Look to what's worked before to spur sluggish economy

WASHINGTON — President Obama and the Democrats desperately need a political issue to distract struggling, jobless Americans from their economic misery. And they think “income inequality” and raising the minimum wage is the answer to their problems.

But the yawning income gap between the wealthy and the middle class is not the cause of our lingering economic troubles. It is a symptom of the president’s failed economic policies. Raising the minimum wage to $10 an hour won’t help, either. It will only make things worse as employers find ways to cut their payroll costs.

What the United States needs is stronger economic growth, in the 5 percent range, that leads to job-creating capital investment. But these terms are not in Obama’s vocabulary, let alone in his policies. More on this in a moment.

Battered by a so-so economy, where 11 million people are unemployed, and a botched health care plan, the president is said to be retooling his class warfare rhetoric to pump up his disappointed and dispirited political base.

The issue of “economic fairness” worked for him in the 2012 election, and Obama and Democratic leaders think it can work for them again in this year’s midterm elections.

It can’t and it won’t, because this time around the polls show a growing number of voters aren’t buying his class warfare demagoguery any longer. Take a look at his declining job scores and you’ll see why.

Throughout 2013, the Gallup Poll’s surveys showed a steady decline in his job-approval numbers — falling from 52 percent in January to 41 percent in December.

But a closer look at the numbers shows that most of his shrinking job-approval score was due to a 14 point decline among independent voters and, most notably, a 15 point loss among Democrats.

“The dip among Democrats explains why Obama has of late focused on economic inequality,” writes Washington Post political analyst Chris Cillizza. “Those moves are aimed at rallying the party’s base and, with it, Obama’s approval numbers.”

That seems unlikely at this juncture. At this same point in Ronald Reagan and Bill Clinton’s second terms, Reagan had a 62 percent approval rate and Clinton’s score was at 58 percent. Both presided over very strong economies.

But Obama remains a prisoner of his widely unpopular health care law, and it’ll become more unpopular as health care premiums continue to rise and its insurance mandate on small businesses is soon reimposed.

With only one exception, public support for Obamacare has ranged between the low 40s and high 30s since the summer of 2010.

“It’s probably fair to say that as goes health care, so goes the Obama presidency for next year,” Democratic pollster Fred Yang told The Wall Street Journal last week.

The Democrats’ political troubles are also worsening because Obama’s economy remains mediocre six years after he came into office, saying he would fix it by throwing $800 billion at the problem. That didn’t work, either.

You don’t hear much about the nation’s unemployment rate now, except once a month when the Department of Labor issues its “seasonally adjusted” numbers. The news media tend to overlook the painful reality behind the cold, hard numbers that are a daily survival nightmare in much of the country.

Consider this all-too-common story in Hagerstown, Md., where the Shenandoah Family Farms had three dozen or so job openings recently, but received 1,600 applicants.

A year ago, Neil Irwin, the Post’s chief economic analyst, wrote a New Year’s article that asked, “Will this be the year that the economy finally breaks out of its pattern of sluggish growth that has held since the recession ended in 2009?”

His answer last week “is a resounding no. On jobs, for example, the nation added an average of 183,000 a month in 2012 — and 189,000 a month through the first 11 months of 2013.”

The economy grew a modest 2.8 percent in 2012 and averaged a more modest 2.6 percent annual growth rate in the first three quarters last year, he said.

“There is no dispute: In terms of overall growth rates, 2013 was a more-of-the-same kind of year,” he concluded.

If that is what’s in store for Americans this year, then Obama’s got his work cut out for him if he is to prevent a Republican takeover of the Senate and a stronger hold of the House.

Sadly, he and his advisers are treating this as a political problem, when it’s an economic one that he’s incapable of dealing with.

In Congress this week, the focus is on legislation that would provide funds for extended unemployment benefits, when the debate should be about growing the economy to produce jobs and higher incomes.

We know what’s worked in the past — cutting taxes on capital investment, on businesses that have the second-highest tax rate in the industrial world, and on income.

Right now, the government is taxing every nook and cranny of our economy, and Obama wants to raise taxes even higher so he can spend more.

In his second term, after carrying 49 states by ending a deep recession in two years, President Reagan signed a bipartisan bill to cleanse the tax code of corporate welfare and other loopholes. He used the increased tax revenue to lower income tax rates to further boost economic growth.

Notably, the tax reforms were actively supported by prominent Democratic leaders such as Rep. Richard Gephardt and Sen. Bill Bradley, who saw lower tax rates as the key to stronger business expansion and job growth.

In 1997, Bill Clinton signed a GOP bill to cut the capital gains tax rate that Democrats said would swell the deficit. In fact, capital gains tax revenues nearly doubled, venture capital investment quintupled and the economy soared.

Instead of playing midterm election politics, as Obama is doing, we need to move the debate toward reforms like these that will unlock capital investment, spur business growth, create new jobs and boost incomes.

This isn’t rocket science. It’s doing what has succeeded in the past and can work again for all Americans.