In an op-ed for The Economist on Thursday, President Barack Obama laid out his views on the shortcomings in the US economy and a way forward for the next president to improve the economy. He also vented some of his frustrations with the current political discussion of the economy.
In addition to touting the work he had done, Obama laid out four challenges facing the next president and ways that he or she can take on those challenges. The challenges were:
- Slowing productivity of workers: Obama noted that despite amazing technological gains, the growth rate of productivity of American workers has been declining. Obama said that encouraging private investment through improving tax codes on businesses, priming the pump with public investment, and creating trade deals like the Trans-Pacific Partnership would help to solve the issue.
- Increasing income inequality: Obama noted that the top 1% of earners in the US now recieve 17% of all post-tax income, versus 7% in 1979. His solutions include raising taxes on the wealthiest Americans, engendering a sense of community between those at the top and bottom, and raising the federal minimum wage.
- Declining labour force participation: Obama noted that 12% of prime age men are not in the labour force today versus 3% in 1959. For women this number has also increased to 26% from 23% in 1999. Obama said wage insurance, a strong community college system, and making re-entry from prison into the workforce easier would help reverse the trend.
- Crumbling infrastructure: Obama said both the financial infrastrusture and the physical infrastructure are lacking in the US. On the financial side, Obama suggested keeping a closer eye on the shadow banking and non-financial lending system. For physical infrastructure, Obama said fiscal stimulus from the federal government could not only fix roads, but also encourage economic growth.
Underneath all of these problems, said Obama, is a political system that has polarised to the point that it has become nearly impossible to get laws passed that would improve the economy.
“Unfortunately, good economics can be overridden by bad politics,” he said.
Obama called the current state of politics “so partisan that previously bipartisan ideas like bridge and airport upgrades are nonstarters.”
His concern was not limited to conservatives either. Obama implicitly criticised those on the left such as Elizabeth Warren and Bernie Sanders who have advocated for wholesale changes to the economic and financial system.
“As appealing as some more radical reforms can sound in the abstract — breaking up all the biggest banks or erecting prohibitively steep tariffs on imports — the economy is not an abstraction,” wrote Obama. “It cannot simply be redesigned wholesale and put back together again without real consequences for real people.”
Despite these issues, Obama concluded that the capitalist system and the US political system can work together to create a growing and stable economy.
“America’s political system can be frustrating,” wrote Obama. “Believe me, I know. But it has been the source of more than two centuries of economic and social progress. The progress of the past eight years should also give the world some measure of hope.”
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