Working women
The portion of American women over 20 with jobs climbed to 58.7% in 1999 from 41% in 1970 and stood at 55% last month, according to the Bureau of Labor Statistics. Home mortgage debt surged to $10.6 trillion in the first quarter of 2008, from $4.5 trillion in the same period of 2000, and stood at $9.5 trillion in the third quarter of last year, according to the Federal Reserve.
Competition from lower-wage workers overseas, technological advances that allow factories and offices to produce more with less labor and declining union membership have all combined to squeeze the pay of the moderately skilled workers who are the backbone of the middle class.
Obama made the economic security of Americans at the middle of the income ladder the central theme of his re-election campaign. At a news conference after his re-election, he said his single mandate was "to help middle-class families and families that have been working hard to try to get into the middle class."
Blaming Bush
The message echoed a theme of his 2008 presidential race, during which he assailed Bush for wage losses suffered by the middle class. Candidate Obama cited Census figures showing the median income of working-age households -- those headed by someone younger than 65 -- had dropped more than $2,000 after inflation during the first seven years of Bush's administration, before the recession began.
The worst economic slump since the 1930s and a recovery that has generated relatively few of the jobs that once supported the middle class have further tightened the financial pressure on many Americans.
Obama made up for part of the declining earning power by lowering the federal tax burden on middle-income families, with the typical family averaging a tax cut of slightly under $1,000 each year of his first term, according to Roberton Williams, a fellow at the Tax Policy Center in Washington. The bulk of those tax breaks have now expired, Williams said.
Deficit spending
During the end-of-year political battle between the White House and congressional Republicans, the two sides extended income-tax rate cuts passed under Bush for couples with income below $450,000 while raising rates on income above that.
Republicans blame Obama's response to the weak economy, including a 2009 stimulus plan estimated at $833 billion, for depressing growth.
Douglas Holtz-Eakin, a former economist on the Bush White House staff, said deficit spending under Obama will continue to raise investors’ fears of future tax increases if government spending isn't cut..
"Bad growth kills the middle class," said Holtz-Eakin, now president of the American Action Forum. "They really need to get the debt trajectory trending down, so the private sector can go about its business."
Greenstone, a former chief staff economist for Obama's Council of Economic Advisers, said another measure by the president, his health care law that will take full effect in 2014, will "have a huge impact on economic security." Its insurance subsidies for lower-income families and access to coverage with no exclusion for pre-existing conditions will reduce the risk of financial ruin from health problems, he said.
Sharper focus
The president's second-term economic strategy will come into sharper focus in the next several months, said William Galston, a former domestic policy adviser to Clinton. Obama will signal his priorities at events such as his Jan. 21 inauguration speech and his State of the Union Address on Feb. 12 and then begin to demonstrate them in the fiscal talks with Republicans.
Amy Brundage, a White House spokeswoman, said Obama "will continue to fight to build on the economic progress we have made by investing in the things that spur growth" and protect the middle class.
The White House has let allies know that a deal on the United State's long-term fiscal path and changes in immigration law to create a pathway to citizenship for undocumented aliens are priorities.
Simplifying taxes
Obama has voiced support for a range of other goals: a simplified tax system with lower rates and fewer breaks for the wealthy; raising the number of college graduates; a major infrastructure program; an energy policy addressing climate change; expanded promotion of exports; and incentives favoring manufacturing.
"I know where their hearts are: They want to do all these things," Galston said. Yet, he added, "There's the real agenda and the notional, aspirational agenda."
Second-term presidents typically have a window of 12-18 months to win passage of legislation before the midterm elections and the positioning for the next presidential election create political obstacles. Often, their successes have come from forging compromises.
Clinton negotiated a balanced-budget deal with the Republicans in 1997 that put the nation on a path to surpluses. That agreement included Democratic goals such as middle-class tax relief through a $500 per child credit, college tax credits and a children's health-insurance plan.
President Ronald Reagan worked with Democratic congressional leaders to win passage of a 1986 tax law that lowered rates while reducing deductions and other breaks.
President Dwight Eisenhower negotiated second-term deals with Democratic congressional leaders, including a 1957 civil rights bill, the first such law since the Reconstruction era. The 1958 National Defense Education Act, passed after the Soviet Union launched the Sputnik satellite, expanded federal aid to schools at all levels.
Bush's second term offers a more cautionary note: It foundered as his efforts to revamp immigration laws and move Social Security to privately directed accounts ran into congressional opposition.
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