Recently, President Obama decided to pivot back to the economy, a subject that seems to compel his periodic but feckless attention. The focus of his latest message was not the strength — or lack thereof — of the economy itself. That would require a much more serious effort, such as a recommendation for corporate tax reform. Rather, he focused his attention on a divisive subject that’s likely to make progress on the economy even more difficult: the inequality of wealth distribution in a weak economy.
Not one for understatement, he called it the defining challenge of our time. It makes you wonder whether he wants to fix the poor economy or use it as a political prop. After all, a good economy means conditions where people look to the private sector, as opposed to government, as the source of their security and prosperity. It is not clear he wants that.
Perhaps it is understandable that he would pick this subject. His signature health care legislation is on life-support. Another of his other favorite causes, climate change, is in the deep freeze. Immigration reform has gone south. The president is lost, and he is looking desperately for an issue with which he can regain the high ground. It is not about his many failures; it’s always about everyone else.
What he does not seem to understand is that income disparity is aggravated during an economic downturn. People who have created surplus wealth are usually in a better position to weather a downturn than most of the middle class — with the exception of his beloved government employees, of course. Past presidents of both parties have always known that improving the prospects of the middle class is the only viable remedy for that disparity. This president, without the benefit of any private-sector experience or understanding, does not know this. The middle class is still stuck in a recession, and median household income has yet to recover from the financial crisis that brought him to power. Still, he is not talking about that, and his many regulatory initiatives are not going to help them. Faced with a failing presidency, he is trying to turn what he is not able or willing to fix to his political advantage.
The real problem, however, is that Washington has done more during Mr. Obama’s term in office to promote wealth and income inequality than at any other time in history. The centerpiece of the president’s economic policy, by default, has been to inject $1 trillion a year of printed money into the financial system. That has brought fabulous wealth to the financial community, in terms of both additional capital and increased equity values. It does nothing, though, for the middle class. In fact, middle-class savers are unable to earn any interest on their own savings, and the costs of the commodities on which they depend, such as energy, have been inflated by a weakened currency. Were it not for the ability of the private sector to turn its technology into an energy boom, the middle class would be desperate this winter.
The president’s failure to consider even modest reforms to the entitlement system has aggravated society’s wealth inequality. We have gone from being an opportunity economy to an entitlement economy, and economic benefits are now going to the entitled. According to an analysis conducted by USA Today, Federal Reserve data show that the overwhelming majority of wealth recovery in the United States since 2009 has gone to older Americans, whose wealth has doubled. Younger taxpaying households have fallen behind, and they have lost wealth after adjusting for inflation. This disparity has been aggravated by the fact that seniors get generous federal retirement benefits that the country cannot afford. USA Today observed that the divide between the rich and poor in America today is more generation gap than class conflict.
To rub salt in the wound, Obamacare is yet another wealth-redistribution program, albeit one wrapped in health-insurance reform. It is like a virus that is targeting the young and the middle class. The beneficiaries, of course, are the same people that profited from Washington’s other wealth-redistribution programs. Its effect on the economy is crippling, though. Young, working, middle-class taxpayers that are struggling to get ahead and get the economy moving are the ones who can least afford the added costs and burdens of this failing experiment in social engineering.
Finally, the national debt will double during Mr. Obama’s time in office. This means that he will have left future generations of Americans with more debt than all of his predecessors combined. Once again, his spending on favored constituents will have to be paid by Americans too young now to understand what that means. Herbert Hoover once wryly stated that blessed are the young for they shall inherit the national debt. This president does not appreciate the significance of that statement. He has cursed the young with the burden of paying for the bloated federal establishment that he administers.
The country does not need a lecture from Mr. Obama on how to address the challenge of wealth inequality in America today, since his policies are largely responsible for making it worse. He will have to learn that the American public will not trust that the man who created this problem is the right man to fix it.
Warren L. Dean Jr. is an adjunct professor of law at Georgetown University Law Center.