Transcript from speech delivered 12/4/2013
THE PRESIDENT: Thank you. (Applause.) Thank you, everybody. Thank you so much. Please, please have a seat. Thank you so much. Well, thank you, Neera, for the wonderful introduction and sharing a story that resonated with me. There were a lot of parallels in my life and probably resonated with some of you.
Over the past 10 years, the Center for American Progress has done incredible work to shape the debate over expanding opportunity for all Americans. And I could not be more grateful to CAP not only for giving me a lot of good policy ideas, but also giving me a lot of staff. (Laughter.) My friend, John Podesta, ran my transition; my Chief of Staff, Denis McDonough, did a stint at CAP. So you guys are obviously doing a good job training folks.
I also want to thank all the members of Congress and my administration who are here today for the wonderful work that they do. I want to thank Mayor Gray and everyone here at THEARC for having me. This center, which I’ve been to quite a bit, have had a chance to see some of the great work that’s done here. And all the nonprofits that call THEARC home offer access to everything from education, to health care, to a safe shelter from the streets, which means that you’re harnessing the power of community to expand opportunity for folks here in D.C. And your work reflects a tradition that runs through our history — a belief that we’re greater together than we are on our own. And that’s what I’ve come here to talk about today.
Over the last two months, Washington has been dominated by some pretty contentious debates — I think that’s fair to say. And between a reckless shutdown by congressional Republicans in an effort to repeal the Affordable Care Act, and admittedly poor execution on my administration’s part in implementing the latest stage of the new law, nobody has acquitted themselves very well these past few months. So it’s not surprising that the American people’s frustrations with Washington are at an all-time high.
But we know that people’s frustrations run deeper than these most recent political battles. Their frustration is rooted in their own daily battles — to make ends meet, to pay for college, buy a home, save for retirement. It’s rooted in the nagging sense that no matter how hard they work, the deck is stacked against them. And it’s rooted in the fear that their kids won’t be better off than they were. They may not follow the constant back-and-forth in Washington or all the policy details, but they experience in a very personal way the relentless, decades-long trend that I want to spend some time talking about today. And that is a dangerous and growing inequality and lack of upward mobility that has jeopardized middle-class America’s basic bargain — that if you work hard, you have a chance to get ahead.
I believe this is the defining challenge of our time: Making sure our economy works for every working American. It’s why I ran for President. It was at the center of last year’s campaign. It drives everything I do in this office. And I know I’ve raised this issue before, and some will ask why I raise the issue again right now. I do it because the outcomes of the debates we’re having right now — whether it’s health care, or the budget, or reforming our housing and financial systems — all these things will have real, practical implications for every American. And I am convinced that the decisions we make on these issues over the next few years will determine whether or not our children will grow up in an America where opportunity is real.
Now, the premise that we’re all created equal is the opening line in the American story. And while we don’t promise equal outcomes, we have strived to deliver equal opportunity — the idea that success doesn’t depend on being born into wealth or privilege, it depends on effort and merit. And with every chapter we’ve added to that story, we’ve worked hard to put those words into practice.
It was Abraham Lincoln, a self-described “poor man’s son,” who started a system of land grant colleges all over this country so that any poor man’s son could go learn something new.
When farms gave way to factories, a rich man’s son named Teddy Roosevelt fought for an eight-hour workday, protections for workers, and busted monopolies that kept prices high and wages low.
When millions lived in poverty, FDR fought for Social Security, and insurance for the unemployed, and a minimum wage.
When millions died without health insurance, LBJ fought for Medicare and Medicaid.
Together, we forged a New Deal, declared a War on Poverty in a great society. We built a ladder of opportunity to climb, and stretched out a safety net beneath so that if we fell, it wouldn’t be too far, and we could bounce back. And as a result, America built the largest middle class the world has ever known. And for the three decades after World War II, it was the engine of our prosperity.
Now, we can’t look at the past through rose-colored glasses. The economy didn’t always work for everyone. Racial discrimination locked millions out of poverty — or out of opportunity. Women were too often confined to a handful of often poorly paid professions. And it was only through painstaking struggle that more women, and minorities, and Americans with disabilities began to win the right to more fairly and fully participate in the economy.
Nevertheless, during the post-World War II years, the economic ground felt stable and secure for most Americans, and the future looked brighter than the past. And for some, that meant following in your old man’s footsteps at the local plant, and you knew that a blue-collar job would let you buy a home, and a car, maybe a vacation once in a while, health care, a reliable pension. For others, it meant going to college — in some cases, maybe the first in your family to go to college. And it meant graduating without taking on loads of debt, and being able to count on advancement through a vibrant job market.
Now, it’s true that those at the top, even in those years, claimed a much larger share of income than the rest: The top 10 percent consistently took home about one-third of our national income. But that kind of inequality took place in a dynamic market economy where everyone’s wages and incomes were growing. And because of upward mobility, the guy on the factory floor could picture his kid running the company some day.
But starting in the late ‘70s, this social compact began to unravel. Technology made it easier for companies to do more with less, eliminating certain job occupations. A more competitive world lets companies ship jobs anywhere. And as good manufacturing jobs automated or headed offshore, workers lost their leverage, jobs paid less and offered fewer benefits.
As values of community broke down, and competitive pressure increased, businesses lobbied Washington to weaken unions and the value of the minimum wage. As a trickle-down ideology became more prominent, taxes were slashed for the wealthiest, while investments in things that make us all richer, like schools and infrastructure, were allowed to wither. And for a certain period of time, we could ignore this weakening economic foundation, in part because more families were relying on two earners as women entered the workforce. We took on more debt financed by a juiced-up housing market. But when the music stopped, and the crisis hit, millions of families were stripped of whatever cushion they had left.
And the result is an economy that’s become profoundly unequal, and families that are more insecure. I’ll just give you a few statistics. Since 1979, when I graduated from high school, our productivity is up by more than 90 percent, but the income of the typical family has increased by less than eight percent. Since 1979, our economy has more than doubled in size, but most of that growth has flowed to a fortunate few.
The top 10 percent no longer takes in one-third of our income — it now takes half. Whereas in the past, the average CEO made about 20 to 30 times the income of the average worker, today’s CEO now makes 273 times more. And meanwhile, a family in the top 1 percent has a net worth 288 times higher than the typical family, which is a record for this country.
So the basic bargain at the heart of our economy has frayed. In fact, this trend towards growing inequality is not unique to America’s market economy. Across the developed world, inequality has increased. Some of you may have seen just last week, the Pope himself spoke about this at eloquent length. “How can it be,” he wrote, “that it is not a news item when an elderly homeless person dies of exposure, but it is news when the stock market loses two points?”
But this increasing inequality is most pronounced in our country, and it challenges the very essence of who we are as a people. Understand we’ve never begrudged success in America. We aspire to it. We admire folks who start new businesses, create jobs, and invent the products that enrich our lives. And we expect them to be rewarded handsomely for it. In fact, we’ve often accepted more income inequality than many other nations for one big reason — because we were convinced that America is a place where even if you’re born with nothing, with a little hard work you can improve your own situation over time and build something better to leave your kids. As Lincoln once said, “While we do not propose any war upon capital, we do wish to allow the humblest man an equal chance to get rich with everybody else.”
The problem is that alongside increased inequality, we’ve seen diminished levels of upward mobility in recent years. A child born in the top 20 percent has about a 2-in-3 chance of staying at or near the top. A child born into the bottom 20 percent has a less than 1-in-20 shot at making it to the top. He’s 10 times likelier to stay where he is. In fact, statistics show not only that our levels of income inequality rank near countries like Jamaica and Argentina, but that it is harder today for a child born here in America to improve her station in life than it is for children in most of our wealthy allies — countries like Canada or Germany or France. They have greater mobility than we do, not less.
The idea that so many children are born into poverty in the wealthiest nation on Earth is heartbreaking enough. But the idea that a child may never be able to escape that poverty because she lacks a decent education or health care, or a community that views her future as their own, that should offend all of us and it should compel us to action. We are a better country than this.
So let me repeat: The combined trends of increased inequality and decreasing mobility pose a fundamental threat to the American Dream, our way of life, and what we stand for around the globe. And it is not simply a moral claim that I’m making here. There are practical consequences to rising inequality and reduced mobility.
For one thing, these trends are bad for our economy. One study finds that growth is more fragile and recessions are more frequent in countries with greater inequality. And that makes sense. When families have less to spend, that means businesses have fewer customers, and households rack up greater mortgage and credit card debt; meanwhile, concentrated wealth at the top is less likely to result in the kind of broadly based consumer spending that drives our economy, and together with lax regulation, may contribute to risky speculative bubbles.
And rising inequality and declining mobility are also bad for our families and social cohesion — not just because we tend to trust our institutions less, but studies show we actually tend to trust each other less when there’s greater inequality. And greater inequality is associated with less mobility between generations. That means it’s not just temporary; the effects last. It creates a vicious cycle. For example, by the time she turns three years old, a child born into a low-income home hears 30 million fewer words than a child from a well-off family, which means by the time she starts school she’s already behind, and that deficit can compound itself over time.
And finally, rising inequality and declining mobility are bad for our democracy. Ordinary folks can’t write massive campaign checks or hire high-priced lobbyists and lawyers to secure policies that tilt the playing field in their favor at everyone else’s expense. And so people get the bad taste that the system is rigged, and that increases cynicism and polarization, and it decreases the political participation that is a requisite part of our system of self-government.
So this is an issue that we have to tackle head on. And if, in fact, the majority of Americans agree that our number-one priority is to restore opportunity and broad-based growth for all Americans, the question is why has Washington consistently failed to act? And I think a big reason is the myths that have developed around the issue of inequality.
First, there is the myth that this is a problem restricted to a small share of predominantly minority poor — that this isn’t a broad-based problem, this is a black problem or a Hispanic problem or a Native American problem. Now, it’s true that the painful legacy of discrimination means that African Americans, Latinos, Native Americans are far more likely to suffer from a lack of opportunity — higher unemployment, higher poverty rates. It’s also true that women still make 77 cents on the dollar compared to men. So we’re going to need strong application of antidiscrimination laws. We’re going to need immigration reform that grows the economy and takes people out of the shadows. We’re going to need targeted initiatives to close those gaps. (Applause.)
But here’s an important point. The decades-long shifts in the economy have hurt all groups: poor and middle class; inner city and rural folks; men and women; and Americans of all races. And as a consequence, some of the social patterns that contribute to declining mobility that were once attributed to the urban poor — that’s a particular problem for the inner city: single-parent households or drug abuse — it turns out now we’re seeing that pop up everywhere.
A new study shows that disparities in education, mental health, obesity, absent fathers, isolation from church, isolation from community groups — these gaps are now as much about growing up rich or poor as they are about anything else. The gap in test scores between poor kids and wealthy kids is now nearly twice what it is between white kids and black kids. Kids with working-class parents are 10 times likelier than kids with middle- or upper-class parents to go through a time when their parents have no income. So the fact is this: The opportunity gap in America is now as much about class as it is about race, and that gap is growing.
So if we’re going to take on growing inequality and try to improve upward mobility for all people, we’ve got to move beyond the false notion that this is an issue exclusively of minority concern. And we have to reject a politics that suggests any effort to address it in a meaningful way somehow pits the interests of a deserving middle class against those of an undeserving poor in search of handouts. (Applause.)
Second, we need to dispel the myth that the goals of growing the economy and reducing inequality are necessarily in conflict, when they should actually work in concert. We know from our history that our economy grows best from the middle out, when growth is more widely shared. And we know that beyond a certain level of inequality, growth actually slows altogether.
Third, we need to set aside the belief that government cannot do anything about reducing inequality. It’s true that government cannot prevent all the downsides of the technological change and global competition that are out there right now, and some of those forces are also some of the things that are helping us grow. And it’s also true that some programs in the past, like welfare before it was reformed, were sometimes poorly designed, created disincentives to work.
But we’ve also seen how government action time and again can make an enormous difference in increasing opportunity and bolstering ladders into the middle class. Investments in education, laws establishing collective bargaining, and a minimum wage — these all contributed to rising standards of living for massive numbers of Americans. (Applause.) Likewise, when previous generations declared that every citizen of this country deserved a basic measure of security — a floor through which they could not fall — we helped millions of Americans live in dignity, and gave millions more the confidence to aspire to something better, by taking a risk on a great idea.
Without Social Security, nearly half of seniors would be living in poverty — half. Today, fewer than 1 in 10 do. Before Medicare, only half of all seniors had some form of health insurance. Today, virtually all do. And because we’ve strengthened that safety net, and expanded pro-work and pro-family tax credits like the Earned Income Tax Credit, a recent study found that the poverty rate has fallen by 40 percent since the 1960s. And these endeavors didn’t just make us a better country; they reaffirmed that we are a great country.
So we can make a difference on this. In fact, that’s our generation’s task — to rebuild America’s economic and civic foundation to continue the expansion of opportunity for this generation and the next generation. (Applause.) And like Neera, I take this personally. I’m only here because this country educated my grandfather on the GI Bill. When my father left and my mom hit hard times trying to raise my sister and me while she was going to school, this country helped make sure we didn’t go hungry. When Michelle, the daughter of a shift worker at a water plant and a secretary, wanted to go to college, just like me, this country helped us afford it until we could pay it back.
So what drives me as a grandson, a son, a father — as an American — is to make sure that every striving, hardworking, optimistic kid in America has the same incredible chance that this country gave me. (Applause.) It has been the driving force between everything we’ve done these past five years. And over the course of the next year, and for the rest of my presidency, that’s where you should expect my administration to focus all our efforts. (Applause.)