This article was published by the Center for American Progress.
Lefting Wrongs

President Barack Obama delivers his State of the Union addressPresident Obama Rightly Says It Is the Challenge of Our Times.

President Barack Obama in his State of the Union address last night forcefully articulated an economic policy framework that correctly recognizes revitalizing America’s middle class is the challenge of our times—and the key to long-term U.S. economic prosperity.

The policy blueprint the president laid out builds on two threads that have come together in recent months as the twin components of this administration’s bridge to a better economy:

  • Continued and intense concentration on repairing the Great Recession’s damage to the middle class
  • Focusing long term on the threat that mounting income and wealth inequality pose to our growth prospects and global economic competitiveness

Taken together, these two strains have the potential to finally liberate our economic policymaking system from the counterproductive—but strangely persistent—thinking that the key to growth is strengthening the hands of monied “job creators” rather than boosting the actual job-creating power of a broad middle class.

Among the key initiatives proposed by President Obama yesterday were tax policies that encourage domestic manufacturing and discourage outsourcing of middle-class jobs, tough trade enforcement that gives American companies even footing in the global market, workforce initiatives that reward hard work and education, and a fairer tax code that ensures everyone contributes his fair share to deficit reduction.

Yesterday’s speech also marks an important elaboration of the president’s December 6 speech in Osawatomie, Kansas, in which he decried “the gaping inequality” that undermines what we might call the American Promise: If you work hard and play by the rules, you can participate in the American Dream.

While pundits have largely described recent White House statements about inequality and the middle class as a populist shift in political rhetoric, it should rightly be recognized as the expression of a sound intellectual theory that recognizes that a thriving middle class is not the byproduct of a prosperous economy—it is in fact the driver of prosperity.

The middle-class consumer creates the incentives to conceive, manufacture, and sell what our economy produces. That demand drives business opportunities and spurs investment. Entrepreneurship and invention also are rooted in the middle class, and the rise in middle-class worker productivity generates much of our nation’s wealth.

This theory was fleshed out earlier this month by Princeton economist Alan Krueger, chairman of the president’s Council of Economic Advisers, in a speech at the Center for American Progress. Krueger persuasively argued that our economy today would be stronger if not for the troubling rise in inequality in the United States in the last three decades.

The Obama administration’s full-throated support of economic policies focused on the middle class presents a welcome contrast to the failed “trickle down” approach favored by conservatives. Economists and policymakers in Washington and across the country should seize this moment to continue to hammer home the importance of strengthening the middle class, and making it easier for Americans of all backgrounds to join it.

That’s why the Center for American Progress has launched a yearlong series of events and publications on the importance of the middle class to our economy. Here’s hoping that in the next State of the Union address, the president of the United States can look back and thank Congress for recognizing that today’s top-heavy economy is neither good for our country or our economy.

See also: President Obama Links Middle-Class Prosperity and Innovation by Ed Paisley and Sean Pool; Manufacturing America’s Energy Future by Kate Gordon; Obama’s Clean Energy Plan for an America Built to Last by Daniel J. Weiss; Will Congress Block Infrastructure Spending? by Donna Cooper

Editor's note: This story first appeared January 24, 2012 at Photo: President Barack Obama delivers his State of the Union address in the House Chamber (US Government Work/Public Domain) via the White House Flickr Photostream.
Gadi Dechter, Michael Ettlinger

Gadi Dechter, Michael Ettlinger

Gadi Dechter is Managing Director of Economic Policy at American Progress. He previously worked as a reporter at Bloomberg News, The Baltimore Sun, and Baltimore’s City Paper. At Bloomberg, Gadi was an investigative reporter covering the intersection of finance and politics. At The Sun, he covered the Maryland General Assembly and higher education. He received the American Association of University Professors’s 2009 Iris Molotsky Award for Excellence in the Coverage of Higher Education and was a finalist in the 2008 Livingston Award for Young Journalists competition. He holds a bachelor’s degree in literature from Yale and a master’s in writing from Johns Hopkins. He teaches public policy communications at George Washington University’s School of Media and Public Affairs, and has also lectured at Georgetown University, Johns Hopkins University, and the Maryland Institute College of Art. Email: [email protected] Michael Ettlinger is the Vice President for Economic Policy at American Progress. Prior to joining the Center he spent six years at the Economic Policy Institute directing the Economic Analysis and Research Network. Previously he was tax policy director for Citizens for Tax Justice and the Institute on Taxation and Economic Policy for 11 years. He has also served on the staff of the New York State Assembly. At the Institute on Taxation and Economic Policy, Ettlinger was the principal developer of the ITEP Microsimulation Tax Model. This model uniquely permits detailed revenue and distributional analysis of federal and state personal income tax, consumption, and property taxes. Also at ITEP and Citizens for Tax Justice Ettlinger authored many reports on tax and economic issues, frequently testified, was widely published, and was often called upon by the media. At the Economic Policy Institute, Ettlinger focused on regional economic development and state-level economic policy. His work included analysis of state minimum wage laws, the role of government in economic growth, public attitudes toward economic policy, and the relative efficacy of alternative state economic policies. Ettlinger has served on several nonprofit boards, advisory commissions, and study groups. Ettlinger holds degrees from Cornell University and American University. Follow Michael on a Twitter. Email: [email protected].