President Obama took his second term economic plan on the road today, starting at a factory in Asheville, N.C. During his State of the Union address Tuesday, Mr. Obama put forward new economic policies including a focus on strengthening the middle class, raising the minimum wage and tackling the budget deficit. Republicans have dismissed many of these ideas as failed policies of the past, making it unclear how many aspects of his plan can be enacted through congressional lawmaking
To discuss Mr. Obama’s economic plan as well as growing economic inequality across the U.S., Judy Woodruff was joined by Kevin Hassett, director of economic policy studies at the American Enterprise Institute, and Katrina vanden Heuvel, editor of The Nation.
Supporting the president’s push to raise the minimum wage, vanden Heuvel said it seemed “moral” and “practical” that someone working full-time should not live in poverty -- a point Mr. Obama emphasized in his speech. Hassett, however, cautioned that raising the minimum wage would force businesses to cut jobs if they can no longer afford to pay all of their workers. He proposed the government subsidize businesses that employ low-income workers.
Vanden Heuvel argued that America is seeing the greatest concentration of wealth the country has ever seen and upward mobility is no longer a possibility.
“It's a face of a country that we need to look at and understand that inequality is perhaps the greatest threat to our economic recovery and democracy, and in that context we must take action,” said vanden Heuvel.
Hassett responded that if the U.S. wants to create high-paying jobs then an environment that attracts such jobs should be created.
JUDY WOODRUFF: Fresh from addressing the nation, President Obama opened a new campaign today to sell his second-term economic plan. In turn, Republicans dismissed most of his ideas as the failed policies of the past.
The president flew south today, going directly to voters with his ideas for creating jobs and boosting the middle class.
PRESIDENT BARACK OBAMA: How you all doing?
JUDY WOODRUFF: The post-State of the Union tour began in Asheville, N.C., at a plant that makes heavy-duty engines. Mr. Obama picked up where he had left off with his message the night before.
PRESIDENT OBAMA: Our job as Americans is to restore that basic bargain that says, if you work hard, if you're willing to meet your responsibilities, you can get ahead.
You can get ahead. Doesn't matter what you look like, doesn't matter where you come from. Our middle class, when it's growing, when it's thriving, when there are ladders of opportunity for people to do a little bit better each year and then make sure that their kids are doing even better than them, that's the American dream. That's what we got to fight for. That has to be the north star that guides everything we do.
JUDY WOODRUFF: The president served notice last night he plans to fight for raising the federal minimum wage from $7.25 to $9 dollars an hour over the next three years.
PRESIDENT OBAMA: Even with the tax relief we've put in place, a family with two kids that earns the minimum wage still lives below the poverty line. That's wrong.
JUDY WOODRUFF: But Republicans led by House Speaker John Boehner today renewed longstanding arguments that a hike will actually hurt job creation.
REP. JOHN BOEHNER, R-Ohio: Listen, I have been dealing with the minimum wage issue for the last 28 years that I have been in elective office. And when you raise the price of employment, guess what happens? You get less of it. At a time when the American people are still asking the question, where are the jobs, why would we want to make it harder for small employers to hire people?
JUDY WOODRUFF: The president's economic to-do list also called for improved access to high-quality early childhood education, partnerships with the private sector and colleges to help American manufacturing, and expanded job training programs for unemployed workers.
Today, he expanded on that theme, announcing a goal of training two million Americans with skills that lead directly to new jobs.
PRESIDENT OBAMA: No job in America should go unfilled because somebody doesn't have the right skills to get that job, nobody.
So, if there's a job open, we should train those folks right away so that they can do the job.
JUDY WOODRUFF: The battle over the budget and its potential effects on the economy were also very much at the heart of the State of the Union message. The president urged lawmakers to prevent $85 billion dollars in automatic across-the-board spending cuts set for Mar. 1. And he insisted again that it be done by balancing cuts with tax increases.
BARACK OBAMA: Now, most of us agree that a plan to reduce the deficit must be part of our agenda. But let's be clear: Deficit reduction alone is not an economic plan.
JUDY WOODRUFF: This morning, Republicans insisted they are giving no ground on that issue. Senate Minority Leader Mitch McConnell said Mr. Obama missed an opportunity in his remarks on the looming spending cuts, known as the sequester.
SEN. MITCH MCCONNELL, R-K.y.: The president had a chance last night to offer a thoughtful alternative to his sequester, one that could reduce spending in a smarter way.
That's what Republicans have been calling for all along, and it's the kind of thing the House has already voted to do not once, but twice. We want to work with him to actually make that happen. But, instead, we just got gimmicks and tax hikes, just one more plan from the president that's designed to fail, so he can blame others when it does fail.
JUDY WOODRUFF: It's unclear how much of the president's plan can get through Congress, but the White House says he will keep up the pressure, with stops in Atlanta and Chicago in the coming days.
For a closer look at some of the president's prescriptions and how they fit into larger questions about inequality in America, we get two views. Kevin Hassett is director of economic policy studies at the American Enterprise Institute, a conservative policy research center. And Katrina Vanden Heuvel is editor and publisher of "The Nation," a liberal weekly magazine focusing on politics and culture.
And welcome to you both.
So, the president spent a lot of time last night, Kevin Hassett, talking about the importance of growing the middle class, but he also said we must make sure that hard work leads to a decent living. In fact, he said today in Asheville, if you're working full time, you shouldn't be in poverty.
Is that a premise that's widely accepted, do you think?
KEVIN HASSETT, American Enterprise Institute: Well, I think that we all would wish that that would be true.
The problem is that when there are periods of high unemployment, then really the wage isn't low enough to encourage employers to give people a job. Right now, there are about five million people that have been unemployed for more than 27 weeks, and the unemployment rate for, say, African-American youth is about 38 percent. And so we have got massive unemployment. It's a really big problem.
And I agree with Speaker Boehner that increasing the cost of hiring a person right now is not the right way to solve that problem.
JUDY WOODRUFF: Katrina Vanden Heuvel, what about this essential point, though, that we shouldn't be in a situation, even with the economy where it is, where if you work full time, you could still be in poverty?
KATRINA VANDEN HEUVEL, "THE NATION": I think that we haven't seen an increase with the minimum wage, Judy, since 2007, though 19 states across this country have increased theirs.
It seems to me both moral and practical that in the richest in nation in the world that someone working full time shouldn't live in poverty. And studies over the last 20 years in states where we have seen these minimum wage increases show there's no discernible impact on employment growth. In fact, what it does is line low-wage workers' pockets with higher wages.
It's a natural thing to increase wages so that demand increases. That leads to recovery, because, at the end of the day, what the president is talking about is building a strong middle class. And the real job creators in this country are the middle class.
JUDY WOODRUFF: So, Kevin Hassett, what about her point, that there are all these studies that have been done over time that show -- you're already shaking your head no -- that show that if you increase the minimum wage, people will take more money home?
KEVIN HASSETT: There are -- oh, it's absolutely true that the people who don't lose their jobs will take more money home.
But there's a recent review paper by Federal Reserve economist Bill Wascher and his colleague David Neumark that finds that when you look at all of the papers that have been written that the balance of the evidence is that unemployment goes up by not a huge amount, but by some if you lift the minimum wage. And it just makes sense that if you lift the cost of something, you get less of it.
If you apply the average effect that they have in their paper to the president's proposal, then it would lift, for example, the teen unemployment rate amongst African-Americans from 38 percent to about 43 percent. And I think that that kind of a change is not what we should do.
But I agree with Katrina that we should be very, very concerned about welfare of people at the bottom. The problem is that lifting the minimum wage is kind of a way too make it look like you're helping them, when you're really not, and it's a way to do it without actually spending taxpayer dollars.
So, I think that if you want to give more money to low-income people, then you should fess up and spend the money as a government. But to try to say that we're going to require employers to give them more money, it's just not going to work, because it's basic economics.
KATRINA VANDEN HEUVEL: But I think -- I think there are a whole wealth of things we could be doing, including the Earned Income Tax Credit.
But I think we need to step back for a moment. We are witnessing the greatest concentration of wealth in this country that we have seen in a century. The redistribution of wealth upwards is making this a country where upward mobility is no longer in our sights, where the investment in our future is being diminished.
And I think last night the president spoke to a future that millions of Americans want to see. There is broad support, by the way, for minimum wage increases. And we are seeing a working-class, a middle class, Judy, which over the last three decades has seen their wages and income stagnate, while the very rich have seen their tax burden lighten in ways not seen in three or four decades.
It's a face of a country that we need to look at and understand that inequality is perhaps the greatest threat to our economic recovery and democracy, and in that context we must take action.
JUDY WOODRUFF: Given what she's pointing out, even if the studies show that it isn't a perfect solution, why not try raising the minimum wage?
KEVIN HASSETT: Oh, because there are better ways to do it.
So, again, if you want to target low-income workers and try to improve their lives, then a better try do it would be to provide a subsidy to employers who hire low-wage workers. A subsidy to employers who hire low-wage workers would increase the demand for those workers, which would drive up their wages. And it wouldn't make anyone lose their job.
JUDY WOODRUFF: That money would come from the government, is what you're saying.
KEVIN HASSETT: That's the point.
And so the point is that what people are doing is that they're trying to help without spending any taxpayer dollars, and it's not going to work. It's really not going to help. It's going to hurt fewer people than you help, but those people are going to be hurt very, very badly. Losing your job is a terrible, terrible thing to have to suffer.
KATRINA VANDEN HEUVEL: It's a terrible thing.
And the president last night laid out, perhaps not at the scale needed for the joblessness that is the real crisis in this country, programs like a 21st century work projects administration to repair the deteriorating infrastructure. But so often, the Republicans are so anti-government, they're not willing to consider what Kevin just spoke of, which -- subsidies to employers.
We need to think anew. Part of that, if I might add, is that we need to tax wealth more, not work. We need to think harder about how it is that the concentration of wealth has become so high. And we can find ways, whether it's a financial transaction tax, making sure dividend and capital gains tax are taxed at income tax rates.
The carried interest tax rate the president spoke of the other day must be repealed. Why should hedge funders and private equity managers be getting a loophole, a kind of benefit that millions of ordinary working Americans don't get?
JUDY WOODRUFF: Those are some of the things the president has talked about.
What about doing that?
KEVIN HASSETT: Well, no, I mean, the fact is that there's nothing on earth more mobile than capital and capital income.
And the U.S. is a relatively high capital income tax country still. We have about the highest corporate tax on earth. I think Guyana and the Congo have higher rates than us. Other than that, nobody does. And so what we do is, if we try to drive up the amount of revenue that we extract from capital, then the capital flees, and then there are no jobs here in the U.S.
And so what we have to do is have a more 21st century appreciation for how economies really work. And if we want to create high-paying jobs for people, then we need to create an environment that's friendly to firms to create jobs.
JUDY WOODRUFF: Katrina Vanden Heuvel, let me ask you about another ...
KATRINA VANDEN HEUVEL: The tax burden -- sure. I'm sorry.
I was going to say, the tax burden on corporations is the lowest it's been in decades.
KEVIN HASSETT: Because they're locating the jobs overseas. That's how the Laffer Curve works. You have a high rate, you don't get a lot of revenue.
KATRINA VANDEN HEUVEL: Eleven -- 11 -- 11 European Union commissioners, including the Conservative finance minister of Germany, has signed on to the financial transaction tax. I think you're seeing an understanding of a 21st century economy and how it treats capital, not in this country, not from the Republicans.
But if I could just say one important thing last night, with the investment -- the call for the investment in universal pre-K early education, this is an investment ...
JUDY WOODRUFF: And that is what I -- yes, I wanted to ask you both just quickly to respond to that.
KATRINA VANDEN HEUVEL: Any advanced country understands this is a public investment in our children, our future, and if we want to see upward mobility restored in a country that prides itself, has prided itself on that, this is one step.
JUDY WOODRUFF: Kevin Hassett.
KEVIN HASSETT: Right. Yes.
And I think this is one place where, refreshingly, we might see some bipartisan action, because I think that most Republicans I talk to absolutely agree that getting school to kids earlier is a really good idea. I think there's evidence that things like Head Start in the past have been very effective.
The one disagreement I have with the president's proposal is I think that making it universal is a big mistake, that most kids have access to preschool. That's really, really great. And I know that wealthy kids, for example, do.
And what we need to do is target preschool in the places that most need it, because, again, we have scarce tax dollars.
JUDY WOODRUFF: So who would be left out, just quickly?
KEVIN HASSETT: So, again, what you would do is you would provide universal preschool to people that can't afford it. But to people who can afford it, then we don't necessarily need to give a lot of tax dollars to them for something that they're already buying.
KATRINA VANDEN HEUVEL: There are a lot of people in this country, Kevin, who can't afford it.
KEVIN HASSETT: Right, and they're the ones who need the help. But if it's universal, then you're giving help to kids, to my kids, who would get pre-K anyway because I'm fortunate enough to be able to afford it.
JUDY WOODRUFF: We hear you both. The debate has only begun.
Katrina Vanden Heuvel, Kevin Hassett, thank you both.
JEFFREY BROWN: Online, find reaction to the State of the Union from members of Congress, foreign policy experts, and a panel of voters, journalists and scholars who talked to NewsHour political editor Christina Bellantoni in a Google hangout last night.