January 12, 2015 12:36 pm
The strength of the US’s economic recovery is creating a quandary in Washington: how to galvanise the broad swath of voters who feel they have been left behind.
Figures released last week by the Department of Labor show that the US added more jobs in 2014 than it has since 1999. The unemployment rate has fallen to 5.6 per cent, its lowest level in six-and-a-half years.
President Barack Obama is criss-crossing the country to tout the success of post-crisis measures such as bailing out the car industry and to outline initiatives to spur growth, ahead of his State of the Union speech this month.
“America’s resurgence is real,” Mr Obama said in Knoxville, Tennessee last week.
But tepid wage growth and a historically low labour participation rate mean that many middle class households have yet to see an improvement in their finances. Average hourly earnings rose just 1.7 per cent in December over the previous twelve months, barely ahead of inflation.
Meanwhile, the gulf between the rich and everyone else continues to widen.
The median wealth of the nation’s affluent families in 2013 was nearly seven times the wealth of middle-income families, the widest gap seen in three decades, and 70 times that of lower-income families, according to a report released last month by Pew Research Center.
Among both Democrats and Republicans, the debate over how to address inequality amid an economic rebound that is swiftly gathering pace is creating new, and sometimes unexpected, faultlines.
On the left, by contrast, senior Democrats are debating whether a growth-focused economic agenda would resonate more strongly with voters as the recovery powers ahead, after the party's disastrous midterm elections in November.
“Basically everyone agrees what the core problem is in that we are seeing an erosion of middle class prosperity,” said Jon Cowan, president of centre-left think-tank Third Way. “Where people disagree is what you do to address it.”
Framing a coherent early message on the economy is crucial for both parties as they gear up for the 2016 presidential cycle.
Several likely Republican presidential candidates, including former Florida governor Jeb Bush, Kentucky senator Rand Paul and Marco Rubio, a senator from Florida, have already shown a willingness to strike a more populist tone, proposing ideas such as revamping the tax system to be more family-friendly and boosting investment in struggling communities.
Mr Bush, in particular, raised eyebrows last week by declaring that “the income gap is real”, in the mission statement for his new political action committee.
It is a message that contrasts sharply with the approach taken by 2012 GOP presidential nominee Mitt Romney, who dismissed Americans who pay no federal income tax as “victims” dependent on the state.
“Too may of the poor have lost hope that a path to a better life is within their grasp,” Mr Bush says in the statement. “While the last eight years have been pretty good ones for top earners, they’ve been a lost decade for the rest of America.”
That is the kind of rhetoric that is more frequently associated with Elizabeth Warren, the former Harvard Law School professor and first-term Massachusetts senator whose relentless bashing of Wall Street has made her the darling of the Democratic party’s leftwing.
Ms Warren has repeatedly said she is not interested in running for president in 2016, even as progressive groups have urged her to mount a challenge to the party’s presumptive nominee, former secretary of state Hillary Clinton.
FT Video
Larry Summers on inequality and Piketty
May 2014: There is an attempt to make capitalism more inclusive. But who is it excluding? John Authers asks former US Treasury secretary Larry Summers if he agrees with Thomas Piketty’s thesis that inequality is increasing, and asks how capitalism can be made more inclusive.
However, her popularity among the party’s grassroots may push Mrs Clinton to embrace a more populist, anti-business stance, a move some political analysts fear could be problematic in a general election against a more moderate Republican nominee.
Opinion remains sharply divided as to how much the issue of economic inequality actually animates voters. That is because while most Americans say they are dissatisfied with the way the country’s income and wealth is distributed, they do not agree on the reasons why there is such a gap, and what the government should do to address it. As many are likely to blame Democrats and liberal policies, such as Mr Obama’s healthcare reforms, for example, as they are Republicans and traditional conservative ideals such as lower taxes.
Still, until wage growth picks up and more of America’s middle class feel better about their economic prospects, the inequality debate will loom large over both parties.
“The basic reality is that the economy is not working for most Americans,” said David Madland, managing director of economic policy at the Centre for American Progress, a progressive think-tank. “The candidate who is going to be successful needs to acknowledge that, and go after it head on."
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