The president tried changing the subject this week from Obamacare to income inequality. It's no surprise. Despite White House claims that Healthcare.gov is now working as intended, reports of major failures -- from inaccurate enrollment data being sent to insurers to dangerously inadequate security -- continue. And the president's critics include those on the left, as well as the right, which is why President Obama has returned to campaign mode.
Obama is a smart man, but what he doesn't know about economics could fill a library. He has never worked outside of the public or not-for-profit sectors. From the "stimulus package" to government-subsidized alternative energy to Obamacare, his solution to every problem is more government intervention. So when he laments growing income inequality in the United States, he proposes more government action to cure it.
Of course, one way to close the gap between rich and poor is to make the rich poorer -- or at least try to take some of the affluent population's wealth and redistribute it to the less well off. Raising taxes and increasing government spending on the poor was the president's first-term solution. But lo and behold, even after income taxes went up on the wealthiest Americans and more government spending was directed toward social programs, the poor are still poor, and there are more of them now than when Obama took office in 2009. And the gap between rich and poor is greater now, too.
Well, if the president can't tax and spend his way out of growing income inequality, maybe he can force employers to pay workers more. This week, Obama told an audience of true believers from the left-leaning Center for American Progress that he supports efforts to raise the minimum wage to a so-called living wage, applauding moves in Washington, D.C., to raise the minimum to $11.50 an hour by 2016.
"We all know the arguments that have been used against a higher minimum wage," the president said. "Some say it actually hurts low-wage workers -- businesses will be less likely to hire them. But there's no solid evidence that a higher minimum wage costs jobs," he assured his listeners.
Even The Washington Post had to give the president two Pinocchios for that fib. As the Post put it, he may have been making a judgment call, but "he appears to be dismissing the research and findings of a significant part of the economic academy."
Indeed, the debate is not so much about whether raising the minimum wage reduces jobs, but by how much. If the increases are small and essentially below the market in a geographic area, so too may be the effects. But raising wages by $3.25 an hour in a place like D.C. (which already has a minimum wage $1 higher than the federal minimum) will have a big effect. Employers looking to expand could set up shop across the Potomac in Virginia and pay workers $7.25 an hour. Jobs are likely to migrate or simply dry up.
If raising the minimum wage is the right solution to closing the income gap, why not raise it to $22 an hour, which was the mean hourly wage in 2012? Then, like Lake Wobegon, "where all the children are above average," no worker would be paid less than the national average.
Income inequality is growing because of complex changes in our society. Well-educated Americans continue to do well. But even education is not the automatic panacea we once believed. Quality as well as quantity of school matters, as does the subject area people choose to study.
Family structure also matters. Yet the president barely touched on the problem in his economic address, offering only that "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." What he should have said is that when 40 percent of American children are born to single mothers, the consequences for society are truly alarming.
Uncle Sam can't replace fathers, not even by providing health care and food stamps and other economic benefits. If Obama wants to understand why it is that there is a growing gap between the haves and the have-nots in America, he should look to what's happened to the American family.