Equality of Economic Opportunity: Obama's Main Thrust

In the print edition for Sunday, Nov. 25, 2012, Washington Post economics writer Zachary Goldfarb offers his take on "How fighting income inequality became Obama’s driving force." This title is a misnomer because, as the article reveals, President Obama has worked most consistently to increase equality of economic opportunity — not income equality per se — for America's lower-middle and working classes.

Yet, overall, there is an increasing gap in incomes, wealth, and opportunity.

Obama's "consistent and unifying principle," writes Goldfarb, is "to use the powers of his office to shrink the growing gap between the wealthiest Americans and everyone else." And make no mistake, the gap between the incomes of the wealthiest among us and the incomes of everyone else has widened over the past 30 years. Here is a graph showing the extent to which the top 0.01% have increased their share of total national income since the Reagan years in the 1980s:

But Obama's solution to income inequality is not so much to redistribute income downward directly, through out-and-out welfare programs, as it is to open up new avenues of economic opportunity for those who need them most.

Perhaps surprisingly, the nation's first black president has long seen economic class, not race, as the great dividing line in our society, says Goldfarb. President Obama knows full well that "economic mobility has slowed or declined," according to Goldfarb, "providing young people with fewer opportunities than their parents had to ascend the economic ladder." So the Obama administration has done certain things to help offset that:

• The "Obamacare" health care reform law will, starting in 2014, charge the richest 1% an income surtax that will nick them for an average of an extra $20,000 apiece, with the proceeds going to "finance insurance subsidies and other coverage in 2014 for people in the lower middle class and below."

• The richest 1% along with the next 1% will pay income tax at a higher marginal rate of 39.6%, if Obama gets his way during the current "fiscal cliff" bargaining.

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By the way: We are hearing a lot about what income levels at the top of the spectrum would be taxed more heavily under the Obama administration's plan. The figure $250,000 for families ($200,000 for individual tax filers) keeps cropping up as, supposedly, the bottom end of the 2% range that would be taxed at a marginal 39.6% rate. But $250,000 represents a figure in the top 3%, not the top 2% ... see Want to Know Your Household Income Percentile Ranking? and also What Percent Are You?.

H-m-m-m-m-m-m ...

Here is a useful chart from Want to Know Your Household Income Percentile Ranking?:

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Yet President Obama's biggest concern is education, not taxation, Goldfarb writes. "Despite budget pressures," the article says, "he made a goal of having every student receive at least one year of college. ... Obama’s rhetoric reflects an acute awareness of recent research. The data show that rising inequality is largely the result of a changing economy that handsomely rewards people with better skills or credentials — a college education — and leaves people with a basic education at a disadvantage."

Obama's economic advisers, during his initial bid for the presidency in 2008, demonstrated to him that "the income of top earners had once climbed at about the same pace as every other category, but had sharply diverged in the previous 30 years. ... [And] the value of a college degree, always lucrative, had soared as a financial advantage. ... [And there's been a] startling drop in the demand for workers — in auto factories and clerical positions — who were being replaced by computers and machines."

Hence, in a nutshell, candidate Obama was convinced that "increasingly sophisticated technology required more educated workers, who subsequently could capture more of the nation’s income."

Fast forward to Obama's second term as president. What is now needed, say some experts, are accordingly "universal child-care and preschool programs, designed to start children on an early path to the skills they will need to succeed while freeing parents to earn more." Also needed are further government outlays to "reduce the escalating cost of college."

But both of those initiatives would cost the taxpayers considerable money. Goldfarb asks whether Obama dares propose them, in the teeth of a hostile Republican-run House of Representatives and of the current fiscal cliff discussions.

Stay tuned for more on that ...