Obama’s Phony Populism

By Dick Morris on December 11, 2013

Published on TheHill.com on December 10, 2013

As he has done before, whenever President Obama is in political trouble, he seeks to rally his base with a particular brand of populism designed to appeal to those who have an impaired memory of his previous diatribes.

But as he rails against income inequality, seeks a raise in the minimum wage and tries to lower the cost of college, we should all remember the policies of this administration that are causing income inequality.

Since Obama took office, 85 percent of all income growth has been concentrated in the top 1 percent of the population. (Under George W. Bush it was 65 percent, and under Bill Clinton it was 45 percent).

The bottom 99 percent have stagnated during the Obama years, but the rich have gotten immensely richer.

This trend is a direct result of his quantitative easing program, in which the Federal Reserve purchases $85 billion of bonds each month, giving banks a windfall of cash to use as they wish.

In theory, they are supposed to lend the money out. However, the banks have asked the Fed to pay them 3 percent interest on funds they keep on deposit. So, without doing anything, banks get free money from the Fed vaults. (Why would a bank lend money to a risky borrower at 6 percent when it can get 3 percent from the Feds?)

This monthly infusion permits bankers to buy back stocks to add them to their stock option compensation, distribute Christmas bonuses or engage in risky trading in derivatives or other speculative investments. Despite having paid nothing to get the money, they have broad latitude in investing it.

Obama’s zero interest policy has blocked savings and limited investment, which is the only way to spur productivity. If productivity doesn’t grow, incomes don’t either, except through inflation.

This policy also makes a mockery of the elderly who have been thrifty and saved during their entire working lives in the hopes that their nest egg would provide them modest funds on which to retire. Not with zero percent interest, it won’t, unless they invest in risky stocks, where it could all be wiped out.

Obama’s refusal to crack down on Chinese currency manipulation also stagnates incomes in this country. Despite China’s undervalued currency leading to the largest trade surplus in five years, the Obama administration is refusing to designate China as a currency manipulator, or to bring actions against the policy before the World Trade Organization (WTO). It is worth noting that China had no appreciable surplus with the U.S. until it was admitted to the WTO in the first place.

Finally, ObamaCare has blighted full-time employment in the U.S. Since January, 152,000 fewer people are working full time, and 400,000 are part-time workers, as employers juggle their payrolls to keep the number of full-time workers under the threshold of 50 that would trigger mandatory compliance under the Affordable Care Act. Anxious to avoid the requirement that they provide health insurance or face a fine of $2,000 per worker, employers are obliterating the 40-hour week, according to no less a source than the AFL-CIO.

Obama’s populist rhetoric ignores a key fact: While the top fifth and the bottom fifth of the country at any moment have a vast and widening disparity in income, there is great individual upward — and downward — mobility. A 20-year study by Pew showed that 60 percent of the bottom fifth moved up over two decades, with 4 percent making it into the top fifth. It also showed that 60 percent of the top fifth fell out over the period.

The important downward mobility shows in Obama’s polling, which triggers his divisive rhetoric in the first place.

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