What Obama Doesn't Get About Inequality

President Barack Obama's speech contained many good elements, but it's doubtful anything he can do alone with help reduce income inequality. 

President Barack Obama started his speech on strengthening the middle class by lamenting the severance of the link between productivity and wages. He then demonstrated just how hard it is for the government to restore that link.

Most of the broad proposals in Obama's speech are hard to oppose. Only rabid anti-government crusaders could argue against better infrastructure and education, and curbing the cost of college is necessary and achievable. It's unclear how much of that can happen without Congress, but Obama is right to push for them.

The problem is that better infrastructure and more education can improve American productivity, but may not translate into higher wages or reduced income inequality. This may explain why the wobbliest parts of Obama's speech came when he talked about using government policy to restore upward mobility.

Obama proposed increasing the minimum wage, but only 2.9 percentof Americans earned $7.25 or less per hour in 2011. He said he would highlight companies that treat their workers well, but companies respond to rules and incentives, not presidential pats on the back. He promised to strengthen U.S. manufacturing, but tax preferences are expensive and their effectiveness mixed. He said the best defense against global competition and economic polarization is "strength of community," which may seem a touch abstract to families with stagnant wages.

The limits of the federal government's power to address inequality were best highlighted by what Obama didn't propose. After noting the decline of unions at the start of his speech, the president failed to mention them again. He argued, correctly, that a secure retirement is a cornerstone of being middle class -- but said not a word about the share of private-sector workers in defined-benefit plans, which fell from 38 percent to20 percent between 1980 and 2008, or how federal policy might address that shift.

One explanation for Obama's unsatisfying proposals is that inequality is partly the result of underlying changes in the economy, as the chairman of the president's own Council of Economic Adviserspointed out earlier this year. Another is that inequality is a product of cultural changes as well as of government policy.

The increased social acceptability of conspicuous consumption; the growing antipathy toward government; the decline of the social compact between employers and workers; the segregation of communities by income; the declining exposure of the average person to unions; the shifting focus toward other areas of social consciousness, including environmentalism and gay rights -- each could be seen as both cause and effect of the economic changes the president bemoaned. Obama could attempt to reverse those cultural trends, but it isn't clear he would succeed, or even that he would want to try.

It's heartening to hear a U.S. president make the case against economic inequality, and commit to fighting it. How much Obama alone can do to achieve it is a separate question.

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