Obama Discovers Inequality

The vast and growing wealth and power of America’s richest 1 percent, reflected in their ability to avoid taxes and export U.S. jobs to repressive low-wage nations, has been irrevocably imprinted on mass consciousness in the U.S. by the Occupy movement. Faced with a radically-altered national discourse, Barack Obama has absorbed the themes of Occupy into a message with a stronger populist flavor, calling the growing gap between rich and poor “The defining issue of our time” in his 2012 State of the Union speech.

But the gap between Obama’s words and his policy directions are extremely stark, a discrepancy missed by most of the media. While appropriating some of lyrics of the Occupy movement, Obama is leading his party away from fundamentally confronting either the massive scope of inequality, which he has downsized, or its roots in the systematic breaking of American unions and the offshoring of millions of jobs.

Yet for a skillful rhetorician like Obama, the urgency of America fracturing along class lines has seemed to infuse Obama’s often-rudderless presidency with a new sense of mission suggested a New York Times January 6 editorial, “It was a relief to hear the president elevate the middle class above the markets,” the Times declared in a seemingly strong criticism of a centrist Democrat who has embodied much of their politics. One could read that comment as the editorialists being pleased that the president had finally chosen the correct priority after three years of policies that aided Wall Street in the guise of assisting Main Street. The editorial continued: “After months of Republican candidates offering a cascade of bad ideas about the economy, President Obama’s speech in Osawatomie, Kansas came as a relief. He made it clear that he was finally prepared to contest the election on the issues of income inequality and the obligation of both government and the private sector to enlarge the nation’s shrinking middle class.”

A number of liberal pundits—especially those who appear regularly on MSNBC like EJ Dionne, Ed Schultz, Rachel Maddow, Howard Fineman, and Lawrence O’Donnell—appeared enchanted by Obama’s seemingly combative style with obstructionist Republicans and his fervent advocacy of higher taxes for the top 1 percent.

Meanwhile, Obama has been increasingly stressing the importance of rebuilding America’s industrial base and halting the relocation of American jobs, a top priority of the populist Schultz and MSNBC guest Russell Simmons, the rapper and entrepreneur who declared that America “must stop sending jobs overseas.”

The notion that Obama is serious about confronting the export of jobs has been fueled by public outrage over revelations about Bain Capital’s record of plant closings and relocations offshore—coupled with former Bain CEO Mitt Romney’s bank accounts in the Cayman Islands and other tax havens—gave Democratic leaders like Party Chair Debbie Wasserman- Schultz a chance to blaze away at the GOP presidential front-runner over his failure to invest in American workers. This line of attack became all the safer when Romney’s leadership at Bain was attacked by Newt Gingrich and Rick Perry, who labeled Bain’s practices “vulture capitalism.”

In reality, the Times and much of the nation’s media corps—including some of its brightest and most liberal members—have generally failed to point out how Obama has narrowed the policy discussion about inequality. Obama has chiefly focused on tax rates for the rich, while saying little about restoring the effective right of workers to join unions and establishing some democratic controls over the ongoing torrent of jobs leaving the U.S. Instead, Obama’s celebration of “insourcing”—referring to a trickle of jobs returning from Mexico and China—points the nation toward handing more tax incentives to corporations which have already successfully plundered the tax system.

Clearly, modestly raising taxes on the rich will not significantly reverse inequality given the vast investments needed in education, health, daycare, income support, and other needs of the poor and working class. Nor will a tiny surge in insourcing restore America’s supply of family-supporting jobs, depleted as a result of NAFTA-style trade agreements providing legal backing for corporations’ shift of jobs out of the U.S.

Moreover, there is even a danger that Obama’s myth-based linkage of corporate tax reductions to domestic job creation could be harnessed by the WIN America coalition seeking to gain an $80 billion windfall by obtaining a sharply discounted tax rate on up to $1.5 trillion in profits earned overseas. Such a tax amnesty would intensify inequality and increase the rewards for offshoring jobs (progressive economist Jack Rasmus—Z January 2012—has recently predicted its passage in 2012).

Not only would a tax amnesty immensely benefit corporations and their stockholders without generating domestic job growth—just as it failed to do in 2004, according to tax expert and author David Cay Johnston—but it would heighten incentives for further offshoring of U.S. jobs in expectation of another “tax amnesty” in the future.

Unfortunately, serious scrutiny of Obama’s direction on inequality is not being raised by liberal commentators or the liberal wing of the Democratic Party, which has largely remained shamefully silent on Obama’s Bush-Cheney-style human-rights abuses like the use of unmanned drones in killing innocent Pakistani civilians or the brutal treatment of alleged Wikileaker Bradley Manning, as detailed by Bill Quigley (Z January 2012). For now, the liberals seem pacified by Obama’s decision to take up, at least rhetorically, the inequality issue and confront obstructionist Republican reactionaries more forcefully. They also appear deeply convinced that any public pressure on Obama might serve to help elect a Republican.

This failure by liberal politicians and pundits is especially notable on issues related to the offshoring of jobs, according to John R. MacArthur, Harper’s publisher and author of the fascinating but disturbing account of NAFTA’s passage under Democratic President Bill Clinton, The Selling of Free Trade. Far too many liberal and progressive pundits and activists have been afraid of criticizing President Obama on a fundamental issue of loyalty to working-class interests. Several months back, Obama pushed through NAFTA style “free-trade agreements” with South Korea, Colombia, and Panama despite the prospect of major job losses to South Korea, continuing assassinations of union leaders in Colombia, and a new wall of legal protection of Panama’s tax haves. “The so-called liberal media and even its leftish fringe are almost all in the bag for Obama,” said MacArthur.

While NAFTA has the cost the loss of at least 879,000 U.S. jobs to low-wage Mexican plants, “free trade” remains an article of faith among Beltway political and media elites. “Obama has been terrible on these issues of globalization,” said MacArthur, pointing to the president’s abandonment of his frequently-declared promise to re-negotiate NAFTA during the 2008 primaries. The president has even failed to enforce the weak side agreements on labor and environmental issues, following in the footsteps of Bill Clinton and George W. Bush.

Economist Rob Scott of the Economic Policy Institute agrees with much of MacArthur’s critique. “The media in Washington is out of touch with what’s happening to the rest of America because of globalization,” said Scott. “The media in this town like to examine every leaf in the forest, while missing the forest. ”Major media have thus missed out on a serious discussion of globalization’s impact on American workers and communities. “Because of the impact of globalization, the 100 million workers without a college degree have lost about $1,400 a year per worker, or $2500 a family. That’s as large as any other measurable factor.”

Rather than even verbally admonishing what Senator John Kerry called “Benedict Arnold CEOs” for transferring jobs to low-wage sites where union and other democratic activity is repressed, Obama has instead tried to generate national enthusiasm behind the trend of insourcing. At a high-profile event, Obama hailed a handful of firms moving a relatively small amount of jobs back to the U.S. from sites like China and Mexico. He proudly declared, “For the first time in 15 years, Master Lock’s Milwaukee complex is running at full capacity.” Obama failed to note that Master Lock has brought back just 100 of the approximately 750 jobs sent to Mexico and China. Similarly, Ford—also cited as a model—has slashed its U.S. workforce by nearly 50 percent in the last 5 years, heavily increasing its presence in Mexico.

Overall, the strategy behind Obama’s plan for insourcing remains mystifying, says Frank Emspak, professor emeritus of the School for Workers at the University of Wisconsin and a long-time expert on industrial restructuring. “I really don’t see what it is,” Emspak told In These Times. “The only thing I saw was tax cuts to encourage manufacturing, and that’s the least effective way to encourage job creation in the U.S. We need to generate more effective demand by raising real wages. Second, we need to restrict capital mobility to prevent the shift of more jobs and capital out of the U.S., undermining our productive base. I didn’t see any of that.”

The situation that global manufacturers currently face—including rising costs of transportation and restive Chinese workers winning a 30-percent wage increase in the auto parts industry—is slowing down U.S. CEO’s headlong rush to shift production overseas and feeding small growth in U.S. manufacturing, Emspak noted.

Bypassing A Chance

By exaggerating the modest insourcing trend, Obama—as well as Democrats and progressives nervous about offering any critical feedback on the president’s proposals in an election year—are bypassing a chance to put forth a comprehensive industrial plan “The Democrats would actually have some room right now to rebuild the manufacturing economy and enunciate a program,” Emspak said. “But I don’t even see the liberals in Congress talking about it.”

A serious program for rebuilding America’s productive base—and the urban economies which have relied on them—would require a massive, coordinated set of policies, noted Emspak. These would include a decision to invest in the production to invest in fuel-efficient mass transit, rebuilding the deteriorating infrastructure, advanced training to elevate the skills of America’s workforce, and other major steps.

Instead, CEOs from the local level to the nation stage advocate re-training for displaced workers without creating any jobs to employ them. Marc Levine of the Center for Economic Development at the University of Wisconsin-Milwaukee, counters: “[Re-training] represents the tried and true approach for those who won’t face up to the fact that the private sector isn’t filling the need for jobs, but don’t want to challenge the private sector or their investment decisions. It’s not a skill shortage; it’s a shortage of private sector job creation.”

With the private sector so clearly opting out of domestic job creation—2.9 million jobs were eliminated in the U.S. since 2000 while 2.4 million were created offshore—local, state, and federal officials must confront the current job crisis with a comprehensive strategy of direct job creation.

“We need Keynesian measures to build consumer demand,” said Levine. “We need direct government involvement to rebuild the infrastructure, renovate our transportation systems, and update our communications system. All of these will also build broader consumer demand.”

The most crucial—and controversial—step is the promotion of union rights, according to economist and author William K. Tabb. Real (inflation-adjusted) wages for U.S. workers have fallen to 1973 levels, he notes. Fully 50 percent of U.S. workers earn less than $26,364 per year. “What are most needed are union-friendly policies that restore the right to organize and allow workers to bargain for higher pay,” said Tabb.

“Restoring a bit of manufacturing alone won’t improve workers lives at this point, Tabb argued. “Manufacturing jobs now pay crap wages—it’s no longer a picture where people are generally receiving based on the going rate at GM and U.S. Steel…. If people are going to have decent pay and inequality is to be reduced, they must be able to join unions.”

At this point, major corporations have effectively repealed the National Labor Relations Act of 1935, long seen as the industrial Magna Carta finally granting workers long-overdue rights. But incessantly-repeated violations of the law have made workers petrified of actually exercising their rights. In fully 95 percent of the instances where workers seek to organize a union, management actively oppose the union organizing effort. In three-fourths of the cases, corporations call in anti-union consultants who fully exploit management’s unilateral access to proselytize against the union, as well as to engage in individual threats and intimidation.

The threats are quite real. Labor journalist and author Philip Dine documented in State of the Unions 31,358 illegal firings of pro-union workers in 2005, a typical year. The penalties are so minimal—back pay minus any earnings the worker had—that the incentive to crush union organizing rights far outweighs the cost. As Kate Bronfenbrenner of Cornell University has documented, since the passage of NAFTA in 1994, 68 percent of union organizing drives in manufacturing are greeted with threats of relocation to Mexico or other low wage countries.

Corporations have been able to classify a growing percentage of workers as “managers,” despite their lack of real authority, and thereby disqualify them from eligibility for union membership, as well as exploit them with long hours of unpaid overtime. With corporations permitted to impose such an intense full-court press against union organizing with virtual impunity, it is easy to see why U.S. labor represents just 12.9 percent of the total workforce and a mere 6.9 percent of the private sector employees. The low levels of unionization widespread in low-wage Southern right-to-work states as of 1980 have come to prevail across the entire nation,

Tabb is alarmed over the prospect that Obama policies will be primarily aimed at benefitting multinational corporations in terms of providing jobs to workers, regardless of the quality of the pay, benefits, and conditions. “I suspect that his policies will be framed as if helping workers but in reality, only helping corporations…. At this point, with wages going down and pensions and health benefits being taken away, many people will go for policies that primarily help corporations on the premise that any job is better than nothing.”

What is most urgently needed, said Tabb, is a vigorous pro-labor social movement independent of the Democratic Party. “Liberalism has moved so far to the right in the last 30 years that labor can no longer count on the Democrats. The Democrats have replaced appeals to working people with appeals based on social issues that draw a more affluent base,” he said. “The Democratic Party has replaced labor with social-value types. It only knows how to say middle class and not working class.”


Roger Bybee is a Milwaukee-based freelance writer and progressive publicity consultant whose work has appeared in numerous national publications, including Z Magazine, Dollars & Sense, Yes!, The Progressive, Multinational Monitor, The American Prospect and Foreign Policy in Focus.