In what he framed as the “defining project of our generation,” President Barack Obama vowed last night in his annual State of the Union address to aggressively address economic inequality in America, with or without support from Congress. Obama re-proposed a vast array of recycled ideas sure to face stiff resistance from Republicans: a minimum wage increase, universal pre-K, a twelfth unemployment benefit extension, infrastructure spending — and the list goes on.
But instead of focusing on areas designed only to create wedge issues for the 2014 election, the President could have focused on proposals with bipartisan support that effectively address the issue of economic inequality. The President could start with these three ideas:
1) School Choice Programs
The clearest way to increase economic mobility is by giving impoverished children the chance to flee their failing schools and attend successful ones. Two Republican Senators intend to introduce school choice legislation this week which would convert a portion of current federal education funding into block grants for states to support school choice initiatives.
One model would be Washington, D.C.’s highly successful federal voucher program which granted families up to $7,500 to attend a private school of their choice. The Department of Education found that program participants’ odds of graduating high school increased by 12 percentage points. Despite opposition from the Obama administration, the voucher program enjoyed bipartisan support on the D.C. City Council and in Congress.
As D.C. vouchers demonstrated, the school choice alternative has the potential to increase education outcomes for poorer Americans while at the same time reducing education costs.
2) Reduce Corporate Taxes
Obama for years has mentioned closing unspecified tax loopholes and ending a nebulous tax incentive for corporations to ship jobs overseas, and last night’s speech was no different. But the surest way to instantly spur corporate investment in America is to flat-out reduce the corporate tax rate, currently the highest in the developed world.
To quote the President: “The best measure of opportunity is access to a good job.”
A 2010 study found that a reduction of the corporate rate from 35 percent to 25 percent would grow the number of jobs in the U.S. an average of 581,000 annually from 2011 to 2020 and increase a typical family of four’s after-tax income by $2,484 per year.
Even if inconsistent with the President’s occasional anti-corporation rhetoric, a joint White House and Treasury Department report released last year actually called for a 7 percentage point reduction of the rate. As long as Obama doesn’t again condition such a reduction on the acceptance of dramatic new spending programs, Republicans could easily support the reform legislation.
3) End the War on Fossil Fuels
If the President is looking for a bipartisan option that would help increase the disposable income of poor and working class Americans, he can start with cutting the Environmental Protection Agency’s backdoor energy tax.
Ever since Democratic Senators helped kill the President’s cap and trade bill in 2009, a proposal that Obama admitted would make electricity rates “necessarily skyrocket,” the EPA has unilaterally limited carbon emissions through regulatory rulemaking. Several Congressional Democrats, particularly from coal-producing states, have denounced the EPA’s carbon rules.
In the United States, the EPA’s climate change regulations are expected to drive up energy bills for both families and businesses alike. State governments with renewable-electricity mandates already have residential electricity rates an average of 31.9 percent higher than states without mandates.
Similar clean energy efforts in Germany and the United Kingdom have resulted in the coining of a new phrase, “energy poverty,” which describes the growing trend of working-class people finding that they are unable to cope with rapidly rising electricity prices.
The contradiction between promoting ‘energy poverty’-inducing policies in a speech focusing on growing economic inequality seems lost on the President. As does the contradiction between fighting income inequality while ignoring the real, bipartisan solutions that could actually get passed in Congress.
