SOTU: Do Policy Proposals Live up to Rhetoric on Wages and Climate Change?
Gerald Epstein: Language on wages and climate change could help shift the debate but policy proposals tied to interests of finance and private sector - February 12, 2013
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Gerald Epstein is codirector of the Political Economy Research Institute (PERI) and Professor of Economics. He received his Ph.D. in economics from Princeton University. He has published widely on a variety of progressive economic policy issues, especially in the areas of central banking and international finance, and is the editor or co-editor of six volumes.
PAUL JAY, SENIOR EDITOR, TRNN: Welcome to The Real News Network. I'm Paul Jay in Baltimore.President Obama delivered the State of the Union speech in Washington on Tuesday night. He early in the speech actually used the five-letter word that almost never gets spoken, and that's the word wages. Here's a little bit of what he had to say.~~~BARACK OBAMA, U.S. PRESIDENT: We know our economy's stronger when we reward an honest day's work with honest wages. But today, a full-time worker making the minimum wage earns $14,500 a year. Even with the tax relief we put in place, a family with two kids that earns the minimum wage still lives below the poverty line. That's wrong. That's why, since the last time this Congress raised the minimum wage, 19 states have chosen to bump theirs even higher.Tonight, let's declare that in the wealthiest nation on Earth, no one who works full-time should have to live in poverty, and raise the federal minimum wage to $9 an hour.~~~JAY: Now joining us to discuss this and other of President Obama's economic proposals is Gerry Epstein. He's codirector of the Political Economy Research Institute in Amherst, Massachusetts.Thanks for joining us, Gerry.GERALD EPSTEIN, CODIRECTOR, PERI: Thank you, Paul.JAY: So let's start with the issue of wages, because, I mean, I think he could have gone a lot further, 'cause the whole issue of the recession and the fact that there'sâI think in the last quarter there was no growth in the economy. I mean, it has so much to do with demand, and, thus, stagnant and low wages. But he did mention it, so what did you make of what he said about it?EPSTEIN: Well, that's right. I mean, first of all, it's good that he mentioned it. It's good that he says we need to raise wages. It's good that he said that wages are not just a cost for business, but that they provide incomes for people to buy things. So that's really a shift in the conversation, the discussion to a more appropriate point of view. And he's going to raise the minimum wage to $9 fromâthe current federal minimum wage is $7.25. That's a modest increase. And it's not sufficient to really be a living wage. If there's an individual with no children, that would putâworking full time, would put that person above the poverty line. But if you have one kid or two kids andâa single parent, you need to have pretty much double that in many parts of the country. So it's like a lot of the economic proposals in his speech. It was good language, but pretty short and meagre in terms of the actual proposals.JAY: Yeah. He said that, like, the standard, the principle behind the policy is that no American family that works for a living should live in poverty. But $9 an hour for a family is living in poverty. As you were saying, it's $14 or $15 toâsome places, what is it?â$17, $18 an hour to really get out of poverty.EPSTEIN: That's right. And if you have more than two kids, it's even more.So he didn't say we should change laws to make it easier for unions to organize.JAY: Yeah, I was just about to raise that. We didn't hear a single thing about the Employee Free Choice Act, which if you go back, I guess, to his first state of the union, and certainly the election campaign, when he was first elected, he certainly said that was necessary. Now not a whisper about it.EPSTEIN: That's right. So that was, I think, a big disappointment, 'cause earlier in some of his campaign speeches, he had talked about the importance of unions and the right to organize. So one would have expected a stronger statement there. So that was a disappointment. Of course, the fact that he did mention wages and the need to raise them I do think at least rhetorically is good.JAY: Now, the other big idea, I guess (but I don't know exactly what is the idea): infrastructure, rebuilding roads and highways and bridges, put people to work, attract private capital. Here's a sentence of what he had to say.~~~OBAMA: [T]onight, I propose a "Fix-It-First" program to put people to work as soon as possible on our most urgent repairs, like the nearly 70,000 structurally deficient bridges across the country. And to make sure taxpayers don't shoulder the whole burden, I'm also proposing a Partnership to Rebuild America that attracts private capital to upgrade what our businesses need most: modern ports to move our goods, modern pipelines to withstand a storm, modern schools worthy of our children. Let's prove there's no better place to do business than here in the United States of America, and let's start right away. We can get this done.~~~JAY: It's certainlyâit's not a Rooseveltian jobs program, or he would have made a bigger deal out of it.EPSTEIN: Yeah, it's a small idea. It'sâa lot of economists, including Robert Reich, but many economists, including my colleague Bob Pollin and others, have talked about the need for more infrastructure investment. James Heintz, my colleague at PERI, has talked about how productive infrastructure investment can be. But what we know is that we need a multibillion-dollar effort to improve infrastructure in the U.S. economy. So there were no details given. And there's no indication that he's really talking about a major program.Second of all, this public-private partnership can be very dangerous, depending on how much is coming from the public and then how much returns are going to the private. So, again, there was no discussion at all about what these public-private partnerships really would mean in practice.JAY: Unless he wants to start privatizing more roads and bridges and let private companies charge tolls to pay for the rebuilding of roads and bridges, I suppose that's one possible scenario, but he didn't explain it very well.EPSTEIN: That's right. And he insisted throughout that this would not increase the deficit at all. So it's hard to see where this would get paid for. Many people for years, economists for years have been arguing for a separate capital budget, which makes sense. So you make long-term investments and pay them back over time. But, of course, you can't say all the details in the State of the Union Address. So one would have liked to have heard something about the scale of what he's talking about and how he would like to pay for it.JAY: So he did mention the words climate change, whichâover much of the last four years of his first term, he barely mentioned them. So now he mentioned them.~~~OBAMA: But for the sake of our children and our future, we must do more to combat climate change. Now, the good news is we can make meaningful progress on this issue while driving strong economic growth. I urge this Congress to get together, pursue a bipartisan, market-based solution to climate change, like the one John McCain and Joe Lieberman worked on together a few years ago. ~~~JAY: But what does it mean in terms of putting meat on the bones? 'Cause the fundamental principle here seems to be, yes, there's climate change, but it has to be a market-based solution. And so far, the market-based solution proposed by him in the past seems to be cap and trade. EPSTEIN: That's right. He hinted that he would support a cap-and-trade type of policy when he was talking about the bill that had been in Congress before. And as my colleague Jim Boyce at PERI has said, the cap-and-trade proposal is often just a giveaway to the electric utility companies, because you give away the permit, and it's oftenâthe way it worked in Europe was kind of a giveaway to a lot of the large companies. A better idea would be a cap-and-dividend type of policy, where you put a cap onâyou option off all the permits, and then you invest some of the money in new investment in technology and you give back a dividend to people. So, again, he seems to really be wanting to go this private direction, which can lead to a massive giveaway to private capital.JAY: And also financialization, 'cause you create all these carbon markets, which allows room for financial speculation and money to be made on that with very little evidence it actually leads to reducing carbon emission.EPSTEIN: That's right. I was told the most expensive lobby in Washington on the climate issue was not the oil companies, but it was the financial sector.JAY: Right. Now, the big underlying theme of all this is none of this is going to costâcreate a dime more of deficit, which means he's still essentially buying into this narrative that you can't have a dime more of deficit still with an economy really mired in recession.EPSTEIN: It was problematic, and he didn't talk about a massive jobs program, which is what, of course, we really need. So he did try to shift the rhetoric again, in positive ways, I think, towards the idea of bubble-up economics, expanding the middle class, creating more manufacturing jobs in the U.S., investing in education, and talking about dealing with climate change. These are all rhetorically refreshingly positive ways to discuss the issues that are facing us. But in terms of really confronting the fact that we are still mired in a virtual depression and that we need a massive jobs program to get out of it, that is missing. What was also missing: there was no discussion at all about financial regulation and financial reform. It's as if that has all been solved. And there was no talk about that at all.JAY: Yeah. This lastâI can't remember which State of the Union it was, but it was a few ago, where he talked about the establishment of this commission that was going to prosecute the fraud-doers and all the rest, and they barely instigated a single lawsuit, as far as I know. The whole thing seems to have just gone away.EPSTEIN: The one thing he did talk about was trying to help people refinance mortgages. It sounded like he was going to dust off a relatively old program that is quite problematic and that hasn't really succeeded so far. So there were no new major initiatives on the mortgage front either.So in terms of financial issues, I would say it was pretty much a bust.JAY: So it seemed to me a very effective speech politically, 'cause on the surface it sounded great to everyone that wants to like President Obama. When you unravel the various pieces of policy, I'm not sure how it's any different than the first four years of his term.EPSTEIN: Well, on the other handâand you and I might disagree about thisâI think changing the rhetoric is important in and of itself. It's obviously not sufficient, and it can just be a cover. But talking in the way he has about the importance of inequality and we have to have a more equal economy, the importance of Head Start, the importance of public investment in infrastructure, the importance of taking climate change seriously, these are all big changes rhetorically, and it does have to shift the debate somewhat away from the dominant neoliberal terms of the debates we've had for the past 15 or 20 years.JAY: Alright. Well, thanks for joining us, Gerry.EPSTEIN: Thank you.JAY: And thank you for joining us on The Real News Network.
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