Tomorrow President Barack Obama is expected to discuss initiatives for spurring growth in the U.S. economy. According to a The New York Times article, the usual suspects are expected to pepper his speech with no new sweeping proposals expected. Do expect the President to ratchet up the phrase “middle-out”, an economic philosophy that says the best approach to economic growth is to increase the number of people in the middle class.
The middle-out philosophy may need to address the fizzle-out reality of this economy. According to the Bureau of Economic Analysis, growth in the U.S. economy has been mediocre at best. Long gone are those historic three percent growth rates economists tend to tout in textbooks and on television show appearances. From the second quarter of 2009 to the first quarter 2013, the U.S. economy, as measured by gross domestic product, has grown annually at a rate of 2.02%.
Combine the economy’s performance under President Obama with the performance of the economy under the much maligned administration of George W. Bush, and the Obama economy looks even more tepid. From the second quarter 2001 to the first quarter 2005, annual growth averaged 2.53%. Not bad given that Mr. Bush, like Mr. Obama, had taking over the reins of an economy coming out of the worse of a recession.
If Mr. Obama’s middle-out philosophy is to take hold, he will have to find a way, craft policy, that can get more people into the middle class to begin with, and based on a recently released report on mobility in the U.S., that may be pretty difficult.
The New York Times published a piece yesterday discussing the difficulty of moving into the middle class depending on where you live. For example, in Atlanta, a child raised in the lower fifth of the income bracket has only a four percent chance of living in the top fifth of the income bracket when he or she grows up. This disparity is due, in part, to the extent that income classes are separated physically. If good jobs are not located nearby and you have barely enough income to eat, transportation to area where there are jobs become a challenge. And if you try to move to more affluent areas where the jobs are, your lack of sufficient income may disqualify you from living in these areas.
Crafting policy that granular may be impossible, although I suspect the community organizer in Mr. Obama may make the attempt, but given that we are in the midst of budget season, a Republican-held House will continue to remain hostile to any policies that call for more debt-fueled spending.