Obama seeks lifeline for struggling families
Tue Dec 23, 2008 3:46pm EST
By Tom Brown - Analysis
reuters.com
MIAMI (Reuters) - President-elect Barack Obama has promised to confront income inequality and the falling fortunes of the working- and middle-class but faces a huge challenge to reverse decades of decline.
The slide from the middle class to the ranks of the working poor gained momentum in eight years under President George W. Bush and fighting that trend will define much of Obama's early years as he faces the worst recession in post-war history.
"My administration will be absolutely committed to the future of America's middle-class and working families," Obama said on Sunday, echoing a central theme of his presidential campaign.
Obama, who has said a strong and growing middle-class is the key to a strong economy, announced the creation of a task force led by Vice President-elect Joe Biden to help working people and those on the lowest rungs of middle-class life.
Biden said on Tuesday the Obama team, which takes over on January 20, was close to agreement with Congress on a huge emergency spending bill intended to create 3 million jobs over two years, the heart of a plan to jolt the economy to life.
The ranks of the middle class, which economists say holds the key to U.S. recovery, have been shrinking since the 1970s, as incomes flattened off. Obama has to reverse the trend at a time of job cuts, bankruptcies and mortgage foreclosures.
Obama plans to boost the economy with middle-class tax cuts, money for public works programs like the building of roads and mass transit, and funds to bolster healthcare and other social programs.
Some analysts say measures the Obama team has proposed so far are woefully inadequate and that radical measures such as protectionist trade barriers and government-imposed curbs on outsourcing jobs may be the only way out.
The current crisis has stunned a whole class of working Americans. "I expected to have a good job my entire life," said Charles Howland, 46, a certified welder who was recently laid off in Arizona from a company building desalinization plants.
"I figured I could at least take care of my family and support them," he said, as he stood in line for emergency food aid at the St. Mary's Food Bank in Phoenix. "I am disappointed and hurt."
There are varying explanations for the erosion of the middle class, but in a country with the largest gap between rich and poor of any industrialized Western nation, many blame it on corporate greed.
"In the last 30 years we've organized an economy (in which) every increase in wealth, every increase in productivity, has gone to the top 1 percent of the population," said Michael Zweig, a professor of economics at New York's Stony Brook University.
"It's gone to the corporate elite, that's who's got the wealth," he said.
CHRONIC POVERTY
Poverty remains chronic in the richest country in the world. About 37.3 million people, or 12.5 percent of the population, were living below the official poverty line in 2007, the latest year for U.S. Census Bureau statistics. The poverty rate had stood at 12.8 percent in 1968, showing there had been little improvement in nearly four decades.
"Up until about the mid-'70s, as the productivity grew in this country, median family income grew just in lock-step. The increasing wealth of the country was reaching regular folks," said Heidi Shierholz, an economist with the Economic Policy Institute in Washington.
"Then around the mid-'70s it just started to depart," she said.
"The battle the incoming administration is facing is really a decades-long sort of erosion of the ability of the middle-class to share in the prosperity of the country," Shierholz said.
The period from 2000 to 2007 marked the first business cycle on record in which median family incomes failed to increase, she added, calling the job market under Bush "a total disaster."
Alan Tonelson of the United States Business and Industry Council, blames misguided trade policies, the decline of America's once powerful manufacturing sector and global competition for lower wages.
"If you don't get the trade policy right, you'll never get this country's economic revival strategy right," he said.
"If we want to create a genuinely healthy economy going forward, we have to produce our way out of this, and that means reviving the American manufacturing sector."
That is the sector most heavily affected by trade policy and trade flows, Tonelson said. The key, he added, is to help U.S. industry win back the huge chunks of its own home market that have been lost to foreign competition.
"We don't see, how that's possible without putting trade barriers into effect," he said.
(Additional reporting by Tim Gaynor in Phoenix; Editing by David Storey)
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