Obama’s agenda for opportunity

The recovery from the worst economic crisis since the Great Depression continues to make progress, with American businesses now having added 8.5 million jobs over 47 straight months of job growth. Although we are on track to overcome many of the acute problems that emerged with the financial crisis in 2008, we still face a longer-running set of chronic challenges to opportunity and advancement for American families.

In particular, there are two interrelated trends that have combined to raise fundamental questions about how the American ideals of opportunity and mobility will manifest themselves in the 21st century.

On the one hand, since the late 1970s, inequality has risen dramatically. While the share of income earned by the top 1 percent is the highest it has been since 1928, ordinary workers have seen their wages stagnate. At the same time, recent research has found that intergenerational mobility has remained relatively low. America celebrates success, and while some degree of inequality is inevitable, it is clear that the tremendous rise in inequality over the past forty years has not been accompanied by any similar increase in opportunity.

{mosads}Although these trends are deep-rooted, we know that effective policy actions can make a big difference. By expanding tax credits for working families, making permanent tax cuts for the middle class and restoring higher tax rates for high-income households, President Obama’s actions have made the tax code the most progressive it has been in decades.

The Affordable Care Act is contributing to slower growth in health care spending which will, in turn, translate into faster increases in take-home pay. Decades of progress in expanding tax credits for working families and other policies like nutrition assistance, Social Security, and Unemployment Insurance have brought down the poverty rate by nearly 40 percent since 1967. And the fact that mobility has remained relatively constant—rather than declining—does suggest that policy on the whole has helped to mitigate some of the forces that have strained low- and middle-income families, like globalization, technological change, the decline in union membership, and the erosion of the inflation-adjusted minimum wage.

In considering next steps, we know that tax policies have been very successful in encouraging labor force participation, raising earnings and supporting families. So it is a welcome development that Republicans, including Sen. Marco Rubio (Fla.), have begun to look at expanding tax credits for households without children. Along these lines, the president has proposed to double the Earned Income Tax Credit for childless households, benefiting more than 13 million workers, encouraging work and reducing poverty.

Tax credits alone, however, are not enough. As noted above, tax credits and other assistance have helped to cut the poverty rate by 40 percent since 1967. But exclude these programs, and the poverty rate has barely budged. So we also need to focus on raising wages and reducing poverty before tax credits and other government programs kick in.

One of the most immediate ways to make progress on this front is to raise the minimum wage, which, after adjusting for inflation, has fallen by almost 20 percent since President Reagan took office in 1981. The president supports raising the minimum wage to $10.10 an hour as a way to benefit 28 million workers and ensure that no one working full time has to raise their children in poverty. A proposal now before Congress would do just that, and would also index the minimum wage to inflation going forward, so that workers never again have to see their real earnings fall because of gridlock in Washington. Crucially, the president is leading by example, recently signing an executive order that will improve the efficiency of federal contracting by raising the minimum wage on new contracts.

Finally, while the growing bipartisan concern about economic opportunity is a good start, it must be matched by a strong commitment to investing in the future. The president believes it is critical to give every American child access to a world-class education, from pre-school up through college. Already, the President has given states new incentives to improve their K-12 curricula and taken steps to make college more affordable. To build on this progress, the president’s FY2015 budget proposal includes the Opportunity, Growth, and Security initiative, which will, among other things, help provide funding for every American child to attend high-quality pre-school. This proposal is firmly grounded in evidence, with decades of research showing that investments in early-childhood development are among the best investments we as a society can make.

In December, the President said that growing inequality and a lack of upward mobility present “the defining challenge of our time.” While the challenge is great, so are America’s strengths, and the president remains ready to work with anyone in Congress offering constructive ideas to move forward.

Furman is the chairman of President Obama’s Council of Economic Advisers.