Friday, February 15, 2013

The Obama plan

In his 'State of the Union' address,  B.Obama outlined a 'kennedian 'vision for the United States. The main thrust is economic recovery coupled with some equity measures for the middle class. Austerity or budget cuts are not seen as an economic policy in itself but as a marginal part of a wider strategy aiming to promote a more sustainable development based on clean energy and other environmental measures.

There are two new ideas in his speech. The first one is to increase the minimum wage from 7 to 9 dollars per hour. The significance of this measure is that economic recovery has to be supported by wage increases rather than reducing purchasing power through internal devaluation measures. As he said in his address: "Let’s declare that in the wealthiest nation on Earth, no one who works full time should have to live in poverty". Persistent high levels of inequality and concern for declining wages of working Americans have strongly influenced that decision. In fact, recent research found that despite the return of the US economy to growth, incomes remain flat but not for the 1% rich. 

The second idea is to " make high quality pre-school available to every child in America" with a view to offer better access to jobs while making savings for the entire society. The assumption is that "every dollar we invest in high quality early education can save more than seven dollars later on - by boosting graduation rates, reducing teen pregnancy, even reducing violent crime".

The agenda is not for 'big government' but rather 'smart government' based on quality and effectiveness of public intervention. But it contrasts strongly with austerity policies which are being pursued in Europe with severe consequences on living conditions of the majority of people.

Europe should take some inspiration of the Obama plan, even if it may appear modest in relation to the depth of the crisis. It has to abandon its destructive budgetary policies and launch a vigorous strategy for jobs and growth at the European level. No country will get out of the crisis alone with current fiscal policies.

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