State of Our Union: How Obama Should Tackle Income Inequality

Tonight, President Obama will deliver his State of the Union address, and people around the nation and the world are eagerly waiting to hear what he will prioritize. One topic that the White House has already said he’ll touch upon is income inequality. This is unsurprising given his long personal history working on the issue prior to entering politics, and the unprecedented national and international soul-searching on the gaps between the wealthy, the middle class and the poor.

As a citizen, and the leader of EARN, a nonprofit that sparks new cycles of prosperity for low-income workers, I have high hopes that the president will deliver a thoughtful, evidence-based appeal for how the nation can remedy the ills of income inequality.

For the record, the New York Times reports that Obama will touch upon increasing the minimum wage, increased infrastructure investment and expanding pre-K educational opportunities for American children. I believe these are all important steps in making the American economy more robust and fair – and typically “packaged” within the limitations of a State of the Union address. But clearly, much more will be needed to solve America’s opportunity problems (for more on these problems, I encourage you to have a look at what I have written on the issue here and what the Pew Charitable Trust finds through their Economic Mobility Project.).

Of course, once the puffery and majesty of the State of the Union ends, the nation will need real leadership from the president and many others, on both sides of the aisle, to solve the income inequality problem. The Wall Street Journal just published dueling op-eds by Democratic New Jersey Senator Cory Booker and former GOP VP nominee and Republic Congressman Paul Ryan of Wisconsin. Both make some excellent arguments that I believe can shape the debate constructively. Booker calls for us to stop the partisan bickering and to focus on data to drive decisions – a requirement for us to be successful, in my opinion. He also calls us out for having no real investment strategy as a nation, and rightly focuses on the many successes of the much maligned War on Poverty.

In his answer to Booker, Ryan rightly observes that poverty “isn’t just a form of deprivation; it’s a form of isolation.” He (prudently, in my opinion) calls for anti-poverty programs to give more flexibility and control to the people and communities receiving government funds. Despite the small breaths of fresh air provided in their pieces, both Ryan and Booker predictably settle into partisan, familiar positions (GOP: “Cut the fat and spend less!” Dems: “Spend more and take it on faith that it will work!”)

If I had my druthers, President Obama and leaders like Booker and Ryan would pause and consider a higher-level framework to make their policy ideas more strategic and effective, and I suggest the start of this framework in the five ideas below. This (admittedly, incomplete) list is informed by what our research has found in helping thousands of low –income workers spark prosperity at EARN, and by research I’ve seen from thinkers across the political spectrum. This list is also informed by my personal experiences - as someone who grew up poor and experienced mobility thanks to the role of public policy:

1) Embrace the powerful, proven role of private, public and social sector partnerships as a guiding methodology to broaden American prosperity. The US has the largest, most dynamic economy in the world for many reasons. Chief among them is the way we’ve created social and economic contracts between citizens, government and markets. This has led to enormous growth of American opportunity, prosperity and wealth. Many of these partnerships and policies are things we take for granted – like the Homestead Act, believed by some economists to be responsible for 25% of American wealth today. The creation of the 30 year mortgage and the GI Bill are two more examples of prudent investments and partnerships between citizens, government and markets. It is time to stop debating whether government should have a role in generating American prosperity. Instead, leaders and innovators need to focus on optimizing the way we form our social and economic contracts – to protect consumers and set standards through the right kind of regulation, and to invest smartly in people and infrastructure to grow the economy. The current boom in housing and equity markets are examples of the upside of getting this formula right.

2) Stop short-changing young people! Politics has created a wild imbalance in how we invest generationally. Since kids can’t vote, and young adults tend not to, boomers and seniors have had a heyday in ensuring that programs for older Americans get huge amounts of government dollars. I believe deeply in Social Security, Medicare and Medicaid, and think they are among our nation’s most important investments. But we must find creative ways to re-apportion. Politics has thrown our funding formulas out of whack, and the data makes this clear. While we’ve reduced the poverty rate for seniors from 35% in 1960 to 9% today, a full 20% of American children live below the federal poverty rate.

3) Shift the focus away from “fighting wars” and toward “building prosperity.” These are two very different points of departure that lead us down very different paths when it comes to formulating policies and defining success. Too often we declare success when we’ve gotten people just over the poverty line. That’s an important milestone, no doubt – but we’ll govern and invest more effectively if our ultimate goal is to move people toward real prosperity – where their household balance sheets are stronger, and they have reason to believe in their ability and their kids’ ability to achieve in the economy, across generations. This approach leads us toward the growth of the American middle class – and away from the Pyrrhic victory of having millions of Americans living one increment above the poverty line.

4) We need to change the way we implement our big ideas. Even if Washington was blessed with an unprecedented outbreak of bi-partisan lovey dovey, resulting in a renaissance of big ideas that Congress and President Obama made into law, it might all be for naught if these ideas are implemented poorly. Too often, policy making ignores the role of implementation to get bills passed, or policy ignores other structures that stand in the way of policy success. The crash and burn debut of healthcare.gov is the most obvious example. But the Homestead Act, which I mentioned above, provides a more instructive and alarming example. As powerful as it was, it only benefited White men, by design – and is also believed to have played a major role in the drastic racial and gender wealth gaps that exist in the US today. In addition to considering forces like structural racism, we must shift to implement big ideas in a way that allows us to fail forward and test key assumptions before making the sorts of massive investments that come with large public private partnerships.I wrote about the need for nonprofits to do this here - it's also true of government.

5) We need to make it easier to vote. I believe in the wisdom of the crowd and believe that if voter participation rates were closer to 80% than 35%, people would vote their economic self-interests into being, with positive results for the nation. This is all the more important as American demographics shift. We will soon be a minority-majority nation, and the voice of the public must be allowed to participate in our democracy – and to use our democracy to help shape future prosperity for all Americans.

I was fortunate to recently participate in an online Reinventors Roundtable hosted by the great Angela Glover Blackwell, CEO of PolicyLink, that delved into how we can create broad prosperity for America – and our conversation touched upon many of these issues. Have a look at the trailer to see if you’d like to watch the whole conversation:

A few years back, I also gave a Ted Talk about how to unleash American possibility, touching upon many of the themes discussed here:

Despite the challenges, I do think the national focus on income inequality provides a real, bona fide opportunity to strengthen the economy and the social fabric of the US. I’ve had my say on the issue above. Cory Booker and Paul Ryan spell out their plans on the editorial pages of the Wall Street Journal. The president will share his vision on Tuesday.

What would you have us do to make our economy strong, dynamic and fair for all Americans? Please share your ideas.

About Ben Mangan: Ben is President, CEO and Co-founder of EARN, a lecturer at UC Berkeley's Haas School of Business, and a blogger for the Huffington Post.

Follow Ben at LinkedIn and Twitter for provocative, truth telling about leadership, social enterprise, the social sector and doing good in the world.

Photo: Official White House Photo by Pete Souza.