In remarks that underscored an emerging concern about the direction of the economy, President Obama told business leaders Wednesday that, despite record corporate profits, stagnant wage growth is creating anxiety among workers.
Appearing at a meeting of the Business Roundtable in Washington, D.C., the president also urged Congress to move forward on tax reform, immigration, and infrastructure spending, and expressed confidence that Washington could avoid yet another damaging standoff over funding the federal government.
But it was his comments on wages—which, though mild, offered a clear challenge to his audience of corporate leaders—that appeared to represent his main message.
“Although corporate profits are at their highest levels in 60 years, and the stock market is up, wages and income still haven’t gone up significantly and haven’t picked up the way they did in earlier generations,” Obama said. “That’s part of what’s causing disquiet in the general public, even though the aggregate numbers look good.”
Obama added that the shrinking of wages and income as a share of overall GDP had caused an “undertow” of pessimism, despite the improving economy, and said giving workers a raise would benefit corporations, too.
“When wages are good, and consumers feel like they’ve got money in their pockets, that ends up being good for business not bad for business,” he said.
Obama appeared relaxed and at ease, but his comments touched on a major emerging policy and political challenge, especially for his party, in an age of widening inequality: how to jump-start wage growth and ensure that economic gains are broadly shared. The issue has been the subject of heated public debate in the weeks since Republicans took full control of Congress propelled in part by voters’ economic anxieties. Several states and cities have raised the minimum wage lately, but a Democratic effort in Congress to do so nationally has failed to gain traction among the GOP.
On immigration, Obama said he remains “hopeful” about the prospects of passing comprehensive reform through Congress, despite Republican claims that his executive order last month, which will ensure around 5 million undocumented immigrants can’t be deported, had “poisoned the well” with Congress.
But he said it likely wouldn’t happen soon. “I suspect that tempers need to cool a little bit in the wake of my executive action,” Obama said, predicting that Republicans would first try to undo his order, before ultimately coming to the table to work on a comprehensive plan.
Still, he said the current system must be overhauled. “I am not going to preside over a system in which we know these folks are in the kitchens of most restaurants in the country, are cleaning up most of the hotels that all of you stay in,” Obama said, “and we tolerate it because it’s good for us economically to have cheap labor and services, but we never give them a path to be a citizen of this country in a more full and fair way.”
He was more bullish on the immediate prospects for tax reform, saying many Republicans agree on the basic principle of cutting corporate rates while closing loopholes. But he said the insistence by some Congressional Republicans, including Rep. Paul Ryan, the House Budget chair, that cuts to the individual rate also must be part of the package could complicate things.
“We’re not willing to structure a tax deal in which either it blows up the deficit – we can’t pay for the revenue that’s lost – or alternatively that you get tax shifting from business to middle class and working families,” Obama said. “My view is, start with the corporate side, [but] that may not be how the Republicans view the situation. And that could end up being a hang up.”
Obama said he’d like to begin a “process” on tax reform soon, predicting that it could take six to nine months to be completed.
He also suggested that prospects are good for avoiding another government shutdown or the threat of a debt default, which in recent years have hurt the economy and dented confidence in the U.S.
“I’ve been encouraged by recent statements by Speaker Boehner and Leader McConnell about their interest in preventing another government shutdown, and I take them at their word,” Obama said. “No one benefits by the government shutting down, and it is entirely unacceptable for us not to maintain the full faith and credit of the United States Government. And we just cannot afford to engage in that kind of brinksmanship that we saw over the last few years.”
In response to a question about burdensome federal regulations, Obama acknowledged that Republicans were “25% right” on the issue. He invited business leaders to tell him which rules were problematic, and promised his administration would consider whether there are more efficient ways of achieving the same goal.
“I suspect there may be four or five regulations out of 25 where you can persuade us, you know this ought to be eliminated,” Obama said. “And we will be open to doing that.”