Bloomberg News

Obama Paints Wider Role for Government in Middle Class

February 13, 2013

Obama Paints Wider Role for Government in Middle Class Revival

U.S. President Barack Obama, bottom center, delivers the State of the Union address to a joint session of Congress at the Capitol in Washington, D.C. on Feb. 12, 2013. Photographer: Andrew Harrer/Bloomberg

President Barack Obama began campaigning today for the activist second-term agenda he laid out in his State of the Union address, flying to North Carolina to build support for programs including a raise in the minimum wage and a plan to encourage new manufacturing jobs.

Before a joint session of Congress last night, the president prodded lawmakers to pass bills he said would help middle-income Americans and make the country more competitive.

Along with raising the federal minimum wage to $9 an hour, he appealed for votes on immigration and gun control, proposed making preschool available to all 4-year-olds, said he’d negotiate a new trade agreement with the European Union, and asked for $50 billion in infrastructure spending. He also lauded steps by companies such as Apple Inc. (AAPL:US), Caterpillar Inc. (CAT:US) and Ford Motor Co. (F:US) to bring manufacturing jobs back to the U.S.

House Speaker John Boehner this morning dismissed the idea of raising the minimum wage at a time when jobs are scarce.

“When you raise the price of employment, guess what happens? You get less of it,” the Ohio Republican told reporters in Washington.

The president today visited Asheville, North Carolina for a speech promoting investment in manufacturing and the rest of his second-term agenda. He appeared at a Linamar Corp. (LIMF:US) facility that produces heavy-duty engine and driveline components in a former Volvo Construction Equipment site in the city. The car parts company plans to employ 200 workers at the factory by the end of the year.

‘More Competitive’

“What’s happening here is happening all around the country,” Obama said. “Because just as it’s becoming more and more expensive to do business in places like China, America is getting more competitive and more productive.”

Obama will travel to Georgia and Illinois later this week.

In his speech last night, Obama said government actions should be guided by three questions: “How do we attract more jobs to our shores? How do we equip people with the skills they need to get those jobs? And how do we make sure that hard work leads to a decent living?”

The address signaled Obama’s plans to move quickly to leverage his political strength from last November’s re-election by challenging the Republican majority in the U.S. House of Representatives to schedule votes on his agenda. He also outlined his willingness to test the limits of his executive powers to implement his priorities if Congress fails to act.

The president asked Congress to “pursue a bipartisan, market-based solution to climate change” in its current term.

Impasse Lingers

In the absence of legislative action, Obama said he was prepared to “direct my cabinet to come up with executive actions we can take, now and in the future, to reduce pollution, prepare our communities for the consequences of climate change, and speed the transition to more sustainable sources of energy.”

Obama spoke as he and congressional Republicans are at an impasse in negotiations to head off $1.2 trillion in automatic, across-the-board spending cuts set to begin taking effect on March 1.

Republican Senator Tom Coburn of Oklahoma said today those budget reductions, known as sequestration, must take place for both sides to eventually forge a broader compromise.

“Sequestration will be some very bitter medicine that will draw people to their senses,” Coburn said in an interview on MSNBC. “The fact is, we’re going to have a sequestration and there’s going to be some pain.”

‘Go-It-Alone Approach’

Obama is also in a struggle over the government’s role in addressing economic inequality, a central theme of his re- election campaign and his inaugural address.

On budget and economic matters, Republicans showed no sign they were ready to accede to the president’s proposals.

Boehner last night criticized Obama for promoting “a go- it-alone approach to pursue his liberal agenda.”

Obama’s call for a minimum wage increase is his first as president. While it last rose in 2009, under his presidency, the increase came out of a 2007 law signed by President George W. Bush. Raising the hourly federal minimum wage to $9 from $7.25 by the end of 2015 would return it to its highest inflation- adjusted value since 1981, under President Ronald Reagan, according to a White House fact sheet.

15 Million

An increase would affect an estimated 15 million people and require approval by Congress. Boehner signaled it had little prospect of passing the Republican-controlled House.

Obama began with a warning about the “sudden, harsh, arbitrary” spending cuts that hit if Congress fails to act to avert the sequester. The across-the-board cuts would slow the economy, “jeopardize our military readiness” and “devastate priorities like education, energy, and medical research,” he said.

He said he stood by an offer he had previously made to cut spending on the Medicare health insurance plan for the elderly by cutting payments to drug companies, raising premiums for the wealthy and changing medical reimbursement procedures.

He repeated his demand that Republicans accept raising tax revenue along with spending cuts as part of any “balanced” approach to his goal of $1.5 trillion in additional deficit reduction over a decade. He said the balance could be achieved by “getting rid of tax loopholes and deductions for the well- off and well-connected.”

Republican Response

Senator Marco Rubio of Florida said in the official Republican response that more tax increases on the wealthy would slow economic growth and ultimately harm the economic prospects for all Americans.

“The tax increases and the deficit spending you propose will hurt middle class families,” Rubio said. “It will cost them their raises. It will cost them their benefits. It may even cost some of them their jobs.”

While there is no settled definition of middle class, the middle 60 percent of households nationwide in 2010 earned between $20,000 and $100,000, according to the U.S. Census Bureau.

Obama said that while the automatic cuts are “a really bad idea,” it would be “even worse” if he accepted Republican proposals to prevent the defense cuts by cutting deeper into other programs.

“We can’t ask senior citizens and working families to shoulder the entire burden of deficit reduction while asking nothing more from the wealthiest and most powerful,” Obama said. “How is that fair?”

Deficit Impact

He didn’t lay out the cost of his proposals, including universal pre-school, saying only that they wouldn’t add “a single dime” to the deficit.

While most of the speech was about the budget, taxes and spending, Obama also highlighted two of the most politically contentious parts of his agenda: immigration and gun control.

The president invoked the suffering of the families of shooting victims to make the case against opponents’ efforts to obstruct gun control legislation.

More than two dozen relatives of victims of gun violence were in the chamber to view the address. They included families from Newtown, Connecticut, where a gunman killed 20 children and six adults at an elementary school and the parents of Hadiya Pendleton, a high school band majorette who marched in his inauguration parade last month and a week later was fatally shot in a Chicago park about a mile from the Obama family home.

“She was 15 years old,” he said of the Chicago teenager. “She loved Fig Newtons and lip gloss.”

Vote Call

Obama listed the sites of recent mass shootings -- Newtown, Tucson, Aurora, Colorado, Oak Creek, Wisconsin -- and implored the lawmakers on behalf of the families to allow a vote on universal background checks and bans on military-style rifles and high-capacity ammunition magazines.

“If you want to vote no, that’s your choice,” he said. “They deserve a vote.”

Republican Senator Lindsey Graham of South Carolina dismissed Obama’s appeal as “more political theater than anything else” for a proposal that won’t pass.

On foreign policy, the president described closing more than a decade of war with the withdrawal of 34,000 U.S. troops from Afghanistan over the next year, cutting the American force there by about half.

He also defended his targeted approach to fighting terrorists and extremism. “We don’t need to send tens of thousands of our sons and daughters abroad, or occupy other nations,” Obama said. “Instead, we will need to help countries like Yemen, Libya, and Somalia provide for their own security, and help allies who take the fight to terrorists.”

While Obama didn’t mention the use of drone aircraft, he said he will continue a policy of “direct action” to kill terrorists, including U.S. citizens, when warranted.

The president also pledged that the U.S. will continue to “stand steadfast with Israel in pursuit of security and lasting peace,” he said. Obama plans to make his first trip to Israel as president next month.

To contact the reporters on this story: Margaret Talev in Washington at mtalev@bloomberg.net; Mike Dorning in Washington at mdorning@bloomberg.net

To contact the editor responsible for this story: Steven Komarow at skomarow1@bloomberg.net


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