Obama: Income inequality threatens American Dream

David Jackson | USA TODAY

WASHINGTON — President Obama sought to revive the issue of growing income equality on Wednesday, saying it restricts economic mobility and threatens to shrink the middle class.

"I believe this is the defining challenge of our time," Obama said in a speech at an event hosted by the Center for American Progress, a pro-Obama think tank. "It drives everything I do in this office."

The growing gap between rich and poor can be closed by actions ranging from an increase in the minimum wage to better education to following through on his health care plan, Obama said.

Basically outlining an agenda for the remaining three years of his presidency — as well as next year's congressional elections — Obama repeated calls for legislation that would strengthen unions, reduce the pay gap between men and women, and make college more affordable.

Obama also again proposed creation of government-assisted "Promise Zones" in urban and rural areas that are struggling.

While Democratic-Republican and liberal-conservative disputes about the economy won't be resolved any time soon, Obama said that "it is important that we have a serious debate about the issues."

Obama gave the speech at a time when his job approval ratings have fallen to around 40%, largely because of problems with the rollout of his health care plan and general anxiety about the direction of the economy.

The president and aides designed the income inequality speech as something of a follow-up to one he delivered two years ago in Osawatomie, Kansas — remarks that previewed his 2012 re-election campaign.

Brendan Buck, a spokesman for House Speaker John Boehner, R-Ohio, noted that Obama has been president for nearly five years and said his health care plan and new business regulations have kept the economy down.

"The president's economic policies promote government reliance rather than economic mobility," Buck said. "Rather than tackling income inequality by lifting people up, he's been fixated on taxing some down."

The 2014 congressional elections are 11 months away.

During his speech, Obama said that since 1979 — the year he graduated from high school — the size of the American economy has doubled, but the top 10% of people have half the nation's income. Obama said the average CEO now makes 273 times the income of the average worker.

Stagnant incomes for the middle class hurt the ability of Americans to move to better jobs, Obama said. It also breaks down social cohesion as more Americans come to think that the system is rigged against them.

"The combined trends of increased inequality and decreasing mobility pose a fundamental threat to the American Dream, our way of life, and what we stand for around the globe," Obama said.

The 49-minute speech gave the president the opportunity to mount a defense of government activism, ranging from Abraham Lincoln's championing of land grant colleges to the development of Social Security and Medicare.

The modern income gap began growing dramatically in the late 1970s because of several factors, Obama said. Technology and globalization allowed employers to reduce manufacturing jobs, or move them offshore.

Politically, Obama cited "a trickle-down ideology" that reduced the power of unions, and led to tax cuts "for the wealthiest, while investments in things that make us all richer, like schools and infrastructure, were allowed to wither."

Obama also disputed the notion that income inequality and related problems affect mostly African Americans and Hispanics, saying these issues cut across socioeconomic lines. "The opportunity gap in America is now as much about class as it is about race," Obama said, "and that gap is growing."

Reducing inequality should help all Americans, Obama said. "We need to dispel the myth that the goals of growing the economy and reducing inequality are necessarily in conflict."