Dec. 5 (Bloomberg) -- The gap between rich and poor that President Barack Obama yesterday called a “fundamental threat to the American dream” has grown during his administration.
The richest 10 percent of Americans earned a larger share of income last year than at any time since 1917, according to Emmanuel Saez, an economist at the University of California at Berkeley. Those in the top one-tenth of income distribution earned at least $146,000 in 2012, almost 12 times what those in the bottom tenth made, Census Bureau data show.
Much of the gap is out of the president’s control, economists say, citing forces such as globalization and the spread of technology that are overwhelming government remedies. Yet while Obama complains that Republicans are blocking his efforts to boost the minimum wage and provide universal pre-school, other policies that he has enacted such as trade agreements also may have contributed to inequality, they say.
“There are things he could do that he hasn’t done,” says Dean Baker, co-director of the Center for Economic and Policy Research, a Democratic-leaning research group in Washington. “He’s done nothing to rein in the financial sector.”
The president also stumbled in implementing the biggest new government program that would benefit the have-nots, the health-care law known as Obamacare. The Oct. 1 debut of the program’s website was botched so badly that it has sapped public support for the administration and emboldened its political opponents.
While acknowledging yesterday “admittedly poor execution” in introducing the health-care exchanges, Obama said the insurance expansion would reduce a “major source of inequality and help ensure more Americans get the start that they need to succeed.”
The speech -- filled with bedrock themes of equality dear to Obama’s base -- comes as some Americans are expressing disappointment in his handling of the Affordable Care Act, National Security Agency snooping and other issues. Obama and the Democrats need to energize the party’s voters heading into the 2014 congressional elections, and the speech offered much to remind them why they supported Obama in the first place.
At the same time, there were few new concrete proposals to combat inequality and little in the way of specific policy prescriptions to close the gap in Obama’s remaining three years in office. The speech also contained many of the same themes of an address he delivered almost two years ago to the day in Osawatomie, Kansas.
The top tier of Americans are doing fine. After-tax corporate profits have more than doubled as a share of the economy and are now at their highest level since records were kept in 1947.
Meanwhile, workers are compensated with a smaller share of national output than at any time since 1952.
“We’re talking about a society where the well-off and the educated are doing better and the rest are doing worse,” Mohamed El-Erian, chief executive officer of Pacific Investment Management Co. in Newport Beach, California, told Bloomberg Television last week.
Rather than embracing new government programs, Republicans say economic growth will help resolve what Obama calls “the defining challenge of our time.” With House Republicans opposed to any expansion of federal spending, the president challenged them to advance alternative ideas for promoting greater economic opportunity.
“If Republicans have concrete plans that will actually reduce inequality, build the middle class, provide more ladders of opportunity to the poor, let’s hear them,” he said yesterday.
It’s a political issue that resonates with voters. In a May survey by the Pew Research Center, 66 percent of Americans said inequality has increased and 47 percent agreed it was “a very big problem.”
And there are signs that public attention to the issue may be intensifying. In Washington, where chronic concern over federal budget deficits has diminished since the 16-day government shutdown in October, the president has thrown his support behind proposals to increase the $7.25 federal minimum wage.
After proposing an increase to $9 in February, Obama last month endorsed a Senate bill that would raise the rate to $10.10 over two years.
“The president is talking about what I think the country ought to be talking about,” says economist Lawrence Mishel of the Economic Policy Institute, a Washington-based research group that focuses on the needs of lower-income workers. “It does reflect a shift in the center of gravity.”
Elsewhere, fast-food workers in 100 cities plan to strike today, seeking a higher minimum wage, which was last raised in 2009. Pope Francis last week added his voice to those worried about the deepening chasm between society’s most and least affluent.
“Just as the commandment ‘thou shalt not kill’ sets a clear limit in order to safeguard the value of human life, today we also have to say ‘thou shalt not’ to an economy of exclusion and inequality,” the pope said. “Such an economy kills.”
Workers haven’t done as well as investors under Obama. Since the end of the recession in mid-2009, the economy has grown at an average 2.1 percent pace. The 7.3 percent jobless rate, though down from its 10 percent peak in 2009, remains more than a full percentage point above the 30-year average.
New trade deals with South Korea, Colombia and Panama continued a decades-long expansion of cross-border commerce that some economists say has cost American workers millions of jobs. A trade deficit of about 3 percent of gross domestic product is probably directly costing the economy about 4 million to 6 million jobs, says Baker.
Since Obama’s first inauguration amid the depths of the recession, the stock market has powered to new heights. The benchmark Standard & Poor’s 500 index closed yesterday at 1792.81, up more than 120 percent since Jan. 20, 2009.
Though those gains have cheered investors, most Americans have watched from the sidelines. The richest third of U.S. households account for 89 percent of all equities ownership, according to the Center for Retirement Research at Boston College.
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