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How fighting income inequality became Obama’s driving force

By Zachary A. Goldfarb,November 23, 2012

When Barack Obama published his autobiography, “Dreams From My Father,” about racial identity in 1995, he talked with his neighborhood newspaper in Illinois, the Hyde Park Citizen, about the economic disparities he had seen while exploring the world as a child and young adult.

“My travels made me sensitive to the plight of those without power and the issues of class and inequalities as it relates to wealth and power,” he said in that interview. “Anytime you have been overseas in these so-called third world countries, one thing you see is a vast disparity of wealth of those who are part of the power structure and those outside of it.”

That sensitivity to inequality has stuck with Obama throughout his rise in politics, from Chicago’s South Side all the way to the White House. He remains largely a pragmatist in his approach to governing. But beneath his tactical maneuvering lies a consistent and unifying principle: to use the powers of his office to shrink the growing gap between the wealthiest Americans and everyone else.

If presidents set missions for themselves that are greater than winning the partisan battle of the moment, then this is Obama’s. Viewed through this lens, the imminent debate over the “fiscal cliff” is not simply a war over taxes, spending and how to tame the nation’s mushrooming debt. As Obama did in legislative fights during his first term, he also will be striving to reduce a three-decades-long wave of rising income inequality that has meant that fewer Americans have prospered while more struggle to get by.

The man who made history as the first black U.S. president long ago embraced the idea that class now rivals race as the nation’s main dividing line. But he will be old and even grayer before he knows whether he has successfully stopped two related phenomena that have exacerbated the income divide.

During the past 30 years, much of the nation’s economic growth has benefited the top 1 percent of earners, while in the past decade, middle-class incomes have fallen. More recently, economic mobility has slowed or declined, providing young people with fewer opportunities than their parents had to ascend the economic ladder.

Obama’s actions as president provide a glimpse of how he views legislation as a means to his end. His health-care reform law, aimed at covering as many of the uninsured as possible, takes a shot at addressing income inequality by imposing new taxes on the wealthiest Americans. Beginning next year, upper-income earners will pay new surcharges that will result in an average additional tax bill of $20,000 for the top 1 percent. The money will help finance insurance subsidies and other coverage in 2014 for people in the lower middle class and below. A recent study by Cornell University’s Richard Burkhauser estimates that “Obamacare” will add $400 to $800 in disposable income annually for these Americans.

Now, in negotiations over the fiscal cliff, Obama has vowed to follow through on his campaign pledge to push for higher taxes on those same wealthy Americans, and to ask the next 1 percent to pay more as well. Unlike previous presidents, however, he wants lower taxes for everyone else. If that happens, it will raise revenue to lower the debt — but it also will narrow the income gap that made such an impression on him in his youth.

These changes may only modestly affect inequality in the United States, but any reduction is notable. Among 35 of the world’s most developed countries, according to the Organization for Economic Cooperation and Development, only a handful of national tax systems do less than the U.S. code to reduce income inequality.

Still, only so much can be accomplished through taxes and government subsidies, and Obama is well aware of that. To truly bend the slope of rising inequality over the next generation, he also has focused on education. Despite budget pressures, hemade a goal of having every student receive at least one year of college.

Every president talks about education, but 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.