This piece is part of a series on Obama’s legacy that The Huffington Post will be publishing over the next week.
In December 2013, President Barack Obama addressed representatives from anti-poverty nonprofits gathered in Washington, D.C.’s chronically depressed Anacostia neighborhood. He declared war on economic inequality.
“A dangerous and growing inequality and lack of upward mobility... has jeopardized middle-class America’s basic bargain ― that if you work hard, you have a chance to get ahead,” Obama said. “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,” Obama added. “It drives everything I do in this office.”
This was Obama’s response to Occupy Wall Street, and it came a few months before Thomas Piketty released Capital In The Twenty-First Century. The French economist’s best-seller offered a strong intellectual undergirding for the protests that had made “the 99 percent” a national slogan. Obama has always had a good feel for the zeitgeist: With Piketty’s book, concern over economic inequality jumped from the activist class to the chattering class, finally replacing the Beltway obsession with debt and deficits that had ruled since 2008.
But by the time Obama gave his 2013 speech, his legacy on economic inequality had been sealed. All he could do was defend his reputation, and there was not much worth defending.
The top 1 percent of all households captured 52 percent of the economic gains in the Obama years, according to research released in June by Emmanuel Saez, an economist at the University of California, Berkeley. The bottom 99 percent have only recovered about two-thirds of the income losses they suffered in the Great Recession. Income inequality is down slightly from its all-time high in 2012, but only enough to return the United States to where it was at the start of the Great Recession.
Median household income rose meaningfully in 2015, but remains below its 2007 level. These numbers may improve modestly as additional data from the final years of Obama’s presidency rolls in, but not enough to change the overall verdict. Obama has failed to meet “the defining challenge of our time.”
Most of the action in the Obama years has come from just three pieces of legislation. The Affordable Care Act, at its best, lowered health care costs for the poor by modestly increasing taxes on the rich. The 2009 stimulus bill prevented millions of people from falling into poverty, and some of the Bush-era tax cuts for the wealthiest Americans were eventually allowed to expire. Everything else from the Obama years has been a wash.
Of course, this is not the way the administration describes it. “President Obama has overseen the largest increase in Federal investment to reduce inequality since the Great Society programs of the Johnson Administration,” declared a February 2016 report from the president’s Council of Economic Advisers. It’s true ― but only because every other president since Lyndon Johnson made things worse.
Obama has a habit of invoking New Dealers when speaking about his legacy. In his December 2013 speech, he cited Franklin Delano Roosevelt as a moral model for his presidency, and most Democrats today view Obama through this lens. Like Johnson, Obama expanded access to health insurance. Like Roosevelt, he battled an economic collapse with government spending.
But Obama has far more in common with Ronald Reagan and Bill Clinton than he does with the Great Democrats of the 20th Century. On the policies that mattered most for economic inequality, Obama consistently placed a greater value on public perceptions of bipartisan cooperation than on actual results.
Obama’s defenders blame the country’s economic woes on the stone wall of opposition he faced from a Republican Congress, which nearly forced America to default on its debt rather than cut a deal with the president. Any serious plan to tackle inequality would have required imposing higher taxes on the rich and redistributing that money ― either into a sustained investment in the economy, or into direct cash transfers to the poor and middle class. Congressional Republicans fiercely opposed that project.
But so did Obama. Barely a year into his presidency, Obama began publicly championing austerity: “Small businesses and families are tightening their belts,” he said. “Their government should, too.” He created a bipartisan commission to slash the budget deficit, and advocated cutting Social Security benefits that disproportionately help the poor. When the Bush tax cuts were set to expire at the start of 2013, Obama infuriated then-Senate Majority Leader Harry Reid (D-Nev.) when he intervened to maintain the lower tax rates for people making $250,000 to $450,000 a year. For Obama, the political value of cutting a deal with then-Senate Minority Leader Mitch McConnell (R-Ky.) was more important than raising taxes on many very wealthy people.
And none of these failures compare to the disaster Obama enforced in housing policy. The 2008 bank bailouts gave the president broad authority to spend money to avert foreclosures. Coming into office, Obama promised to help up to 4 million homeowners by devoting between $50 billion and $100 billion from the bank bailout fund to “a sweeping effort to address the foreclosure crisis.” To date, the administration has spent about $21 billion on the crisis. Republicans could not and did not block additional funding ― Obama just didn’t spend it.
Tragically, as the journalist David Dayen documented in his book Chain of Title, the administration turned management of its foreclosure relief plan over to big banks, which resulted in massive fraud on consumers that the banks would later pay $25 billion to settle. (Dayen argues persuasively that even this settlement delivered little to nothing for wronged homeowners.)
Between 2006 and 2014, 9.3 million families lost their homes to foreclosure. The crisis never really ended. There were 1.1 million houses in foreclosure in 2015, according to RealtyTrac data ― lower than the 2.9 million peak in 2010, but up dramatically from the 717,522 recorded in 2006. The homeownership rate has declined steadily throughout Obama’s presidency.
Houses are the assets that matter to the middle class. When the stock market rises, it does nothing for the half of families headed by people between the ages of 32 and 61 who have no retirement plan at all. If Obama wanted to rebuild middle-class wealth, cushioning the damage to the housing market would have been a good option. Doing so would have also helped the broader economy. In 2014, economists Atif Mian and Amir Sufi published a massive study concluding that anti-foreclosure policies would have provided a tremendous, broadly shared boost to the economy by repairing the balance sheets of middle-class families who would, in turn, have been able to spend more freely on other goods.
“We all believed in 2009 what Mian and Sufi have now conclusively demonstrated — that reducing mortgage debt would spur consumer spending,” wrote Larry Summers, the former director of Obama’s National Economic Council, in a 2014 review for the Financial Times.
But the administration can’t get its story straight. Former Treasury Secretary Tim Geithner offered a contradictory account in his memoir Stress Test: “We did not believe, though we looked at this question over and over, that a much larger program focused directly on housing could have a material impact on the broader economy.”
Obama didn’t invent economic inequality. The gap between the rich and the rest of us has been widening since the 1970s ― and if Piketty is to be believed, it may be an intractable element of capitalism itself. But when presented with the opportunity to do something about it, Obama never really tried.