President Obama might have been economical with the truth when he promised Americans they could keep their doctors when Obamacare takes effect, but he is proving a man of his word when it comes to the exercise of presidential power as he defines it. “I’ve got a pen and I’ve got a phone,” he told his cabinet, developing a theme of his State of the Union message. “We’re not just going to be waiting for legislation, or plans, or any logical idea of what will result in order to make sure we’re providing Americans the kind of help I’ve decided they need.” Liberals, or progressives as they now prefer to be called, found this activism cheering; conservatives and constitutionalists found it a chilling echo of some Latin American caudillo.
The presidential telephone so far has been deployed primarily in an effort to persuade Vladimir Putin to leave the Crimea, but a 90-minute call seems to have had little impact on an adversary who responds more to a display of power than of rhetoric. The pen, however, is proving mightier than the telephone: the president is using it to make changes in the Affordable Care Act (Obamacare) without bothering to obtain congressional approval, to tighten the regulatory noose around the neck of the coal industry, to prevent his Justice Department from enforcing a law that makes use of marijuana illegal, and now to drive wages up and profits down. For all his jacket-less, tie-less informality, Obama’s presidency is as close to an imperial one as we have had in modern memory.
Now the president is refilling his pen for an assault on what he feels is the second greatest problem facing the nation, the first being climate change. The background is important. Wall Street bonuses are up by an average of 15 percent, and average wages are “stagnant for too long,” according to Obama—median household income remains below the 2007 level when adjusted for inflation. Wages have declined sharply as a portion of national income, while profits are taking a larger share. Never mind that there are complex forces at work depressing wages of workers facing competition from low-paid Asian and Latin American workers, that the premium paid for education has risen, as has the premium for managerial skills in a globalized economy. Those complexities are best dealt with by policy pedants at cushy think tanks. Obama and the progressive wing of his party feel no need to worry about “any logical ideas of what will result” or to examine complex causes when simple, direct action on the results of these causes is at hand.
No one has ever argued that our labor markets work perfectly. At times employers have exploited desperate workers, at others trade unions’ excessive demands have brought down great companies and, lately governments. That’s why we have minimum wage laws and statutory penalties to protect against excessive work-weeks, procedures to assure a modicum of fairness in labor disputes, and lately a reconsideration of the structure of public-sector wage bargaining.
Because Obama believes that the wages produced by those regulated markets have been too low for too long, he has decided to engineer a rise in the minimum wage and in the number of workers eligible for time-and-a-half payment for time spent on the job beyond forty per week. He undoubtedly has been told that a rise in the wage minimum will push up other wages as employers find it necessary to restore wage differentials. And that reducing inequality will stimulate economic growth. Ross Eisenbrey, vice president of the liberal Economic Policy Institute put it this way, “Move more money from employers into employee pockets. That is good for the economy.” A recent study by the International Monetary Fund also finds a relationship between greater equality of income distribution to more rapid wealth.
The first step was a directive to all government departments to contract only with companies that pay a minimum wage of $10.10 per hour, rather than the current statutory minimum of $7.25. Because that order can only affect future contracts, it has minimal effect just now. But as new contracts phase in, the cost of government will rise and taxpayers will get the bill, with no overt increase in tax rates needed to extract the additional funds from them.
The president’s next step was a campaign-style tour, the sort in which he engages in times of stress, in which he argued that no working person should have to live in poverty, a proposition with which it is difficult to quarrel. The president then summoned CEOs of several large corporations to the White House to persuade them to raise their minimum wages. Since many of the companies represented are enmeshed in the president’s wider regulatory net, “persuade” might be the wrong word, and “coerce” a better one. Having gone as far down this road as his executive authority will take him, Obama is asking Congress to pass legislation raising the minimum to his $10.10 level. (“It’s easy to remember, $10.10,” Obama said in his State of the Union address.) The nonpartisan Congressional Budget Office says that passage might result in a loss of 500,000 jobs but also might improve incomes of over 16 million households.
Last week he returned to use of the presidential pen, this time to expand the reach of a 1938 law that requires employers to pay certain classes of workers time-and-a-half for any hours worked beyond forty in a given week. In 1975 President Gerald Ford’s Labor Department ruled that workers earning less than $455 a week were covered by the time-and-a-half rule. Obama wants the Labor Department to review that level, which the Obama-favoring New York Times says must be raised to $1,000 per week merely to keep pace with post-1975 inflation. The president also wants “my” Labor Department, as he refers to it, to narrow the number of exempt administrators, supervisors or managers. Because the wheels of the rule-writing bureaucracy grind slowly, it is Obama’s successor who will decide whether these new rules ever go into effect. Diana Furchtgott-Roth, formerly chief economist at the Labor Department and now a scholar at the Manhattan Institute, tells me that if they do, workers will forfeit a current benefit—the informal arrangements employers often make with them to compensate for overtime work with time off, a compensation method often preferred by young workers and hard-pressed working mothers. But she guesses that the rule-making process will outlive the president’s term of office.
Economists disagree about the effect of these exercises in presidential power. But there is little question about two things. The fact that the benefits of this recovery have been concentrated in the already-comfortable is inviting and providing justification for tinkering with the market system to over-ride its distributive consequences. The second is that Obama’s pen-led populism, a result of political calculation and sincere belief in “fairness” as he defines it, has done nothing to shore up his Obamacare-battered ratings: only four-in-ten Americans approve of the way he is doing his job.