As Barack Obama enters the twilight of his presidency, he presides over an America vastly different from the one he envisioned building during his 2008 campaign that promised to empower everyday Americans on Main Street over wealthy bankers and investors on Wall Street.
A stream of statistics published over the holidays — while Mr. Obama vacationed in Hawaii — paints a clear picture of the gap that has emerged between the audacious promise of his first campaign and the economy’s performance since.
Six years into his agenda, Wall Street is roaring higher than ever, with the Dow topping out over 18,000 for the first time recently and the top 10 percent of wealthy Americans amassing wealth at a double-digit pace.
But on Main Street large numbers of Americans have dropped from the job market, middle-class wages are stagnant, and even larger numbers of Americans are now dependent on some form of government subsidy for disability, jobless benefits or food stamps.
Even data from the president’s signature legislative accomplishment provides warning signs about the health of Main Street: More than four out of five Americans who got new health insurance under Obamacare did so with a government subsidy.
Experts say forces in the macroeconomy, coupled with Mr. Obama’s aggressive regulatory agenda, have left the promise of a more robust Main Street in shambles.
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“The man really believes in regulating the private sector as opposed to structural remedies, and those regulations have hurt Main Street,” said Peter George Morici Jr., an economist and international business professor at the University of Maryland’s R.H. Smith School of Business.
One area where Main Street is struggling is in access to banks and capital, Mr. Morici added.
“His banking regulations are so opaque and complex that small banks can’t cope with them, so they sell out to bigger banks,” he said. “And so what you’ve got is a situation where the focus of banking [is] shifted from Wall Street to Main Street. Regional banks now have less money to lend because there are less of them. That takes banking away from Main Street — from builders and people who would buy homes.”
Education debts are also skyrocketing, leaving a new generation of students with bigger debts and a still-soft job market, according to the administration’s newest statistics.
According to the Monthly Treasury Statement, the aggregate balance in the federal direct student loan program jumped from $687 billion in 2013 to nearly $807 billion in 2014. When coupled with private student loan debt, the total amount owed exceeds $1 trillion, according to a November 2014 quarterly “Household Debt and Credit Report” published by the Federal Reserve Bank of New York.
“About 11.1% of aggregate student loan debt is 90 [plus] days delinquent or in default,” the report added in an ominous warning.
One reason for the default is that the job market for recent college graduates remains remarkably soft. A Bureau of Labor Statistics report from 2013, for instance, found that 12.6 percent of the 2011 class of college graduates remained unemployed. With no jobs, young Americans are seeking additional education and accumulating debt.
“The federal government has been loaning 20-somethings money under the guise of being students, but they’ve not learning anything,” Mr. Morici said. “They get their masters degrees in useless areas, and they’re still unemployed, living in their parents’ house.”
For certain, the economy has improved on Mr. Obama’s watch. Unemployment has dropped from a high of 10 percent in the fall of the first year of his presidency to 5.8 percent. And the gross domestic product of the United States grew at a robust 5 percent during the third quarter of 2014, far higher than the anemic growth earlier in his presidency. There also have been 50 straight months of job growth, and the country is poised to add 3 million job in 2014.
“As a country, we have every right to be proud of what we’ve accomplished: more jobs, more people insured, a growing economy, shrinking deficits, bustling industry, booming energy,” Mr. Obama told the nation in his year-end news conference.
But economists say the rosy statistics mask some real concerns about the underlying strength of the economy, noting that large numbers of Americans have left the job market, and companies are sitting on trillions of dollars of spendable money until they get more clarity from Washington. And beneath all that, a large segment of America’s Main Street is becoming increasingly reliant on government help to make ends meet.
Just how dependent is America on subsidies and welfare?
Under federal standards a family is considered dependent on welfare if more than 50 percent of its total income in a one-year period comes from one of three government assistance programs: Temporary Assistance for Needy Families (TANF), the Supplemental Nutrition Program (SNAP) (formerly food stamps) and/or Supplemental Security Income (SSI).
According to the annual federally mandated report “Welfare Indicators and Risk Factors,” published by the Department of Health and Human Services, the welfare dependency rate “peaked” under Mr. Obama’s watch in 2010 when 5.3 percent of the total population was receiving half of its total income in a one-year period from the government, and that figure has only “declined slightly since,” according to the report.
The overall dependency rate dropped dramatically under President Bill Clinton, from 5.9 percent in 1993 to 3.1 percent in 2001, and remained steady under President George W. Bush, at 3.5 percent until 2007. During the 2008 financial crisis, the rate jumped a half point to 4, but that number has since increased 1.2 points under Mr. Obama from 2009 to 2011.
While total dependency on welfare has been growing, the number of Americans needing some form of federal aid to get by has skyrocketed. The latest report from the government estimates more than 23 percent of Americans lived in a family that received some form of welfare help under Mr. Obama, up 17.1 from the last year of Mr. Bush’s presidency.
One of the fastest-growing areas of federal dependency is Social Security disability, where the number of Americans has ballooned from 7.4 million in January 2009, when Mr. Obama took office, to 10.9 million in November.
And despite Mr. Obama’s landmark health care legislation, history is already proving that most of the plan’s participants can’t afford it without additional government assistance.
“About 87 percent of people who selected health insurance plans through HealthCare.gov for coverage beginning Jan. 1, 2015, were determined eligible for financial assistance to lower their monthly premiums, compared to 80 percent of enrollees who selected plans over a similar period last year,” according to a December analysis released by the Department of Health and Human Services.
Health subsidies are just one of many forms of federal dependency that have grown on Mr. Obama’s watch.
Such statistics have led some important constituencies in the Democratic Party to cool Mr. Obama’s argument that the economy is recovered.
Perhaps the most poignant rebuke came last summer, when AFL-CIO President Richard Trumka declared the nation’s largest federation of unions would not endorse any Democrat that uses Mr. Obama’s economic team.
“If you get the same economic team, you’re going to get the same results,” Mr. Trumka said. “The same results aren’t good enough for working people . For most folks it seems to be an economy of stagnation.”
Mr. Trumka’s assertions are backed by data.
BLS statistics show an American workforce that has become demoralized, with millions dropping from even the search for jobs.
The percent of Americans in the workforce — either working or seeking work — remained steady, at around 66 percent during the Bush presidency. But under Mr. Obama it has plummeted from 65.7 percent the month he took office in January 2009 to just 62.8 percent in November. That translates to more than 7 million fewer workers in the workforce. That drop is artificially lowering the unemployment rate, some economists argue.
Part of the frustration for working-class Americans is their plight has worsened — with lower income and stock investments — while the wealthy’s opportunity has improved.
A 2013 Pew Research study of U.S. Census Bureau data found simply that the rich got richer and the poor got poorer during the Obama economic recovery.
“During the first two years of the nation’s economic recovery, the mean net worth of households in the upper 7% of the wealth distribution rose by an estimated 28%, while the mean net worth of households in the lower 93% dropped by 4%,” the analysis reported.
“The Census Bureau data also indicate that among less affluent households, fewer directly owned stocks and mutual fund shares in 2011 (13%) than in 2009 (16%), meaning a smaller share enjoyed the fruits of the stock market rally. Likewise, fewer had individual retirement accounts (IRAs) or Keogh accounts (22% in 2011 versus 24% in 2009), and the same share had 401(k) or Thrift Savings Plan accounts (39% in both years).”
To add injury to insult, the Bloomberg Billionaires index late month revealed that the world’s 400 richest people added some $92 billion to their collective wealth in 2014.
Put simply, it was a very good year to be wealthy.
And for those on Main Street, government subsidies have become an essential bridge to survival. The question is if Mr. Obama can change that dynamic in the final two years of his presidency.