 40 percent today," he says.

In other words, a year or two after the recession started, losing your job could be viewed as a temporary setback. But as you evaluate your standing on the brink of the recession's seventh year, maybe it's time to face the facts and rate yourself a little lower on the economic ladder.

At 40 years old, Arkansas mother-of-two Brandy Swanson is part of the 5 million "prime-aged workers" — those aged 25 to 54 — who have been unemployed for a long time. She was working three, 12-hour shifts a week at her local hospital, but as the economy tanked, that work dried up and she is still out of work.

"We're doing everything we possibly can to save every single dollar just so we can eat and pay our bills and buy gasoline," she says. "I don't go out and buy anything just because I want them ... we have to be really careful."

Finding Solutions

As families strain to get by and the gap between the rich and the poor widens, there is a stark partisan divide on the fundamental question of how to help — if at all.

"Ninety percent of Democrats say [government] should [do something], and only 45 percent of Republicans say it should," says Doherty of Pew.

But when the poll gets specific about solutions, the answers tell a different story. Doherty says 73 percent of Americans, for instance, favor raising the minimum wage, and 63 percent favor increasing long-term unemployment benefits.

"Those policies are popular," he says. "The question is, if implemented, would they have a significant effect on either inequality or poverty?"

Certainly the Obama administration thinks both raising the minimum wage and extending unemployment insurance will help the millions of Americans still struggling. In his State of the Union speech, Obama urged Congress to pass both those measures and more.

On Friday, he went a little further by holding a summit with about 300 companies and urged them to end hiring discrimination against the long-term unemployed.

Jason Furman, chairman of the Council of Economic Advisers, says the president would like to see follow-through from businesses, localities, states and — most importantly — the federal government.

But long-term unemployment insurance has taken a backseat in both chambers, and prospects don't look good for the minimum wage bill, either. And as much as the president can ask companies to help out, there simply aren't enough jobs for the millions who would like one.

While Congress and the president search for solutions, Swanson and her family are settling into their new reality.

"I think that my family is learning how to survive in the economy now," she says. "If in the near future, I'm lucky and I get a job at a living wage ... then I think that the recovery may be possible. I might be able to see that light."

Copyright 2014 NPR. To see more, visit http://www.npr.org/.

Transcript

ARUN RATH, HOST:

This is ALL THINGS CONSIDERED from NPR West. I'm Arun Rath.

(SOUNDBITE OF STATE OF THE UNION ADDRESS)

REPRESENTATIVE JOHN BOEHNER: Members of Congress, I have the high privilege and distinct honor of presenting to you the president of the United States.

RATH: Last Tuesday night, President Obama stepped up to a podium before Congress and the country, and he declared that the state of our union was strong.

(SOUNDBITE OF STATE OF THE UNION ADDRESS)

PRESIDENT BARACK OBAMA: The lowest unemployment rate in over five years, a rebounding housing market, a manufacturing sector that's adding jobs for the first time since the 1990s.

RATH: Critics quickly pointed out that, of course, things look better if you use the lowest point in the economy, 2009, as the baseline. But the president didn't keep the rose-tinted glasses on for long. Here's the same speech just a few minutes later.

(SOUNDBITE OF STATE OF THE UNION ADDRESS)

OBAMA: 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 to get ahead. And too many still aren't working at all.

RATH: And that's our cover story today: the long-term unemployed, the state of the economy and what can be done.

(SOUNDBITE OF MUSIC)

RATH: To figure this out, I asked Zanny Minton Beddoes. She's with The Economist magazine, and she says the president isn't wrong.

ZANNY MINTON BEDDOES: Well, I think the U.S. economy is recovering, and it's recovering more rapidly.

RATH: There are definitely good signs, Minton Beddoes says. She points to things like housing sales and the GDP, which grew about 3.5 percent by the end of last year. Most economists agree that that's the right amount for a healthy economy - not too fast, not too slow.

BEDDOES: That said, there's a lot of very big challenges, and the president pointed them out, right? I mean, you have a lot of people who have been unemployed for a very long time. You have a lot of - a huge widening in income disparities in this country. You have stagnant social mobility. These are not things that arrived in the few years since the financial crisis. These are very big secular changes that are taking place in the U.S. economy, thanks to new technology, thanks to globalization.

And I think now as we've sort of emerged from the kind of big trough of the crisis and then the very sluggish recovery after it, if indeed the economy is on a more sustainable path of faster recovery, now is the time to turn to these longer term things.

RATH: So Stanford University just released their own State of the Union study. It considers a lot of different points, and they said they have found what they call, quote, "a broadly deteriorating poverty and inequality landscape." And it seems that every day, Americans agree that their views about the economy are still pretty pessimistic.

BEDDOES: I think that's absolutely right. And I think one of the big reasons is that, of course, we have these very big secular changes going on, which are making, you know, income distribution much worse in this country. A lot of the gains of the recovery that we've seen have come to people at the very top, particularly the very top 1 percent. And so ordinary people's incomes have not accelerated that much. And so it doesn't seem as though the economy is doing that well. The thing that makes it feel as though the economy is humming, for most people, is when the labor market is strong.

RATH: And one figure that's stuck out to me, this is people age 25 to 54, the, quote, "prime age" adults, people who, when in good economic times, about 80 percent of them are working. At the end of last year, that number was closer to 76 percent. It doesn't seem like a lot of movement, but that's still five million people.

BEDDOES: Absolutely. And that's been one of the really striking things about the U.S. economy in the past few years is that you've seen this very big decline in the share of the labor force that is employed and the share of people that are employed. Now, partly that is to do with the fact that the population is aging and the baby boomers are aging. And as you get older, fewer people work. But a lot of it probably has to do with the weakness of the recovery itself. And there are people who would like to work but haven't been able to find jobs.

And I think you're absolutely right. That is a signal of a weakness in the economy. It's both a sign of the weakness of the recovery. But if you look the other way around, it's also a sign of potential trouble ahead because the economy's potential is obviously weaker if you've got fewer people working. First of all, in the short term, you have a weaker recovery, right? You have fewer people who have the income and hence the ability to spend.

Secondly, you can have some potential long-term effect on the economy, what economists called scarring, which is that the longer people are detached from the labor force, the longer they don't have a job for, the harder it becomes for them to get a job. Their skills don't keep up with what's going on in the workplace, and the more you can really have permanent damage, permanent hit to those people themselves and to the economy's potential.

RATH: Zanny Minton Beddoes of The Economist.

We asked the question of ordinary Americans: What is the state of your personal economy? Are you optimistic?

ISAAC VEGA: Right now, it's very, very good and stable. I'm able to save money, retirement. I can go out.

TRALEE THORN: It's been hardship after hardship after hardship. And I just - I keep hoping that it's going to get better, but I don't see it changing.

KYLE GALLE: We're not the richest people on the block by any stretch of the imagination, but we're doing OK.

RATH: That was Isaac Vega of San Diego, California; Tralee Thorn of Salem, Oregon and Kyle Galle of Worthington, Minnesota. If they sound like they have mixed views, well, that's true of the whole country.

Carroll Doherty is the director of political research at the Pew Research Center. Just last week, they released a poll about how Americans are feeling about the economy. While some people reported they're doing well, Doherty says that the majority have a more pessimistic message.

CARROLL DOHERTY: People are telling us in a lot of ways that they're struggling financially. Fifty-seven percent in our poll say that their family incomes are not keeping up with the cost of living.

RATH: And Doherty says it's remarkable how long the negativity about the economy has lasted.

DOHERTY: It's been years since there's been any real substantial improvement in people's feelings about the economy.

RATH: Over the last few years, Pew has been asking people where they stand economically. Do they consider themselves upper class, middle class, lower class? And since the start of the recession, there has been one dramatic pattern: More and more people are identifying as lower-middle or lower class.

DOHERTY: That went up from 25 percent about six years ago to 40 percent today. So quite a climb.

RATH: In other words, a year or two after the recession started, losing your job could be viewed as a temporary setback. You were still middle class. You had a house, a car, a retirement fund. But on the brink of the recession's seventh year, as you've looked for a new job or taken a big page cut, broken into your savings, struggled with the mortgage, maybe it's time to face the facts and rate yourself a little lower on the economic ladder.

Brandy Swanson is one of those people. She's a licensed respiratory therapist and teacher from Conway, Arkansas. She was working three 12-hour shifts a week at her local hospital, but as the economy tanked, that work dried up. Now...

BRANDY SWANSON: I'm looking, and I'm trying to get a job, any job. But currently, I don't have a job.

RATH: Swanson considers herself lucky. Her husband is still employed, and that has helped their family to keep their house and pay the bills. Still, she says, with two kids, expenses continue to pile up.

SWANSON: We've cut corners. We're doing everything we possibly can to save every single dollar just so we can eat and pay our bills and buy gasoline. I don't go out and buy just anything because I want them. We don't go out to eat as much. And that's a big thing. I mean, I used to be able to spend excess money on things like that, and I no longer can. And we have to be really careful, like can we really afford that type of meat at the grocery store?

RATH: At 40 years old, Brandy Swanson is part of those five million prime-aged workers who have been unemployed for a long time. Add to that, a new problem: Most new jobs these days pay very well or not very much at all. Jobs with salaries in the middle just aren't returning at the same rate. Of course, that's a great formula for income inequality.

According to that same Pew poll, two-thirds of Americans agree that the gap between the rich and everyone else was growing. But we're split on whether the government should be doing anything about it. Again, Carroll Doherty of Pew.

DOHERTY: Ninety percent of Democrats say it should, and only 45 percent of Republicans say it should. So on the fundamental question of whether the government should get involved in this issue, there's this huge partisan gap.

RATH: But when the poll gets specific about solutions, the answers tell a different story.

DOHERTY: Seventy-three percent of Americans, for instance, favor raising the minimum wage, 63 percent favor increasing long-term unemployment benefits. Those policies are popular. You know, the question is, you know, if implemented, would they have a significant effect on either inequality or poverty?

RATH: Certainly, the Obama Administration thinks both of those things will help the millions of Americans still struggling. Last Tuesday night, Obama urged Congress to pass both those measures and more. On Friday, he went a little further.

JASON FURMAN: The president convened a summit here at the White House, and he used his pen and his phone to do everything he can to help those people get jobs.

RATH: Jason Furman is the chairman of the Council of Economic Advisers, the three White House economists who advise the president. He says Obama has persuaded about 300 companies to end discrimination against the long-term unemployed for new hires. As Zanny Minton Beddoes of The Economist explained earlier, it could kill the recovery to have millions of people with no job, no income, no way to buy anything or put that money back into the economy.

Furman, though, is optimistic. That dropping unemployment rate puts natural pressure on wages to grow, he explains. He says we've already seen it happen a bit.

FURMAN: We can't take for granted, though, that those wage gains are going to happen across the entire income spectrum. And that's why the president, on Tuesday night, said that he was going to be raising the wages for federal contractors to $10.10 an hour, and he'd like to see businesses, localities, states and, most importantly, the federal government through legislation by Congress follow through.

RATH: At the same time - and you can read between the lines there - President Obama really can't do that much on his own. Long-term unemployment insurance has taken a backseat in both chambers. Prospects don't look good for the $10.10 minimum wage bill either. And as much as the president can ask companies to help out the long-term unemployed, there simply aren't enough jobs for the millions who would like one.

While Congress and the president search for solutions, Brandy Swanson and her family are settling into their new reality.

SWANSON: I think that my family is learning how to survive in the economy now. If I'm lucky and I get a job, a job at a living wage, not minimum wage, but a living wage, then I think that the recovery may be possible. I might be able to see that light. But if I don't get a job, then no. Transcript provided by NPR, Copyright NPR.