Obama’s War on the Middle Class

NEPplanHow many times have you heard President Obama express concern for the middle class? More than you can count.  Even his website begins “Learn more about Barack Obama and why he’s fighting for the middle class.”[1]

But if we look at Obama’s actual record rather than his rhetoric, it is plain that the middle class has been one of the leading victims of his presidency.

The decline in median family and median net worth that began during George W. Bush’s presidency has continued under Obama. Citing recent Census Bureau data, the Pew Research Center published data showing that the only one of nine income levels whose net worth increased in the 2009-2011 period was the highest-earning cohort—those earning over $500,000 per year.

Income, too, showed a similar pattern: During Obama’s first term, the wealthiest 20% of households eked out a 2% gain while incomes for the rest fell.[2] Obama may talk tough about “the rich,” but they have been the only group that have gotten richer on his watch.

Further evidence of Obama’s silent war on the middle class is the explosion in the number of Americans receiving food stamps. When Obama took office in January 2009, there were approximately 32 million Americans on food stamps; as of April 5, 2013, that numbered had swollen by nearly 50% to 47.3 million.[3] Poor Americans already had been receiving food stamps before Obama became president; the increase came from members of the middle-class Americans that his policies had initiated into hard times.

Another dramatic indicator of economic hardship has been the unprecedented increase in the number of Americans receiving federal disability payments—8.8 million, a 19% increase in only four years. Working conditions haven’t become more dangerous;  the disturbing rise in these numbers means that many  have found it easier to get on disability than to get a job. The 1.4 million net increase in disability enrollments is five times greater than the growth in net jobs during the same period—a meager 291,000 jobs.[4]

Lowering The Economic Hammer

The three primary sources of income in a market economy are labor, investment and entrepreneurial business startups. All three have fared poorly under Obama’s policies.

Investment Income

Millions of middle-class Americans, especially seniors, prefer to stick to safe, ultralow-risk interest-paying investments, such a savings accounts, interest-earning checking accounts, money-market accounts, and certificates of deposit. A normal market rate of return on such investments would be around 3%, but today’s savers have been zeroed out by  the Federal Reserve’s “Zero Interest-Rate Policy.”[5]

Obama’s extraordinary increase in federal spending is the culprit. His big-spending policies far exceeded federal revenues, so they had to be financed by borrowing. The massive amount of new debt that was incurred was beyond the capacity of capital markets to finance at interest rates low enough for the federal treasury to afford. Fed Chairman Ben Bernanke became Obama’s compliant accomplice, essentially bailing out the treasury by employing extraordinary measures (the series of “quantitative easing” programs) to cram interest rates down to near zero. In doing so, Bernanke deprived millions of Americans of the option of earning safe interest income. The Fed has rigged the markets so that middle-class seniors who want the safety of U.S. Treasury debt instruments are losing income while, in effect, granting virtually interest-free loans to the federal government.

Entrepreneurial Income

Obama’s policies have had a dampening effect on business startups—foundation for the middle class. Citing a study by the Ewing Marion Kauffman Foundation, which specializes in studying startups, respected social scientist Joel Kotkin writes, “…today fewer than 8% of U.S. companies are five years old or younger, down from between 12% and 13% in the early 1980s, another period following a deep recession.”[6]

There are several reasons for the sluggishness in small business startups, but one of the central ones is been the administration’s heavy-handed regulatory practices. The Mercatus Center, which maintains a database of federal regulations, tabulated an average of 17,212 regulatory rules and restrictions added per year by Obama, compared to 13,441 per year under George W. Bush.[7]

Obama’s second term will see even more new regulations—and therefore more trouble for the middle class– as his administration proceeds to implement the most significant, complex laws passed during Obama’s first term—the Dodd-Frank Wall Street Reform and Consumer Protection Act and the Patient Protection and Affordable Care Act (Obamacare).  Both of these pieces of legislation will remove people from the middle class and make it harder for those trying to climb the economic ladder to reach this rung.

Labor Income

The official unemployment rate has fallen at historically slow post-recession rates under Obama. At the end of April 2013, according to the Bureau of Labor Statistics, the rate was 7.5%—the lowest it has been since he became president.

On the surface, it might seem that this statistic points to an increasingly healthy job market. But Investor’s Business Daily reports, “The average workweek in April was 2% shorter than it was a year ago, marking the ‘steepest decline since 1980.’” Employers are reducing the number of hours they employ workers to avoid incurring the heavy costs of impending ObamaCare rules.[8]

The participation rate of the US labor force is lower than it has been in decades–63.30% as of April 30, 2013. This rate has been declining, counter-intuitively, in lockstep with the official unemployment rate.[9] This means that the middle class is not only having a hard time finding jobs, but even giving up on the prospect of employment.

More than half of Americans under age 25 holding a bachelor’s degree are either unemployed or underemployed.[10]

Economic statistician John Williams, who maintains the well-known Shadowstats website, pegs the actual unemployment rate at the end of April 2013 at 23.0%.[11]

Obama channeled millions of stimulus dollars to increase employment for such favored constituencies as teachers, construction workers, and federal employees in his first two years without significantly reducing unemployment. The economic explanation is this: When a job exists (or earns as much as it does) only because of a government subsidy, then the job is costing more than the value it is producing. This imposes a net loss on society, and the wealth that is diverted from the private sector reduces its ability to create and sustain economically viable jobs.

Is the Obama-Caused Economic Weakness Intentional?

Was this Obama’s goal? Either he didn’t understand that his policies would be so detrimental, in which case he is economically illiterate and incompetent, or he knew what he was doing and was willing to sacrifice the middle class to achieve his overall goals. I think the latter is the case.

Signs of Antipathy

Five days before the 2008 election, Obama told a crowd of his supporters that “we” were on the verge of “fundamentally transforming” the country. Since the American system was designed to maximize economic opportunities and the standards of living, middle-class Americans might well wonder why Obama wanted to fundamentally change it.

Obama revealed his antipathy for middle-class values in the 2008 presidential campaign when he spoke contemptuously of Americans who cling to guns and religion. For 20 years, he attended Rev. Jeremiah Wright’s church where the message from the pulpit was a vehement “God damn America!”

It is well known that Obama is a disciple and practitioner of the strategy and tactics of the late revolutionary Saul Alinsky, who despised the middle class, denigrating them as “materialistic, decadent, bourgeois, degenerate, imperialistic, war-mongering, brutalized and corrupt.”[12]

Obama repeatedly displayed his disrespect for the middle class in his policy approach to the deflating housing bubble he inherited. His proposals to bail-out underwater mortgage holders—many of whom had put little or no money down on their houses—was blatantly unfair to the tens of millions of middle-class Americans who had faithfully made the monthly mortgage payments for ten, twenty, or thirty years, and to those who had deferred Hawaiian vacations, new cars, and other enjoyments to save for large down payments on their houses. Obama pushed for bailouts not only to rich Wall Street firms, but to homeowners whose adjustable-rate mortgages had been reset higher—hardly fair to more financially prudent middle class Americans who had bitten the bullet and locked in fixed-rate mortgages that initially (and potentially permanently) were at higher interest rates than those who took out ARMs.[13]

The Green Agenda

President Obama is what I call a “mean green.” Like the radical environmentalists, he objects to the American middle class’s standard of living. He disapproves of Americans living comfortably when there are poor nations in the world. In his words: “We can’t drive our SUVs and, you know, eat as much as we want and keep our homes, you know, 72 degrees at all times…and then just expect that every other country is going to say OK…[when we] keep using 25 percent of the world’s energy.”

That explains why Obama chose Dr. Steven Chu to be Secretary of Energy for his first term. Chu’s most famous policy goal was encapsulated in his statement, “Somehow we have to figure out a way to boost the price of gasoline to the levels in Europe.” Well, Chu didn’t succeed fully, but the price of gasoline is approximately double what it was at the outset of the Obama presidency.

Chicagoland Politics and the “Curley Effect”

Chicago politicians are known for being particularly ruthless in their pursuit of political power. They play hardball. Their goal is to demolish their competition and forge a permanent majority. It hardly seems surprising, then, that Barack Obama is doing his best to take the Curley effect, historically an urban phenomenon, nationwide.

As defined by Harvard scholars Edward L. Glaeser and Andrei Shleifer in a famous 2002 article, the Curley effect (named after its prototype, James Michael Curley, a four-time mayor of Boston in the first half of the 20th century) is a political strategy of “increasing the relative size of one’s political base through distortionary, wealth-reducing policies.”  Translation: A politician or a political party can achieve long-term dominance by tipping the balance of votes in their direction through the implementation of policies that reward their political allies and punish their opponents, even if the overall result is economic decline. Yes, strange as it seems, making a city poorer often increases the power of those who engineer that impoverishment.

Here is how the Curley effect works: Politicians adopt policies that bestow tax-financed favors on various special interest groups—welfare constituencies, unions, the public sector in general, and select corporations. In demonstration of George Bernard Shaw’s astute axiom, “The government that robs Peter to pay Paul can always count on the support of Paul,” the recipients of those favors and handouts loyally support their political patrons, giving them reliable electoral support in the form of votes, campaign contributions, get-out-the-vote drives, etc.

Meanwhile, those segments of the population who bear the economic burden of supporting the favored special interests often flee. This reduces the number of political opponents on the city’s voter registration rolls, thereby tilting the electoral balance and making it more likely that the political party running the wealth redistribution scheme stays in power. So successful has this strategy been for Democrats that they have retained uninterrupted control of many large American cities for decades, and in the more extreme cases, have created virtual one-party fiefdoms.

Perhaps you have seen the chain e-mail listing the ten poorest US cities with a population of at least 250,000: Detroit, Buffalo, Cincinnati, Cleveland, Miami, St. Louis, El Paso, Milwaukee, Philadelphia, and Newark. Besides all having poverty rates between 24% and 32% and a vanishing middle class, these cities share a common political factor: Only two have had a Republican mayor since 1961, and those two (Cincy and Cleveland) haven’t had one since the 1980s. Democratic mayors have had a lock on City Hall despite these once-great and prosperous cities stagnating on their watch. This is the Curley effect in action.

The strategic mistake of the Democratic leaders of those poor cities have adopted policies so virulently anti-business that they have hollowed out the economic base of the city and caused stagnation, decline, and bankruptcy.

Obama is trying to achieve the Curley effect nationwide. He is striving to forge a political coalition that will give the Democrats a permanent electoral majority. He has adopted a two-pronged strategy. On the one hand, he has done everything he could to strengthen Democratic constituencies (e.g., stimulus spending steered predominantly toward unions and strategically allied state and municipal entities; waivers from Obamacare for unions; continual increases in the Index of Dependence on Government during Obama’s presidency);[14] on the other, he has endeavored to weaken Republican constituencies by strengthening alliances with Big Business while making things difficult for small businesses, because the latter are “a building-block of the Republican base.”[15]

If Obama and his fellow progressives succeed in achieving the Curley effect on the national level, Americans will no longer be able to move to a new city or state to escape the withering economic impact of Curley-style politics. Their only option would be to leave the country.  However, it appears that Obama has anticipated that response. To close the escape hatch from an Obama-led, Curley-effect America, the president has signed the Foreign Account Tax Compliance Act that mandates closer monitoring of Americans’ offshore accounts. He also seems to favor policies that would impose financial penalties on anyone desiring to give up U.S. citizenship, and he has called for “global minimum taxes.”[16]

An Enduring Crisis of the Middle Class

Obama’s policies are enlarging the twin millstones around the neck of the middle class– taxation and inflation. While it is true that income tax rates haven’t yet risen under Obama and inflation has surfaced only in a few areas (e.g., food and energy) these twin curses are quietly gathering strength for a future whirlwind of destruction. The six trillion dollars of new debt resulting from Obama’s spending binge (plus trillions more of accumulated unfunded federal liabilities) are tax hikes on future taxpayers. As mentioned earlier, the costs of this flood of red ink has been obscured by the Fed’s Zero Interest Rate Policy and its willingness to buy approximately 60% of new federal debt with newly created dollars. Whenever ZIRP ends, some combination of massive tax hikes and/or raging inflation will ensue. .

Already, Obama’s economic policies have hurt the middle class. They have sapped the job market, raised food and energy bills, and resulted in falling incomes and net worth. Now the table is set for additional economic pain in the future.

A contracting middle class in retreat from the optimism and affluence that have always been its hallmark is, at this stage of his presidency, Barack Obama’s legacy.

Notes:


[2] Obamanomics: Rich Get Richer, Everyone Else Poorer,” (unsigned editorial) Investors Business Daily, Posted 04/24/2013 6:69 PM ET. news.investors.com/ibd-editorials/042413-653244-rich-get-richer-poor-poorer-under-obama.htm

[3] Matt Trivisonno’s blog, accessed May 5, 2013; www.trivisonno.com/food-stamps-charts

[4] John Merline, “Nearly 90,000 Apply for Disability, December Record,” posgted 12/21/12 01:19 PM ETnews.investors.com/122112-637978-disability-ranks-continue-to-explode-under-obama.htm?p=full

[5] Mark W. Hendrickson, “We’ve Been ZIRPed,” Grove City PA: The Center for Vision & Values, October 12, 2011; www.visionandvalues.org/2011/10/we-ve-been-zirped/

[7] Joseph Lawler, “President Obama Leads in Regulations Issued,” posted on realclearpolicy.com on November 2, 2012; www.realclearpolicy.com/blog/2012/11/02/president_obama_leads_in_regulations_issued_338.html

[8] “The ObamaCare Train Wreck Is Already Here,” IBD Editorial, posted May 6, 2013 07:18 PM ET; news.investors.com/ibd-editorials/050613-655037-the-obamacare-train-wreck-is-already-here.htm?p=full

[9] data.bls.gov/timeseries/LNS11300000; cf. “US Labor Force Participation Rate,” ycharts.com/indicators/labor_force_participation_rate

[10] Mark Hendrickson, “Myth-Busting 101,” posted on forbes.com August 16, 2012; www.forbes.com/sites/markhendrickson/2012/08/16/mythbusting-101-uncomfortable-truths-your-college-wont-tell-you/

[11] Bill Quick, A Reality Check from Shadowstats.com, posted on dailypundit.com, May 3, 2013; www.dailypundit.com/?p=71610

[12] Saul Alisky, Rules for Radicals, p. 185, quoted in James R. Keena, We’ve Been Had, Nahsville TN: Twin Creek Books, 2010, p. 68.

[13] Mark W. Hendrickson, “Tough Times for Wise Virgins,” Grove City: The Center for Vision & Values, posted February 18, 2009; www.visionandvalues.org/2009/02/tough-times-for-wise-virgins/

[14] Patrick Tyrrell, “Index of Dependence on Government Jumps for the Fourth Year in a Row,” posted on “The Foundry,” a Heritage Foundation blog Sept. 18, 2012; blog.heritage.org/2012/09/18/index-of-dependence-on-government-jumps-for-the-fourth-year-in-a-row/

[15] Kotkin, “Wall Street’s Hollow Boom.”

[16] Mark Hendrickson, “Team Obama: Tax Predators On The Prowl,” posted on forbes.com, 4/19/2012 @ 5:45PM; www.forbes.com/sites/realspin/2012/04/19/team-obama-tax-predators-on-the-prowl/

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  • Ash

    The Curly strategy is disturbing, but it appears to be very successful and Obama’s weapon of choice. Combine it with blind voting based on skin colour, and you get a disastrous combination.

    • patron

      It may look so now. Not so much when markets catch up to reality, central banking collapses, capital dries up, and the DNC no longer has king obama to clean out the ghetto on election day.

  • http://www.adinakutnicki.com AdinaK

    A revolutionary leftist must, by definition, eviscerate the middle class, thus ensuring/enslaving a subservient underclass, as it becomes wedded to gov't handouts. Once this happens the gov't has TOTAL control and that is the point. But people hear what they want to hear, regardless of the wreckage around them, whether economic or otherwise.

    In this respect, "hope and change" was never anything more than the total evisceration of the economic health of the nation, with aggregate power within Obama Inc's hands – http://adinakutnicki.com/2012/08/07/barack-hussei

    It's almost a done deal.

    Adina Kutnicki, Israel http://adinakutnicki.com/about/

  • http://www.invisibleserfscollar.com Robin

    Obama's Regional Equity push to carve the US into 12 regions is the stealth but active agenda of this 2nd term. But it counts on transferring money from the regions which have prospered to those who drove away business as a result of the Curley Effect. Every city in that Bottom 10 listed is hugely active in the REM. Cleveland is even billing itself as the Green City on a Blue Lake.

    Living Cities obtained by squeezing away the economic life elsewhere is a more accurate way to look at it. And everything falling under the Administered Planned State. Think of it as the License Raj comes to North America.

  • Cassandra

    “we” were on the verge of “fundamentally transforming” the country. " When I heard this for the first time I had shivers run down my spine and I still have when I hear it again. Obama wants to get rid of the middle class because the middle class has always been the backbone of this once great country. Small business were also the back bone of this country and he wants to destroy them too. Obama would love to see 2 classes ,the poor and the wealthy elite like him.. He would then add Islam to the mix and he could rule over the mess. Hope it won't happen.

  • Asher

    Everything this President has done has been destructive, the only truth he told is that "We are only days from Fundamental Change."

  • Arlie

    This is the best article I have ever read on the true tactics with the cause and effect enumerated so clearly.

  • patron

    For years big government advocates pushed scarcity regarding base materials like oil, water, arable land, and precious metals. Unfortunately we are quickly discovering the sad reality that these resources will exist long after our national wealth becomes scarce.

    There will be supplies of oil and minerals in the ground we cannot recover because liberal Democratic spendthrifts squandered our wealth to buy votes with welfare for grafting corporations and scumbag deadbeats. Pay an oil rigger with monopoly money and he moves to Australia. Reduce entitlements by a tenth of a percent and that fat pig Richard Trumka hires the rent a mob and half of Chicago is burnt down.

    Thanks, Obama.

  • Jim_C

    I enjoy Mr. Hendrickson's articles at Forbes.com, and while I disagree with some of the characterizations in this article, I have to say it is a step up in quality from some of the usual fare, here. I appreciate the research; the author's sources hold up in context, too, which pleasantly surprised me.

    I happen to think Obama operates not from some insidious agenda but from a desire to use government to fix all the problems he sees (including, clearly, the problem of opposition to his policies). And he seems to come from the Bill Clinton/Tony Blair "middle way" school. In other words, he actually has the option and the base support to be a lot more s-cialist than he has been, and has failed to do so.

    But we are at a point where we are playing with pretend money and making decisions on an almost purely political rather than practical basis. I chalk this up to Obama's achilles' heel, and that is his greenhorn status as a player in DC. I had hoped he'd be a bit more bold in the right ways in his second term, and I'm not sure he's up for it. So it seems like there is a real opportunity for a sensible, non-bozo Republican, or even a pro-business Democrat to make a case to the American people for the tough choices we are inevitably going to have to deal with.

    • mylesman

      Apparently you have chosen to see the light regards the democrat party's obsession to regulate, tax, and redistribute. And there is no limit to the damage they would wreck on the republican base if they regain the House in 2014.

      But despite your epiphany, I'm guessing you still pull the voting lever for democrats. My guess is you are part of the establishment, you are doing well and have never suffered. You Jim are the problem. Snooty liberals who loves to play the intellectual are the enlightened ones who gave us obama. Go light your candles, recycle, and don't forget to put on your helmet.

      • Jim_C

        Find me a Republican candidate who is in touch with what everyday people go through, who takes a libertarian view toward social issues, and can explain his views without resorting to cliches, and you'll have my vote. Simple as that.

  • Christopher Riddle

    "Fundamentally Transform This Country"!I remember that,well!!Since when was a POTUS elected to do ANYTHING like this?Where is Obongo's mandate for this??He doesn't care as he"Rules";he doesn't"Govern"!!!I remember what he said when(during a debate with McCain/2008),the moderator asked him what had he done that would qualify him to be President?His reply:"I Was A Community Organizer"!!!!In other words,"Rabble Rouser".!!!!!!"Rabble Rousers"don't MAKE anything;They BREAK EVERYTHING!!!!!!!!!!!!!!!!!!!!!!!!!!!!!

  • onecornpone

    Nice article. It seems that the POTUS is attempting to redefine the middle class. For about two years I have noticed that he refers to the entitlement class as "the middle class". It could be one of those self esteem lifting strategies, after all, what is he going to call them? Calling them "the poor" isn't very flattering, since they are his base voters, and poor has insurmountable negative connotation.

    By expanding the Food Stamp program to encompass folks above the level of the desperately poor, he blurs another distinction, and coincidentally removes a nasty characterization, while simultaneously stripping money hoarders of their interest income, forcing them to consume their principle. Another phase of "leveling the playing field". Remember his scat pontification, "at some point, don't you have enough money".

    This seems to be classic Cloward-Piven.

    At the same time he is elevating the poor to middle class, by little more than sanctimonious decree, he is washing out true middle class wealth very quickly, which I expect will lead to a blending, with scant line of demarcation. Through his tax proposals, we have seen that he wants to shove the upper middle class into the category of "wealthy" to be taxed so heavily they will not be able to maintain, thus will also fall into his middle class melting pot. The scheme is canny.

  • Mary Sue

    Even if he's doing it on purpose (and he probably is), the miscalculation is the drying up of revenue as more and more are pushed onto welfare. It's simply not sustainable.

    So either he's deliberately trying to Greece America, or he really is the most incompetent President in history, beating out Jimmy Carter.

  • WilliamJamesWard

    Obama is delivering one thing to America, "The Bad", everything he touches turns bad and
    destructive and pitifully this can only happen to a people that have gone to bed and refuse
    to get up. Leftists hate and desire the destruction of America, it's Churches on through
    every institution and freedom we have. America has been had by the Communist left and
    it is close to the destructive end it desires, however I wonder what they plan for the
    millions of freedom minded individuals hanging on to thier Bibles and guns, I do not think
    that has been thought out thoroughly enough, will occupy punks show up everywhere,
    we shall see…………………………….William

    • HiPlainsDrifter

      Great questions…
      there must be an implosion at some point, what the trigger will be is the question..
      Guns are useful, as long as ammo is available….but it's in shorter supply than patriotism…

      • WilliamJamesWard

        Seems as though the Obamanites are buying it all up but improvisation is and American
        trait and time running out and before the boyscout motto changes from "Be prepared"
        to "Buy a doiley" I will try to prepare myself for the predictable future…………….William

  • Kevin Stowell

    The one at the head of the classroom all but dictates the future of the country.

    • HiPlainsDrifter

      When the 3d's (dolphins, dinosaurs, diversity) supplant the 3r's, were pretty much screwed…

      • Kevin Stowell

        Ha. Succinctly stated.

  • Linda A. From NY

    Our Country needs prayer more then ever!!!!! We need to get back to God and Pray. Pray to have this nazi regime investigated and prison for the crimes this administration have committed Obama and this whole administration must go before they destroy our Country. May God Help Us.

  • Hohn C. Davidson

    It would have been nice to Lou Dobbs get some credit for his similar stance on theis issue.

  • Brujo Blanco

    If we do not stop what is happening we will.be a.soviet style communist dictatorship. Obama and crew want the middle class.to disappear and that will be accomplished with confirmatory taxation and Obamacare.

  • http://twitter.com/undefined @undefined

    as Fred explained I'm amazed that people can earn $8836 in four weeks on the computer. did you look at this page… up444.c­om

  • Ellman

    Expanding the food stamp program, adding people to disability roles, impoverishing the middle class, destroying small businesses: these are not policies for 'transformation' but for 'destruction'. Obama is either a deluded and pathetically ignorant imbecile or a cunning and vicious destroyer of civil society, wealth and prosperity. He wanted to become President for some reason but that reason had nothing to do with promoting and pursuing the general well-being of the country. He wanted specific groups to benefit and others to suffer and that's exactly what is happening. But the country as a whole will decline economically, morally, spiritually and ethically. No Beowulf will rescue us from this beast!

  • Revanika

    He wanted to become President for some reason but that reason had nothing to do with promoting and pursuing the general well-being of the country. He wanted specific groups to benefit and others to suffer and that's exactly what is happening. But the country as a whole will decline economically, morally, spiritually and ethically.
    Living Room Design

  • Guest

    What does this mean?