Despite his best efforts, the president who vowed to conquer Wall Street and revive opportunity for everyday Americans on Main Street has this to show for his first five years in office: U.S. stock markets are in record territory, posting 30 percent gains just last year, and Wall Street is home once again to the biggest concentration of billionaires on earth, while wages for the middle class have barely kept up with inflation.
As President Obama prepares to lay out an economic agenda to address this disappointing state of affairs in his State of the Union address this month, his inability to stem long-term trends toward inequality are giving congressional Republicans little incentive to work with him as they push their recently developed agenda against poverty.
Mr. Obama has acknowledged that the record gap between the rich and everyone else has only grown on his watch, and has vowed to devote his final three years in office to trying to rectify the situation.
But success is far from guaranteed, Economic analysts say trends contributing to the erosion of middle incomes were in place for years before he took office and some steps he took early in his first term likely accelerated them, even while softening an immediate blow to middle-class Americans.
Taking over where President George W. Bush left off, Mr. Obama propped up Wall Street’s biggest banks through a series of bailouts to end the crisis in the financial markets and bring stability back to the economy, but these moves also left the banks larger and more profitable than ever.
Mr. Obama moved during the brief period the government took ownership of the banks in 2009 to curb bonuses and incomes for Wall Street executives, but the banks quickly shook off those limits by using renewed profits to pay off taxpayers and shed their government bonds.
During the crisis, the collective incomes of the wealthy took a rare but brief dip caused by the collapse of the stock market. But since that period, the top 1 percent of earners have made more money than ever, reaping 90 percent of the income gains from the recovery of the economy and stock markets since 2009, according to a study last month by researchers at the University of California at Berkeley.
The stock markets have more than recouped a nearly 60 percent loss during the crisis, despite greatly increased federal regulation of Wall Street under Mr. Obama’s banking reform law. They are back in record territory with spectacular gains in major stock indexes of 30 percent or more just last year.
Middle-class wage earners with pension funds have prospered some from the stock bonanza, but the overwhelming share of the benefit accrued to those who trade or own most of the stocks: the well-heeled bankers on Wall Street and their wealthy clients, as well as the elite corps of corporate executives who derive most of their income from stock grants and options.
As a result, Wall Street once again is in the midst of a major boom, with the biggest concentration of billionaires on earth. Meanwhile, average wages for middle-class workers have grown by 2 percent or less since the depths of the recession in 2009, barely keeping up with inflation. The gap between the rich and the middle class has reached levels not seen since the Gilded Age of the late 19th century.
Mr. Obama recently called this growing inequality the “defining challenge of our time” and vowed to remedy it through a raft of measures such as raising the minimum wage, increasing worker training, and fostering good-paying middle-class jobs in infrastructure and manufacturing. He gained a partial victory in his battle to make the rich sacrifice more with the end of some of Mr. Bush’s tax cuts a year ago.
But most of the president’s remedies face daunting opposition from Republicans in Congress. Even if Mr. Obama secures approval, economists say, his proposals would do little to overcome powerful market forces that enable the affluent to reap most of the gains from financial markets and from the mechanization and globalization of the economy that have shifted millions of middle-class jobs from the U.S. to the developing world.
Republicans, anticipating an onslaught from Mr. Obama and congressional Democrats on the equity issue this year, have developed their own agenda to boost the poor and middle class.
House Budget Committee Chairman Paul Ryan of Wisconsin, the 2012 Republican vice presidential candidate and a likely 2016 presidential contender, was a keynote speaker at a Brookings Institution “summit” Monday on social mobility. Mr. Ryan acknowledged that government has a role to play in lifting the fortunes of the poor and middle class, but said free-market solutions are the best way to attack wage stagnation and income inequality.