Only a year into his second term, President Obama is already at risk of becoming a lame duck president. With his annual State of the Union address in the rear view mirror, it is expected that Obama will focus on alleviating poverty and growing inequality. The question, however, is what the President can do with Congress in the hands of the Republican Party.
President Obama will use an executive order to raise the minimum wage for all workers on Federal contracts to above $10 dollars per hour. While this move could potentially raise the wages of a few hundred thousand workers, it will not affect the Federally mandated minimum wage that covers most workers across the United States and is currently set $7.25.
Southpoint Qualified Fund and Southpoint Qualified Offshore Fund returned 2.5% net for the first quarter, compared to the S&P 500's 6.2% return and the Russell 2000's 12.7% gain. During the first quarter, Southpoint's funds averaged 133% long and 70% short. Q1 2021 hedge fund letters, conferences and more The fund's long positions added 13% gross Read More
Beyond that executive order, however, Obama appears to have few options in pushing actual policies through through Congress.
Obama has few options to address issue
So far, Congress has proven to be too ideologically divided to act on most issues. While the President can propose policies, he lacks the authority to enact laws on his own. Congressional cooperation is required, but with the Republican Party shifting sharply to the right under the pressure from the Tea party, Obama lacks the power to push laws through Congress.
Without Congressional cooperation there appears to be little Obama can do to address the issue. So far Congress has shown little willingness to stomach another stimulus package owing to already high debt levels. Many Republicans also appear to be against raising the minimum wage, arguing that raising the costs of doing business will only send jobs overseas.
GOP offers balanced, if not muted, response
Compared to past years, the GOP turned down its criticisms a notch. Following the radicalization of the far right of the Republican Party, it appears that mainstream Republicans are now trying to tone things down a notch.
Rep. Cathy McMorris Rodgers from Washington delivered a balanced approach. While criticizing the President on numerous counts, she resisted the temptation to lambaste and drive the nail home on every issue. Rodgers focused much of her criticism on the now unpopular Affordable Care Act, even calling for its repeal. Beyond that most of her criticisms were relatively muted.
After years of Tea Party antics which have largely sullied the GOP brand, it appears that party leaders are looking to once again promote a more moderate message. And with the upcoming 2014 elections promising to be bruising, this move may prove to be the essential step necessary to maintain control of Congress, or it could deflate the considerable momentum built up by the Tea Party.
Poverty and inequality a growing issue for the United States
The theme of Obama’s State of the Union speech centered largely around the economy, and specifically on the growing inequity and shrinking middle class in the United States. Obama stressed on several occasions the need to create opportunities for all Americans.
The United States has some of the highest levels of inequality and poverty in the developed world. The United States’ Gini coefficient, which measures inequality, has ticked above .45 since the Great Recession. Following World War II, the gini coefficient generally fell below .36 but starting in the 1980s it began to gradually climb.
Inequality in-and-of itself might not be much of a problem, so long as people in general are enjoying a higher quality of living. The number of people in poverty, however, has also been slowly growing. In 2003, the official poverty rate was 13%, but has since risen to 15%. This number is also among the highest in the developed world.
Some have also argued that this number may be miscounting the number of people actually living in poverty by wide margins. The United States poverty measurement is based on three times the cost of what a person needs to buy adequate food. When the formula was created in the 1960’s, food was a large portion of the average American’s budget, but these days food costs have since shrunk, while costs for rent, health care, college, and numerous other vital goods and services have risen sharply.
Indeed, when the initial poverty formula was created, Americans spent a quarter of their budget on food. Now, food makes up only 6% of the average person’s budget, according to the Gates foundation. If this number is correct, the way the United States measures poverty could be grossly incorrect. If so, the problem could be far worse than actual numbers indicate.