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I’ve written that Rep Paul Ryan did the world a favor by not trying to hide the ball with his budget — now adopted by House Republicans and endorsed by Gov. Romney. Their vision for America is clear, a vision that we at CBPP have been elaborating through a set of publications in recent days (see here, here, here, and here).

President Obama made a similar point Tuesday in a speech here in DC:

“I can’t remember a time when the choice between two competing visions of our future has been so unambiguously clear.”

So what’s the best way to most succinctly describe these visions? At On The Economy, I’ve tried to do so by examining the role of government. We should do our best to understand what the private market does best and what it does least well. The latter should be considered as a role for government.

The president made a similar point citing another president, and a Republican at that. Abraham Lincoln believed that “through government, we should do together what we cannot do as well for ourselves.”

This is, of course, an ancient argument, dating back to Hamilton and Jefferson, but it is crystallized in the House budget in a way that one might view as the logical realization of the 2010 midterms, where a bunch of members were sent to DC to vastly shrink the role of government.

I’ll speak to that role in a minute, but there’s another dimension to this — it’s not simply a debate on what “we cannot do as well for ourselves.” It’s also about further enriching the wealthiest households. The Ryan budget solves the problem that the poor have too much and the rich have too little… that is, if you think that’s the problem.

That aside, here’s one economist’s list of the functions better accomplished at least in part by government than wholly left to markets. I tried to keep this list quite spare, listing only those functions agreed upon by most folks who think about this pragmatically, as opposed to ideologically:

-Social insurance for retirees: Health and income security for those past their working years cannot efficiently and universally be offered at affordable rates and are therefore at least partially provided by governments in every advanced economy.

-Public infrastructure: Private commerce depends on the provision of public goods including roads, bridges, rail to move goods and people. Households and businesses depend on public infrastructure to accommodate the provision of safe water, energy, communications, air travel — much of which is privately provided but could not exist without pubic coordination and support. (more…)

There’s just something about manufacturing. Ask Rosie the Riveter. Ask the computer geeks and artists across America who create “Hacker Space” workshops to help each other invent and fabricate to their imaginations’ content.

Yeah, it’s cool to make stuff. The “maker,” whether an inventor or engineer or welder gets a thrill out of performing work that results in visible, viable products.  Manufacturing also gives the “makers” the feeling of empowerment that can be seen all over Rosie the Riveter’s face.

Manufacturing is powerful. And power is coveted. That’s why mother America always loved manufacturing most. Since the early days of this country, visionary political leaders like Alexander Hamilton and Abraham Lincoln nurtured manufacturing. They knew manufacturing builds a country’s economic strength. And the capacity to manufacture secures a nation’s military might. So President Obama’s focus on reviving American manufacturing, including his proposal last week to give American manufacturers a small tax break, is wise, even if the banking brother and service sector sister feel aggrieved as a result.

President Obama said in his State of the Union address that his goal was to forge an economy built to last. That, he said, would be based on American manufacturing and American know-how, American-made energy and skilled American workers.

Since then, he has talked up his plans to reinvigorate manufacturing during several factory tours. At Master Lock in Milwaukee, Wis., he applauded the company for bringing 100 jobs back to America from overseas.  The tax code should reflect that, the President said. He proposed the government give tax breaks to companies that on-shore jobs, instead of granting them to those that offshore.

It’s illogical, even unpatriotic to use tax dollars to subsidize companies that send jobs overseas, transferring America’s manufacturing power to foreign countries like China.

Later, in Everett, Wash., President Obama lauded The Boeing Co. for manufacturing planes in America. Orders for Boeing’s commercial aircraft rose by more than 50 percent last year, and it hired 13,000 Americans.

During a tour of the plant where Boeing manufactures its 787 Dreamliner, the President said:

 “We can’t go back to an economy that was weakened by outsourcing and bad debt and phony financial profits.”

While Wall Street’s financial gambling took down the nation’s economy, the solid, steady, circumspect practices of manufacturers are facilitating recovery. No wonder manufacturing is the favored child.

Manufacturing, Obama pointed out, supports jobs throughout the economy, from mines to machines shops to malls. At the Boeing plant, he said:

“Every Dreamliner that rolls off the assembly line here in Everett supports thousands of jobs in different industries all across the country. Parts of the fuselage are manufactured in South Carolina and Kansas. Wing edges, they come from Oklahoma. Engines are assembled in Ohio. The tail fin comes from right down the road in Frederickson.”

In addition, those supply chain factory workers, whose jobs pay about eight percent more than comparable ones outside manufacturing, support service sector jobs in their communities. (more…)

When revenue problems forced the Central Community Schools in DeWitt, Iowa, to cut back on expenses, Amanda Greubel and her husband, Josh, who both work at the schools, kept their jobs but lost $10,000 a year in income. With a five-year-old and another child due in December, a mortgage and student loans to pay, their life has changed dramatically.

Greubel, director of the Family Resource Center for Central Community Schools, told a Senate Health, Education, Labor and Pensions Committee hearing today what life is like in the day-to-day world of middle-class Americans struggling in this economy. The hearing was aptly titled, Stories from the Kitchen Table: How Middle Class Families Are Struggling to Make Ends Meet. Said Greubel:

Sometimes the grocery money runs out before payday, and then we have to be creative with what we have in the cupboards until we get paid again. My son ends up eating more cold cereal at dinnertime than I care to admit.

It means that most of our clothing now comes from Goodwill, garage sales, or clearance racks. This past spring our son was hospitalized for three days, resulting in $1,000 in out-of-pocket medical expenses. This month a problem with our roof required $1,500 in repairs. Even though we’d been setting aside a little money each month for medical expenses and home repairs, we weren’t prepared enough and have spent the last few months catching up.

(more…)

When you criticize the Republican’s plan for Medicare privatization, their kneejerk comeback is to claim that Medicare is going bankrupt. They’ve got to break it to fix it.

It’s a misleading non sequitur that should not go unchallenged.

The claim was amplified recently by the Medicare Trustees report, which projects that the Medicare Hospital Insurance trust fund (“Part A” of the program) will become insolvent by 2024.

But before you jerk that knee, consider these points:

• The other main parts of the program, Part B (insurance covering doctors’ services, outpatient care, medical supplies) and Part D (the prescription drug benefit) are mostly funded by premiums and general revenues, and, according to the trustees report, are “projected to remain adequately financed into the indefinite future.”
• The Trustees’ Report always presents the date that the trust fund won’t be able to fully meet its obligations (see figure below). As you see, it’s a moving target, most recently shortened by the weak economy and lower tax receipts. That doesn’t we should ignore the warning, but it does not mean that the insolvency date will continue to change with policy, economic, and cost changes. (more…)

By James Parks
AFL-CIO Senior Writer

Unlike our nation’s economic competitors, such as China and Germany, which have national policies geared to increasing their economic development, the United States does not. While we admonish such countries to consume more and export less, they are figuring out ways to increase exports and consume less—and, in turn, are growing their economies far faster than the United States.

In a recent letter to President Obama, Sen. Sherrod Brown (D-Ohio) and a group of bipartisan senators wrote that the key to turning our economy around and creating good new jobs is a national industrial policy that would emphasize long-range actions to rebuild our manufacturing base, which has been decimated over the past few decades. In short, they urged the adoption of a national manufacturing policy.

The loss of manufacturing plants and jobs has stifled economic opportunity for middle-class families and compromised our ability to compete in the 21st century economy. Indeed, for the last several decades, administrations have passed up critical opportunities to formulate a rational and comprehensive manufacturing policy. Continued apathy will undermine our country’s ability to achieve energy independence and place our military readiness at risk.

One-third of American manufacturing plants have shut down in the past 10 years, and today only 1,000 U.S. factories employ more than 1,000 workers, according to the Alliance for American Manufacturing (AAM). And we are losing high-tech workers at a faster rate than traditional manufacturing jobs, AAM says.

An emphasis on manufacturing is not only good policy, it’s popular. In a recent poll by Mark Mellman and Whit Ayers, 86 percent of the respondents say they back increased government support for manufacturing. A whopping 95 percent believe Congress and the president should spend more time creating jobs, and 85 percent believe they should focus on creating manufacturing jobs. (more…)

By Jared Bernstein
Chief Economist and Economic Policy Adviser to Vice President Joseph Biden

John Boehner wants a lot of people to lose their jobs.

We were awfully surprised to hear Rep. Boehner come out for killing jobs en masse in his own state and district by stopping the Recovery Act on last Sunday’s news shows.

Though we’re sure he didn’t know it, the Congressman is advocating to kill the expansion of the Butler County Community Health Center and bring some of the twenty-five highway projects across the district to a grinding halt. Across the state of Ohio, he said that approximately 4 million working families should get an unexpected cut in their paycheck as the Making Work Pay tax credit disappears, unemployed workers should go without unemployment benefits, and major Ohio road projects like the US-33 Nelsonville Bypass project and the Cleveland Innerbelt Modernization project should be stalled or stopped. Oh, and some of the more than 100 clean energy Recovery projects employing workers across the state should be shut down.

That would be the direct consequence of his suggestion that we shut down the Recovery Act: “There’s still about $400 billion or $500 billion of the stimulus plan that has not been spent. Why don’t we stop it?” Now if you have been following this blog, you know that the notion there is “$400 billion or $500 billion” in Recovery Act funding unspent couldn’t be further from the truth. In fact, we’re right on track to hit the goal set when the Recovery Act passed: that 70% of the $787 billion in funds would be “outlaid” or provided in tax benefits by September 30, 2010. But you don’t have to take our word for it — independent fact-checker Politifact.com recently rated Rep. Boehner’s claim flat-out false. As they noted:

[R]ight off the bat, Boehner’s $400 billion to $500 billion figure is much too high. (more…)

 By Jared Bernstein
Chief Economist and Economic Policy Adviser to Vice President Joseph Biden

This episode of ‘The Recovery Act in Action’ takes place in Barre, Vermont, where SBE, Inc., an electronics firm that builds capacitors for batteries, is breaking ground on a brand new factory.

The thing is, that groundbreaking almost took place in China.

SBE’s owners were seriously considering opening this factory abroad until the Recovery Act stepped in and changed their minds. The firm received a $9 million grant from the Act’s Electric Drive Vehicle Battery and Component Manufacturing Initiative (and yes, we need to work on the names of these things) toward SBE’s $18 million new plant.

The factory is going to produce “Power Ring” capacitors, designed to increase the efficiency of hybrid and electric vehicles. SBE expects the plant to have the capacity to support 100,000 electric vehicles within three years, but this technology should also be useful in producing wind and solar energy. (Feed your inner engineer by going here — I, for one, was happy to see that these capacitors provide “extreme current pulse survival.”)

And it’s going to employ people — SBE expects to hire 100 workers for the new plant, possibly rising to 300 by 2015 depending on where demand is headed for this stuff (which, in my humble opinion, is straight up).

These are good jobs. I spoke to SBE’s CEO, Ed Sawyer, and he told me the new factory would employ technicians, machine operators, and inspectors, as well as office personnel.

Most importantly, they’re good jobs. And they’re here in this country, not somewhere else. I asked Ed about what changed SBE’s plan to build the factory in China.

“We were preparing to go to China,” he said. The problem, he told me, was that they lacked the capital they needed to build the highly automated domestic plant required to offset the labor cost advantage in China. But with the Recovery Act grant, “We were able to build a factory that would match unit costs, and that made all the difference.”

It’s a great example of the Recovery Act making the right investment at the right time. The result is an American company keeping good jobs here while partnering with private capital to build the clean energy infrastructure at the heart of President Obama’s vision to reform US energy use and production.

It’s enough to push your current pulse survival rate into extreme range.

***

Before joining the Obama administration in December of 2008, Jared Bernstein served as Director of the Living Standards program at the Economic Policy Institute. His latest book is Crunch: Why Do I Feel So Squeezed? (And Other Unsolved Economic Mysteries), which follows All Together Now: Common Sense for a Fair Economy. He is the co-author of eight editions of the EPI book The State of Working America. His work has also been published in The New York Times, Washington Post, American Prospect, and Research in Economics and Statistics. He has served as a contributor to the financial news station CNBC. His areas of research include income inequality and mobility, trends in employment and earnings, low-wage labor markets and poverty, international comparisons, and the analysis of federal and state economic policies.

 By Lawrence Mishel
President, Economic Policy Institute

Financing health care reform will be a prime subject of discussion among the Senate and House conferees, specifically how much the financing relies on a tax on high-cost health plans. Supporters of this tax label these “Cadillac” health plans and make the assumption that they provide comprehensive (even lavish) coverage that requires very low out-of-pocket costs from beneficiaries. However, in the dysfunctional health insurance market, high-cost does not equal high-value; and it is not comprehensiveness of coverage that is the primary predictor of who will be affected by this tax, rather it is the size of the firm they work for or the age of their co-workers. The fact that Chevy plans are about as likely to be taxed as Cadillac plans is one reason to be cautious about relying on such a tax. Bivens and Gould (2009) document this as well as other reasons to prefer the more straightforward, progressive financing in the House bill.

One claim for the Senate excise tax has recently surfaced: that health care cost increases have been a major driving force in constraining wage growth and that wages will grow more strongly by curtailing employer health costs via the excise tax. This claim boldly asserts that health care costs are large enough (and the tradeoff with wages is large enough) to drive major changes in overall wages. This is a much stronger claim than saying that there is some tradeoff between higher health costs and wages in the total compensation package.(1)

Jonathan Gruber, an economics professor at M.I.T., argued in an op-ed in the Washington Post on December 28, 2009:

And when firms reduce their insurance generosity, they make it up in higher pay for their workers. We saw this in the late 1990s, when the rise of managed care temporarily lowered insurance costs, and wages rose in real terms for the first time in many years. But as soon as managed care was weakened and health costs rose again, we once again saw flat or declining real wages in the United States. (Gruber 2009)

Others, including prominent and well-respected journalists, have also made the argument recently for a “health care theory of wage determination.”(2) Proponents of this theory point for evidence to the latter half of the 1990s, a five-year period when wages were growing rapidly while growth in employer health care spending was relatively constrained. They contrast the period from 1995 to 2000 with the periods from 1989 to 1995 and 2000 to 2006, when wages stagnated while health care costs grew much more rapidly.

There is logic to their argument, but it is only skin-deep and deeper examination will show it to be simply not true. The logic can be seen looking at trends in health care premiums and wages—wage growth fared better in the late 1990s when health care premiums grew more slowly than in the early 1990s and wages performed poorly in the 2000s, a period when health premiums grew strongly again.(3)

However, digging just a bit beneath the surface reveals the following:

1. Health care costs are not large enough to substantially move wages as these proponents claim;

2. Examination of actual wage and benefit trends confirms that changes in the trajectory of health care costs did not materially affect wage trends over the last 20 years; and

3. The wage behavior described—accelerating in the late 1990s and more slowly thereafter—actually best characterizes wage growth for low-wage workers who have minimal access to employer-based health care. Conversely, this pattern of wage-growth over time is least pronounced for higher paid workers with the most health coverage.

Clearly, this “health care theory of wage determination” is wrong, and other factors explain these overall wage trends. The simple explanation is that productivity accelerated in the mid-1990s, and the low unemployment (and hikes in the minimum wage) facilitated faster wage growth. That this wage growth disappeared entirely in the 2002-07 recovery is not due to faster health care cost increases but to weak employment growth and employers’ ability to achieve increased profitability rather than pass on productivity gains to workers. This reveals a fundamental flaw in our economy: productivity gains are not passed on to higher living standards for workers.

SCALE

It is easy to understand that health care cost trends have not been a significant driver of wage trends when one examines the scale of employer expenditures on health care. Health care costs were just 7.6% of total compensation and 9.4% of total wages (all wages paid, including premium pay, paid leave, and so on) in 2007.(4) The share of health care in total wages (in nominal, non-inflation adjusted terms) grew from 7.2% in 1989 to the 9.4% in 2007, suggesting that the expanded role of health costs could have reduced wage growth by 2.2% over this entire 18-year period, or 0.12% each year. This assumes a complete tradeoff between health costs and wages (if every dollar of higher health costs reduced wages correspondingly). Consequently, employer health costs can hardly be considered a major determinant of wage growth.

Further, overall benefits’ (health care plus all other fringe benefits) share of total compensation has actually been stable for the last 20 years or so—as health costs expanded, pension and payroll tax shares diminished. Hence, the story of stagnant wages in the U.S. economy is not one of growing non-wage compensation.(5)

ACTUAL WAGE AND BENEFIT TRENDS

Digging deeper, consider the changes in health care costs and wages per hour worked in the early 1990s, the late 1990s, and 2000 to 2006, the periods cited by proponents of the health care theory of wage determination.

The data in Table 1 show that wages and total compensation definitely accelerated in the late 1990s, with hourly compensation growth tripling from a $0.22 to a $0.68 annual growth. This alone disproves the theory that moderated health care costs were the primary driver of wages: it was not a change in the mix of compensation between wages and benefits that drove growth, rather it was the simple fact that total compensation accelerated rapidly. After 2000 compensation growth subsided to $0.41 per hour but still remained faster than that of the 1989-95 period.

Do trends in health care costs explain this behavior in compensation or wages? Employer health care expenditures grew $0.03 in the late 1990s, pretty much the same as in the early 1990s, so that hardly seems an explanation. Health care expenditures did grow more quickly in the 2000-06 period (up $0.09 each year).

This greater growth could at most explain $0.06 of the $0.45 deceleration of wage growth from 2000 to 2006 versus the late 1990s. Interestingly, the growth of pension costs is more important than that of health costs. More important, the health care story misses and cannot explain the substantial deceleration (one-third slower) of overall compensation growth in the 2000s.

Most economists would point to the faster productivity growth of the late 1990s to explain the faster wage and

compensation growth. In the early 1990s, as in the 1980s, productivity growth was about 1.3% each year. Productivity growth doubled in the late 1990s to 2.5% annually and maintained that pace in the 2000s. It is the combination of this trend—a faster growing pie—and the lower unemployment and higher minimum wages that allowed workers the leverage to make sure their wage growth kept pace with overall productivity.

But the lessons of the 2000s are also instructive: despite the faster productivity growth there has been no real wage growth recently, either for those with a high school or a college degree (See Mishel et al. (2009), Figure 3A).

There is something fundamentally broken about our economy when workers gain nothing from productivity

growth, and this should give pause to those who assume that when employers lower their health care expenses they will automatically pass these savings onto workers in the form of higher wages. This is an especially problematic assumption given the very high unemployment expected to prevail over the next five years, an environment where workers will have little leverage.

WAGE TRENDS FOR LOW-, MIDDLE-, AND HIGH-WAGE WORKERS

The last piece of evidence on this issue is data on the wage trends for workers at differing wage levels. The same trends discussed above—accelerated wage growth in the late 1990s and the subsiding of this growth in the 2000s—are evident across the board for segments of the workforce that have extensive health care coverage and those for whom coverage is sparse.

This is a point made by Jared Bernstein and Sylvia Allegretto in an analysis in 2006:

About half of all workers don’t even receive employer-provided coverage. According to the U.S. Bureau of Labor Statistics (BLS), 47% of workers did not participate in employer-provided health care benefit plans in 2005. Thus, there is no health care squeeze that would explain the wage losses of nearly half the workforce. In addition, the BLS data show that among workers whose average wage was less than $15 per hour last year, only 39% participated in employer-provided health plans….. low-wage workers also lost the most ground in terms of real wages. Thus, those least likely to get health care experienced the greatest loss in real wages, the opposite of what the trade-off explanation would predict. (Bernstein and Allegretto 2006)

 

Table 2 shows the wage growth for workers at every decile over the 1989 to 2007 period, including the relevant sub-periods. Wage growth was far faster from 1995 to 2000 than in the 1989-95 period at every wage level. However, the acceleration of wage growth was far greater for low- and middle-wage workers, the groups with the least coverage by employer-provided health care plans: only 27% and 64%, respectively, of workers in the bottom and middle fifths of the wage distribution received employer-sponsored health insurance in 2000 (see coverage by wage fifth in Mishel et al. (2009), Table 3.12). This further reinforces how health care cost containment of the late 1990s was not the major, or even an important, determinant of wage trends. Note that the acceleration of wages for the two highest-paid groups—at the 90th and 95th percentiles—was half that of what the lowest-paid workers enjoyed even though 80% of the highest fifth of earners received employer-sponsored health coverage. This runs directly counter to the notion that health care costs are driving wage trends. Note also that wage growth was substantially diminished in the 2000s, even though productivity growth continued at the same fast pace. In the recovery period from 2002 to 2007 there was hardly any wage growth at all (see Mishel et al. (2009), Table 3.1). The worst wage growth in the 2000s was for low- and middle-wage workers, the groups with the least health care coverage. So, it does not seem likely that faster health care premium growth in the 2000s can explain the disappointing wage growth.

CONCLUSION
The recent claims that trends in employer health care expenditures explain the beneficial wage growth of the late 1990s and the disappointing wage growth since 2000 does not hold up to any careful scrutiny. Health care expenditures are relatively small compared to overall wages, and an examination of the actual trends shows that health care cost increases do not correspond to the major movements in wages or compensation. This is especially the case for the wage trends of low- and middle-wage workers: their wages accelerated the most in the late 1990s and grew the least in the 2000s. The fact that these groups have the least participation in employer-provided health plans confirms that health care is not the major factor that the advocates of this new health care theory of wage determination would have us believe. There undoubtedly is a tradeoff between health care costs and wage growth, but this dynamic does not play a leading role in the drama of the stagnant wages facing workers for several decades and the inability of working families to benefit from rising productivity growth.

REFERENCES
Bernstein, Jared, and Sylvia Allegretto. 2006. The Wage Squeeze and Higher Health Costs. EPI Issue Brief #218. Washington D.C.: Economic Policy Institute. http://www.epi.org/publications/entry/ib218/
Bivens, Josh, and Elise Gould. 2009. The House Health Care Bill is Right on the Money: Taxing High Incomes is Better Than Taxing High Premiums. EPI Issue Brief #267. Washington D.C.: Economic Policy Institute. http://epi.3cdn.net/d4461bae3920d3a28a_7jm6b9314.pdf
Gruber, Jonathan. 2009. ‘Cadillac’ tax isn’t a tax—it’s a plan to finance real health reform. Op-ed. Washington Post. December 28.

http://www.washingtonpost.com/wp-dyn/content/article/2009/12/27/AR2009122701714.html

Mishel, Lawerence, Jared Bernstein, and Heidi Shierholtz. 2009. The State of Working America 2008/2009. Washington, D.C: Economic Policy Institute.

ENDNOTES
1 I remain a skeptic that the tradeoff is 100% over any short-run period, especially the high unemployment period ahead. That is a different topic for another time.

2 Ezra Klein, in his (appropriately) highly regarded blog for the Washington Post and in an op-ed, was the first to enunciate this “health care theory of wage determination”:

From 1989 to 1995, median wages actually fell a bit. Then, managed care kicked in. Annual growth in health-care costs fell from more than 10 percent in the early 1990s to less than 5 percent in the late ‘90s. Meanwhile, wages shot through the roof, rising more than 11 percent from 1995 to 2000. Then we ended the managed-care experiment, and health-care costs resumed their normal speed of growth. Predictably, wages slumped back down from 2000 to 2006. (http://voices.washingtonpost.com/ezraklein/2009/12/lower_health_costs_higher_payc.html)
David Leonhardt, an influential economics reporter for the New York Times, weighed on this as well:
A dollar that an employer spends on insurance is a dollar that’s unavailable for income. This helps explain why the one period of slow growth in medical costs over the last two decades — the late 1990s — was also the one period of rapid income growth. (http://www.nytimes.com/2009/12/23/business/economy/23leonhardt.html?_r=1)

3 See Exhibit One in this compilation from the Kaiser Foundation: http://www.kff.org/insurance/7672/upload/7693.pdf.

4 See the Bureau of Labor Statistics’ survey of Employer Costs for Employee Compensation, Table 9, ftp://ftp.bls.gov/pub/special.requests/ocwc/ect/ececqrtn.pdf.

5 See the Bureau of Labor Statistics’ survey of Employer Costs for Employee Compensation, Table 9, ftp://ftp.bls.gov/pub/special.requests/ocwc/ect/ececqrtn.pdf.

***

Lawrence Mishel has co-authored numerous books, including The State of Working America, Emerging Labor Market Institutions for the Twenty-First Century, The Charter School Dust-up: Examining the Evidence On Enrollment And Achievement, and The Teaching Penalty: Teacher Pay Losing Ground 

***

This piece was crossposted from the Economic Policy Institute, originally published on January 6, 2010.

By Robert Kuttner
Co-Founder and Co-Editor of The American Prospect

I do not view the labor movement as part of the problem, to me it’s part of the solution.

– President Barack Obama, January 30, 2009

The great union leader John L. Lewis, who headed the United Mine Workers from the ’30s through the ’50s and helped organize millions of workers into the CIO, used to declare in organizing drives: “President Roosevelt wants you to join the union.” Roosevelt never said that in so many words, but FDR did strongly back the Wagner Act, giving workers the clear right to organize.

During World War II, Roosevelt’s War Labor Board made clear that corporations seeking war contracts needed to have good labor relations. In practice, that meant unions; and it meant “pattern bargaining” in which workers for different companies in the same industry got the same wages, so that companies could not play workers off against each other.

Roosevelt’s wartime contracting policies, the Wagner Act, and the militancy of the labor movement laid the groundwork for the golden age of American unions during the postwar boom. Not coincidentally, this was also the one period in the past century when the economy became more equal, and more secure for working people.

So, while Roosevelt’s words never quite urged workers to join unions, his deeds spoke volumes. John L. Lewis was well within the bounds of poetic license.

On Friday, President Obama, a onetime organizer, had more words to say about unions, and they were the kind of explicit endorsement that we literally haven’t heard from a president since FDR’s day.
“We need to level the playing field for workers and the unions that represent their interests, because we know that you cannot have a strong middle class without a strong labor movement,” the President said. “When workers are prospering, they buy products that make businesses prosper. We can be competitive and lean and mean and still create a situation where workers are thriving in this country.”
Wow!

And Obama offered deeds to match. This stunning declaration of support came at the White House announcement of a Task Force on Middle Class Working Families headed by Vice President Biden, with Jared Bernstein as its executive director. The idea was proposed last summer by Change to Win unions, who endorsed candidate Obama early in the primary season. He embraced the concept, and it was a commitment he kept. His remarks and actions were a dazzling example of the transformative power of a president to shift public opinion and the political center of gravity.

The task force, and the effusive and genuine embrace of the labor movement, came as a huge relief to union leaders, who have watched anxiously as nearly all the key economic posts went to centrist veterans of the Clinton administration, and the job of secretary of labor was not announced with the other senior economic officials. As it turned out, the appointment of Hilda Solis, a very pro-union member of Congress, was delayed because others had turned down the job first, but the delay sent an unfortunate signal.

Labor activists have also been worried about whether Obama will keep his pledge not just to sign the Employee Free Choice Act (EFCA) guaranteeing the right to join a union, but to work hard on its behalf with legislators, especially in the Senate. Since the election, the US Chamber of Commerce and allied anti-union business organizations have mounted a furious publicity and lobbying offensive with one message: Mr. President, you don’t need this bruising fight right now.

But the Chamber’s allies in the Republican House Caucus have beautifully undercut that logic. The Chamber’s premise was that EFCA would be highly divisive, at a time then the new president was seeking unity. With the wall-to-wall Republican stonewalling on the Obama recovery package, that premise is up in smoke. And the Chamber’s other allies, on Wall Street, have also done a service by inviting some salutary class warfare. Obama responded last week, calling Wall Street bonuses in the face of government bailouts “shameful,” and seems to genuinely view the growth of unions as a necessary counterweight.

The task force itself will be a welcome counterweight to the outsized influence of Wall Street inside the Obama administration. Several weeks ago, Jared Bernstein, then a senior economist at the Economic Policy Institute, wrote a joint op-ed piece for the New York Timeswith Robert Rubin pointing out where they agreed. One issue where they pointedly disagreed was on the Employee Free Choice Act, which Rubin explicitly refused to endorse. The Biden operation now looks to be the go-to place for progressives seeing access to Obama’s priorities. The Task Force will serve as the White House center to review all proposals, legislative and administrative, for their impact on the effort to raise wages and rebuild a middle class.

Without Obama’s strong personal engagement, EFCA will be anything but a legislative cakewalk. Democrats may have a working majority. But at least five business-oriented Democrats are not considered certain votes for EFCA, and Obama will need to let them know that the White House considers this bill a top priority.

Our last two Democrats went out of their way not to get close to organized labor. Jimmy Carter did not lift a finger when the last big push to put some teeth back in the Wagner Act’s right to unionize went down to defeat by just two votes in the Senate in 1978.

On Friday, announcing the Task Force, Obama signed three executive orders. One will prevent federal contractors from discouraging their employees to join unions. Another will assure that workers keep their jobs when a contract changes hands. Down the road is an executive order to promote project agreements on construction contracts.

If Obama is serious, he can take a leaf from FDR’s book, and use government’s extensive contracting power to actively promote unions. Late in the Clinton administration, then Vice President Al Gore led an effort called the Responsible Contractor Initiative. The idea was to reward federal contractors who took the high road by providing good jobs and not standing in the way of unions.

It remains to be seen just how much real power Obama will give Vice President Biden. But the task force is a superb beginning. If government can just use its influence to make sure employers stay neutral, it will be a new day for the labor movement–and for American progressivism.

Robert Kuttner is Co-Editor of The American Prospect. His new book is “Obama’s Challenge: America’s Economic Crisis and the Power of a Transformative Presidency.”

This blog was first published on Huffington Post.