David Rohde

Since asking the candidates at Tuesday’s presidential debate how they would improve his job prospects, college junior Jeremy Epstein has been lionized on Twitter, repeatedly interviewed on television and declared a nerdy sex symbol.

Unfortunately, as they have throughout the campaign, Romney and Obama avoided details when answering Epstein’s thoughtful question. Instead, they lampooned each others’ records and policies. Such answers are to be expected, arguably, in the waning weeks of an extraordinarily tight presidential campaign.

But an analysis of Obama’s and Romney’s specific proposals and the positions of their key advisers – particularly when it comes to creating manufacturing jobs – shows that voters do face a critical choice. This is, in fact, an election that will send the federal government in one of two very different directions when it comes to long-term job creation.

In his answer at the debate, Romney referred to his five-point plan that he said will create 12 million new jobs in the United States. The plan, which is detailed in a white paper endorsed by four leading conservative economists, is a full-throated endorsement of using tax breaks and market forces alone to revive the American economy. While Romney is tacking toward the center in the race’s final weeks, it is fair for voters to assume that he will slash the size of government, and rely on a free-market approach to the economy.

The white paper, for example, calls for reducing federal spending to 20 percent of GDP by 2016, its pre-financial crisis average. It hails Romney’s proposed across the board 20 percent tax break. And it calls for a sweeping reduction in government regulation, specifically repeal of the Dodd-Frank Wall Street regulations and Obamacare. The word “manufacturing” does not appear in it.

The Romney camp seems wary of even a light-touch attempt to boost manufacturing. During this spring’s Republican primaries, R. Glenn Hubbard, lead author of the white paper, dean of Columbia University’s business school, and a top Romney economic adviser, criticized a proposal by Republican presidential candidate Rick Santorum to use tax policy to bolster American manufacturing. In February, Santorum proposed that government aid the sector by exempting manufacturing companies from corporate income taxes.

“By proposing special tax breaks for manufacturing, Mr. Santorum follows Mr. Obama’s incorrect lead and introduces a significant economic distortion,” Hubbard wrote in a March Wall Street Journal editorial. “In a world with highly mobile capital, tax policy needs to be neutral toward different forms of business activity and not succumb to the temptation to pick winners and losers.”

If Romney is likely to embrace a no-government approach, it is fair for voters to assume to assume that Obama will do the opposite. Obama also tacked to the center in Tuesday’s debate, but he and many liberal economists embrace an entirely different view of economic theory and American history.

Members of the administration and liberal economists credit the role of government research and defense spending with creating everything from the Internet to high-speed semi-conductors to the completion of the human genome project. That level of basic research, they contend, created the foundations for enormous growth by private sector online, pharmaceutical and computing companies.

“There is a long history of government involvement in supporting innovation and growth in many ways,” Gary Pisano, a Harvard Business School professor, told me in an interview today. “Sometimes, it is very broad, like land grant colleges. Sometimes, it is very specific like granting railroads right-of-way in the American west. It has had a role. We can’t deny it.” (A separate interview I did with Pisano about his new book Producing Prosperity: Why America needs a manufacturing renaissance earlier this week is below.)

A second Obama term is likely to involve heavy government role in promoting manufacturing. An investment in community colleges would theoretically create the skilled machinists, for example, that are needed for advanced manufacturing. A National Institute of Manufacturing – modeled on the National Institutes of Health – may even be created.

Ironically, whoever wins the presidency is likely to enjoy a sharply improved economy.

The Congressional Budget Office estimates that even if the so-called “fiscal cliff” is not averted in January, the American economy will create 9.06 million jobs between 2013 and 2017, nearly double the number created in the last four years. In an even more optimistic prediction, Moody’s analytics says that whoever is elected president, 12 million jobs will be created by 2016.

Whether they deserve it or not, the winner will claim that the improving economy is an endorsement of their economic vision. In short, the decision is an important one. It is also stark.

Obama has at times gone too far in intervening in the economy. The administration’s disastrous investments in Solyndra and other alternative energy companies was a classic example of government trying to pick winners and losers. But we ought not to conclude that just because certain types of government investing go awry there is no role for government at all.

I agree with Pisano’s outlook that government, in fact, plays an enormous role in the economy. The carried interest tax break is a massive subsidy to the private equity industry. The home mortgage interest deduction is an enormous boost for the middle class.

And in today’s globalized economy we compete with economic rivals who aggressively subsidize their leading industries. Having no government assistance in manufacturing is the equivalent of unilateral disarmament in today’s de facto trade wars.

I believe there is a broad, long-term role the government can and should take in reviving manufacturing, but it should not engage in picking winners and losers. Both candidates’ plans have their shortcomings. In the end, I err toward the approach that is less ideological. On job creation and reviving manufacturing, Obama is more realistic.

PHOTO: U.S. President Barack Obama (L) and Republican presidential nominee Mitt Romney (R) speak directly to each other during the second U.S. presidential campaign debate in Hempstead, New York, October 16, 2012.   REUTERS/Win McNamee/POOL

The Barack Obama of last night’s presidential debate was eerily similar to the man who delivered a muddled acceptance speech at the Democratic National Convention. The incumbent was cautious, tired and on some level – it seemed – turned off by the manipulation of facts that is the ugly heart of politics.

Mitt Romney, on the other hand, seemed to relish it. The challenger was fresher, faster and folksier than a sub-par president. Obama seemed startled and frustrated by Romney’s deft shift to the center and audacious effort to portray Obama as the extremist: Obama is a defender of the big banks; Obama is gutting Medicare; Obama funneled $90 billion to fat-cat contributors in the renewable energy industry.

Fact-checking by Reuters and other news organizations shows that Romney glaringly twisted the facts. What was more surprising – and troubling – was Obama’s tepid response.

As in Charlotte, Obama was extraordinarily careful last night. While Romney adopted a wholly new political tack, Obama used the same tired rhetoric, calling for a “balanced approach” to reducing the deficit, all Americans “playing by the same rules” and Romney favoring “those who are better off.”

I can’t think of a single new policy idea that Obama unveiled last night or in Charlotte. The president and his speechwriters must develop more lucid, pithy ways of describing his policies. That may be distasteful, but it is real.

Romney, on the other hand, dramatically shifted to the center. As Matt Miller of the Washington Post pointed out, Romney and his aides will be lauded as geniuses if he wins. Instead of shifting to the center after securing the nomination, as candidates have for decades, they are dashing to the center in the race’s final weeks.

Whether voters believed Romney or not remains to be seen, but last night he was a Rockefeller Republican moderate who embraced the need for regulation, Social Security and his governorship of Democratic-leaning Massachusetts. All of the hard-right, Tea Party red meat of the primaries vanished. Whatever the veracity of his statements, credit Romney with having a plan last night, taking a risk and executing well.

Obama and his aides may have decided to sit back, hold steady and maintain the presidential high ground. They may have gambled that Romney would make a gaffe, trip up or somehow stumble. Clearly, they lost that wager.

In the end, there is a problem that goes beyond debate tactics. Obama is failing to lay out a clear agenda for his second term. Yes, specificity is the enemy of any politician. But Americans need a reason to vote for Obama, not just a reason to vote against Romney.

I don’t know the true dynamics inside the White House, but from the outside two forces seem to weaken Obama’s presidency: insularity and overconfidence. To the surprise of many, the Obama White House has proved to be as isolated as that of the George W. Bush administration.

In the Obama White House, a small circle of aides plays a central role in all major decisions, according to press accounts. The president rarely engages with outsiders. Since taking office, he has developed few strong relationships with leaders of Congress or foreign heads of state. And like all presidents, he lives in a bubble.

As David Gergen noted after the debate, Obama joined the long line of incumbent presidents who seemed thrown off their game when their opponents bluntly challenged them in their first re-election debate. News stories have euphemistically referred to Obama being “distant” or “aloof.” The president – like all of his predecessors – is reported to have a staggering ego.

Surviving the pressure, brutal criticism and isolation of the presidency clearly requires self-confidence. But both performances created the sense that Obama needs to work harder for this win.

Lastly, David Brooks raised another possibility after Obama’s weak performance in Charlotte. Is the Obama administration, he asked on the PBS NewsHour, intellectually exhausted?

For me, this is the most troubling scenario. Four years of brutal partisan warfare in Washington could leave the administration out of touch and bereft of new ideas.

In the weeks ahead, we’ll find out if that is true. Romney may have inadvertently done the president a favor by publicly humbling him. Obama needs to come down from the mountain, take more risks and be a more daring and deft politician. More aloof calculation could cause voters to send him packing.

PHOTO: President Barack Obama (R) listens as Republican presidential nominee Mitt Romney speaks during the first presidential debate in Denver, October 3, 2012. REUTERS/Jim Urquhart

Throughout the last two weeks of political conventions, Barack Obama, Mitt Romney and a vast array of surrogates accused their opponents of gutting the American middle class.

Paul Ryan and Bill Clinton did it blatantly. Michelle Obama and Ann Romney did it subtly. And all speakers tried to portray themselves as in touch with the middle class, from the Romneys eating “lots of pasta and tuna fish” to Barack Obama’s proudest possession being “a coffee table he’d found in a dumpster.”

In the process, though, both parties gave politically skewed definitions of the middle class, simplistically blamed each other for its struggles and presented pat solutions for the complex problems it faces.

In Republican oratory, the middle class consists of small-business owners who are being crushed by taxes, regulation and a bloated government. In truth, only about 11 percent of American heads of household are self-employed.

In Democratic speechifying, the middle class is made up of hard-working teachers, police officers and union members being laid off by miserly Republicans. Yet those Americans, however hard they work, depend on successful businesses and banks for their prosperity.

In reality, the middle class is a dizzyingly complex demographic. It includes the 50 percent of Americans, for example, who work for large companies with more than 500 employees. And it includes drillers and farmers in North Dakota who are collecting hefty paychecks and cashing in on bumper crops in the state, which has a 3 percent unemployment rate, the lowest in the nation.

The middle class is not in free-fall, as some Republicans argued. And the middle class is not the country’s sole economic engine, as Democrats suggested. Overall, the American middle class today is struggling to surmount torpid wages, global competition for jobs, low home values and spiraling healthcare and education costs. The middle class is stagnant.

What follows is the first of several efforts to sort through Republican and Democratic portrayals, pronouncements and promises for the middle class. More will follow between now and Nov. 6.

Middle-class taxes

In his acceptance speech, Romney said Obama had raised taxes on the middle class. And multiple Obama surrogates – including Vice-President Joe Biden and Massachusetts Senate candidate Elizabeth Warren – said that Romney would raise taxes on the middle class by $2,000. All of their statements were misleading.

Since taking office, Obama has, in fact, cut middle-class tax rates. Romney, though, was probably referring to the $960-to-$1,200 annual penalty that an estimated 3 million middle-class Americans who fail to obtain health insurance will be expected to pay under Obamacare. In its ruling upholding the healthcare law, the Supreme Court declared the penalty a tax. Definitions of the middle class vary, but most experts view it as the middle 50-60 percent of Americans, or roughly 114 million working-age adults. The penalty will apply to approximately 3 million of roughly 57 million middle-class Americans.

Biden’s and Warren’s claim that Romney will increase middle-class taxes is pure speculation. Romney has promised that he will cut tax rates across the board by 20 percent but not reduce overall tax revenues in the process. Independent experts have said it will be extremely difficult for Romney to achieve this goal, and the Republican nominee has declined to give specifics. But the New York Times notes that Romney could decide, instead of increasing middle-class taxes, to add to the deficit, take away preferential rates on savings and investments or make smaller cuts to marginal tax rates. And Romney has repeatedly promised not to raise middle-class taxes.

“Crushing the middle class”
Romney blamed Obama for a decline in middle-class incomes and a rise in family expenses.

“In the richest country in the history of the world, this Obama economy has crushed the middle class,” Romney said in Tampa last week. “Family income has fallen by $4,000, but health insurance premiums are higher, food prices are higher, utility bills are higher, and gasoline prices have doubled. Today more Americans wake up in poverty than ever before.”

Romney’s figure of $4,000 includes 13 months of wage decreases that took place before Obama took office, according to FactCheck.org, a non-partisan organization run by the Annenberg Public Policy Center. Romney is right, though, about food prices, which have risen by 6.2 percent.

Gas prices have, in fact, doubled, but the global recession sparked by the financial crisis artificially lowered them just before Obama took office. Healthcare premiums are up by 9 percent, but independent experts attribute 1 percent to 3 percent of the rise to Obamacare.

And while the total number of Americans living in poverty has never been higher, that is because the U.S. population has grown over time. Today 15 percent of Americans live in poverty, a figure significantly lower than the 23 percent that did when poverty rates were first calculated in 1959. In short, the middle class has definitely suffered under Obama, but not to the extent Romney claimed.

“Tax breaks for millionaires”

In his acceptance speech, Obama said that Romney’s proposed tax cuts for the wealthy would add to the deficit and fail to spark economic growth. “I don’t believe that another round of tax breaks for millionaires,” Obama said, “will bring good jobs to our shores, or pay down our deficit.”

Experts generally agree that the more educated a workforce, the higher its earnings, according to the Washington Post. But economists are divided over tax cuts for the wealthy. There is broad agreement that reducing taxes for the wealthy has led to increased deficits in the past, but there is disagreement over whether tax cuts for the rich spur economic growth. Some economists say it does not, while others insist that it does.

“So what’s the job score?”

Bill Clinton declared that 24 million private-sector jobs had been created during the 28 years Republicans held the White House over the period since 1961. But, he said, Democrats produced nearly twice as many private-sector jobs – 42 million – in the 24 years they were in power during that 52-year period.

Clinton’s figures are accurate, according to Bloomberg Businessweek. But other experts have found that if job creation starts being counted one year after a president takes office – and his policies take effect – the numbers are more even. And many economists argue that the U.S. economy is so large that short-term government policies enacted by any president have a limited effect. Administrations are given too much credit for a growing economy, they say. And too much blame for recessions.

***

With low TV ratings and the vast majority of voters having already made up their mind, the conventions are unlikely to decide the election. The unimpressive jobs report issued on Friday – only 93,000 new jobs in August – could blunt any momentum the Democrats gained.

In the end, both candidates stayed disappointingly true to form. Romney was cautious and vague. Obama was cautions and incremental. The middle class heard some debate, but mostly got pandering.

PHOTO: Confetti bursts following the speech of President Barack Obama during the final session of the Democratic National Convention in Charlotte, North Carolina, September 6, 2012.  REUTERS/Jonathan Ernst

Barack Obama is going to save America’s middle class by taxing the rich and fostering an American manufacturing renaissance. Mitt Romney is going to revive it by creating more jobs for women and rewarding successful people instead of punishing them.

Welcome to the so-far deeply disappointing 2012 general election. This week’s middle-class-related broadsides from both campaigns bordered on the comic.

Obama’s promoting of the Buffett Rule in Florida on Tuesday was smart politics, but the measure is unlikely to create jobs or significantly reduce the deficit. Even liberal pundits assailed it as an election-year “gimmick.”

And Obama’s concept of reviving American manufacturing is politically appealing but completely untested. As my colleague Chrystia Freeland noted, it flies in the face of decades of Anglo-American conventional wisdom that state interventions in the economy inevitably fail. Whether Obama is right or wrong will not be known before Election Day.

Romney, meanwhile, used a piece of carefully selected economic data to try to attack a 19-percentage-point advantage Obama enjoys among female voters. On Tuesday, he toured a Delaware company that has a female CEO and said women have suffered 92.3 percent of job losses since Obama took office in January 2009. Within hours, the figure, while technically accurate, was criticized as misleading.

Since the recession began in December 2007, men have lost 3.3 million jobs and women have lost 1.2 million jobs, according to the New York Times Economix blog. The surge in job losses among women is primarily due to cuts in the female-dominated government sector. Those reductions were backed by Republicans, not Democrats.

Both campaigns can – and must – do better. A deeply shaken American middle class is yearning for honest debate and realistic approaches to the country’s economic and fiscal dilemmas.

The far left and far right have gotten louder thanks to Fox, MSNBC and the corporate owners of those media outlets, which profit financially from the division they sow. But I believe Middle America – and the independent voters who will decide the election – will award the White House to the candidate who shows the most pragmatism and political courage.

In truth, there are no simple answers when it comes to helping the middle class or understanding what is happening to it. No official U.S. government definition of the “middle class” exists. Nor does a consensus: Democrats say the middle class is in free fall, while Republicans insist it is doing just fine.

Whatever is occurring, public opinion polls show deep unease in Middle America. An ABC News/Washington Post poll conducted last week found that 76 percent of Americans believe the country is still in recession and 68 percent think it is headed in the wrong direction.

Economists broadly agree that the best way to help the middle class is to create large numbers of high-paying new jobs. It is also crucial to rein in the federal deficit and make Social Security and Medicare – two cornerstones of a middle-class retirement – financially sustainable. The problems are far more complex than Warren Buffett paying less tax than his secretary or conservative diatribes against government regulation.

As Matt Miller correctly pointed out in the Washington Post this week, both parties are ignoring hard truths and hard choices. “The big Republican lie” is that the American government does not need to raise taxes in any form as baby boomers retire and the number of people on Social Security and Medicare doubles. And “the big Democratic lie” is that the country can solve its staggering fiscal problems by raising taxes only on people who make over $250,000 a year.

“More than most political deceptions,” Miller wrote, “these two warp the debate in ways that make pragmatic progress impossible.”

Miller’s solution? A truth-telling third-party candidate. The chances are low, but the stirrings of an independent bid still exist. Independents now make up 34 percent of voters across the country, according to a 2011 poll by the Pew Research Center, compared with 34 percent identifying themselves as Democrats and 28 percent as Republicans. A website, Americans Elect, has collected 2.5 million signatures in an effort to place an as-yet-unchosen independent candidate on the ballot.

I share their disappointment. So far, the two-party system is failing to spark the serious debate we desperately need.

Obama should detail exactly how he would tackle the deficit and create a lean but effective federal government. Romney should stop blaming government for all of America’s evils. Obama should announce specific reforms that will make Social Security and Medicare sustainable. And Romney should propose a reduction in defense spending instead of an increase.

Both candidates should take risks, be less political and get off their talking points. That is a naive sentiment, of course, but the country is divided, adrift and urgently in need of new models.

Romney, beware. Obama, for now, is winning the battle for Middle America.

Asked in last week’s poll which candidate would do a better job “defending the middle class,” Obama had a 10-percentage-point advantage over Romney. Asked which was a bigger problem in America, 52 percent chose “unfairness in the economic system that favors the wealthy” and only 37 percent said “over-regulation of the free market that interferes with growth and prosperity.”

And Obama, beware. He may narrowly win re-election, but avoiding hard truths is no way to gain a mandate. Tactical compromise has not served the White House well for the past four years. Is the Buffett Rule really the legacy Barack Obama wants to leave?

PHOTOS: President Barack Obama speaks about tax fairness and the economy at Florida Atlantic University in Boca Raton, Florida, April 10, 2012. REUTERS/Kevin Lamarque  Republican presidential candidate and former Governor of Massachusetts Mitt Romney (L) walks into a campaign event with business owners Lorri Grayson (C) and Becky Suppe during a campaign event in Wilmington, Delaware, April 10, 2012. REUTERS/Tim Shaffer

This essay was originally published in the March/April issue of Foreign Policy.

When Barack Obama took the oath of office three years ago, no one associated the phrase “targeted killing” with his optimistic young presidency. In his inaugural address, the 47-year-old former constitutional law professor uttered the word “terror” only once. Instead, he promised to use technology to “harness the sun and the winds and the soil to fuel our cars and run our factories.”

Oddly, technology has enabled Obama to become something few expected: a president who has dramatically expanded the executive branch’s ability to wage high-tech clandestine war. With a determination that has surprised many, Obama has embraced the CIA, expanded its powers and approved more targeted killings than any modern president. Over the last three years, the Obama administration has carried out at least 239 covert drone strikes, more than five times the 44 approved under George W. Bush. And after promising to make counterterrorism operations more transparent and rein in executive power, Obama has arguably done the opposite, maintaining secrecy and expanding presidential authority.

Just as importantly, the administration’s excessive use of drone attacks undercuts one of its most laudable policies: a promising new post-9/11 approach to the use of lethal American force, one of multilateralism, transparency and narrow focus.

Obama’s willingness to deploy lethal force should have come as no surprise. In a 2002 speech, Illinois State Senator Obama opposed Bush’s impending invasion of Iraq, but not all conflicts. “I don’t oppose all wars,” he said. “What I am opposed to is a dumb war.” And as president, in his December 2009 Nobel Peace Prize acceptance speech, Obama warned, “There will be times when nations — acting individually or in concert — will find the use of force not only necessary but morally justified.” Since then, he has not only sent U.S. forces into Afghanistan, Iraq and Libya, but also repeatedly approved commando raids in Pakistan and Somalia and on the high seas, while presiding over a system that unleashed hundreds of drone strikes.

In a series of recent interviews, current and former administration officials outlined what could be called an “Obama doctrine” on the use of force. Obama’s embrace of multilateralism, drone strikes and a light U.S. military presence in Libya, Pakistan and Yemen, they contend, has proved more effective than Bush’s go-heavy approach in Iraq and Afghanistan. “We will use force unilaterally if necessary against direct threats to the United States,” Ben Rhodes, the administration’s deputy national security advisor for strategic communications, told me. “And we’ll use force in a very precise way.”

Crises the administration deems indirect threats to the United States — such as the uprisings in Libya and Syria — are “threats to global security,” Rhodes argued, and will be responded to multilaterally and not necessarily by force. The drawdown of U.S. troops in Iraq and Afghanistan, as well as the creation of a smaller, more agile U.S. military spread across Asia, the Pacific and the Middle East, are also part of the doctrine. So is the discreet backing of protesters in Egypt, Iran and Syria.

The emerging strategy — which Rhodes touted as “a far more focused approach to our adversaries” — is a welcome shift from the martial policies and bellicose rhetoric of both the Bush administration and today’s Republican presidential candidates. But Obama has granted the CIA far too much leeway in carrying out drone strikes in Pakistan and Yemen. In both countries, the strikes often appear to be backfiring.

Obama and other administration officials insist the drones are used rarely and kill few civilians. In a rare public comment on the program, the president defended the strikes in late January. “I want to make sure the people understand, actually, drones have not caused a huge number of civilian casualties,” Obama said. “For the most part, they have been very precise precision strikes against al Qaeda and their affiliates. And we are very careful in terms of how it’s been applied.”

But from Pakistan to Yemen to post-American Iraq, drones often spark deep resentment where they operate. When they do attack, they kill as brutally as any weapon of war. The administration’s practice of classifying the strikes as secret only exacerbates local anger and suspicion. Under Obama, drone strikes have become too frequent, too unilateral, and too much associated with the heavy-handed use of American power.

In the January interview, Obama insisted drone strikes were used only surgically. “It is important for everybody to understand,” he said, “that this thing is kept on a very tight leash.”

Drones, though, are in no way surgical.

In interviews, current and former Obama administration officials told me the president and his senior aides had been eager from the outset to differentiate their approach in Pakistan and Afghanistan from Bush’s. Unlike in Iraq, where Democrats thought the Bush administration had been too aggressive, they thought the Bush White House had not been assertive enough with Afghan and Pakistani leaders. So the new administration adopted a unilateral, get-tough approach in South Asia that would eventually spread elsewhere. As candidate Obama vowed in a 2007 speech, referring to Pakistan’s president at the time, “If we have actionable intelligence about high-value terrorist targets and President Musharraf won’t act, we will.”

In his first year in office, Obama approved two large troop surges in Afghanistan and a vast expansion of the number of CIA operatives in Pakistan. The CIA was also given more leeway in carrying out drone strikes in the country’s ungoverned tribal areas, where foreign and local militants plot attacks for Afghanistan, Pakistan and beyond.

The decision reflected both Obama’s belief in the need to move aggressively in Pakistan and the influence of the CIA in the new administration. To a far greater extent than the Bush White House, Obama and his top aides relied on the CIA for its analysis of Pakistan, according to current and former senior administration officials. As a result, preserving the agency’s ability to carry out counterterrorism, or “CT,” operations in Pakistan became of paramount importance.

“The most important thing when it came to Pakistan was to be able to carry out drone strikes and nothing else,” said a former official who spoke on condition of anonymity. “The so-called strategic focus of the bilateral relationship was there solely to serve the CT approach.”

Initially, the CIA was right. Increased drone strikes in the tribal areas eliminated senior al Qaeda operatives in 2009. Then, in July 2010, Pakistanis working for the CIA pulled up behind a white Suzuki navigating the bustling streets of Peshawar. The car’s driver was later tracked to a large compound in the city of Abbottabad. On May 2, 2011, U.S. commandos killed Osama bin Laden there.

The U.S. intelligence presence, though, extended far beyond the hunt for bin Laden, according to former administration officials. At one point, the CIA tried to deploy hundreds of operatives across Pakistan but backed off after suspicious Pakistani officials declined to issue them visas. At the same time, the agency aggressively used the freer hand Obama had given it to launch more drone strikes than ever before.

Established by the Bush administration and Musharraf in 2004, the covert CIA drone program initially carried out only “personality” strikes against a preapproved list of senior al Qaeda members. Pakistani officials were notified before many, but not all, attacks. Between 2004 and 2007, nine such attacks were carried out in Pakistan, according to the New America Foundation.

In 2008, the Bush administration authorized less-restrictive “signature” strikes in the tribal areas. Instead of basing attacks on intelligence regarding a specific person, CIA drone operators could carry out strikes based on the behavior of people on the ground. Operators could launch a drone strike if they saw a group, for example, crossing back and forth over the Afghanistan-Pakistan border. In 2008, the Bush administration carried out 33 strikes.

Under Obama, the drone campaign has escalated rapidly. The number of strikes rose steeply to 53 in 2009 and then more than doubled to 118 in 2010. Former administration officials said the looser rules resulted in the killing of more civilians. Current administration officials insisted that Obama, in fact, tightened the rules on the use of drone strikes after taking office. They said strikes rose under Obama because improved technology and intelligence gathering created more opportunities for attacks than existed under Bush.

But as Pakistani public anger over the spiraling strikes grew, other diplomats expressed concern as well. The U.S. ambassador in Pakistan at the time, Anne Patterson, opposed several attacks, but the CIA ignored her objections. When Cameron Munter replaced Patterson in October 2010, he objected even more vigorously. On at least two occasions, CIA Director Leon Panetta dismissed Munter’s protests and launched strikes, the Wall Street Journal later reported. One strike occurred only hours after Sen. John Kerry, head of the Senate Foreign Relations Committee, had completed a visit to Islamabad.

A March 2011 strike brought the debate to the White House. A day after Pakistani officials agreed to release CIA contractor Raymond Davis, the agency — again over Munter’s objections — carried out a signature drone strike that the Pakistanis say killed four Taliban fighters and 38 civilians. Already angry about the Davis case, Pakistan’s Army chief, Gen. Ashfaq Parvez Kayani, issued an unusual public statement, saying a group of tribal elders had been “carelessly and callously targeted with complete disregard to human life.” U.S. intelligence officials dismissed the Pakistani complaints and insisted 20 militants had perished. “There’s every indication that this was a group of terrorists, not a charity car wash in the Pakistani hinterlands,” one official told the Associated Press.

Surprised by the vehemence of the official Pakistani reaction, National Security Adviser Tom Donilon questioned whether signature strikes were worthwhile. Critics inside and outside the U.S. government contended that a program that began as a carefully focused effort to kill senior al Qaeda leaders had morphed into a bombing campaign against low-level Taliban fighters. Some outside analysts even argued that the administration had adopted a de facto “kill not capture” policy, given its inability to close Bush’s Guantánamo Bay prison and create a new detention system.

In April 2011, the director of Pakistan’s intelligence service, Lt. Gen. Ahmed Shuja Pasha, visited Washington in an effort to repair the relationship, according to news accounts and former administration officials. Just after his visit, two more drone strikes occurred in the tribal areas, which Pasha took as a personal affront. In a rare concession, Panetta agreed to notify Pakistan’s intelligence service before the United States carried out any strike that could kill more than 20 people.

In May, after the bin Laden raid sparked further anger among Pakistani officials, Donilon launched an internal review of how drone strikes were approved, according to a former administration official. But the strikes continued. At the end of May, State Department officials were angered when three missile strikes followed Secretary of State Hillary Clinton’s visit to Pakistan.

As Donilon’s review progressed, an intense debate erupted inside the administration over the signature strikes, according to the Wall Street Journal. Adm. Mike Mullen, then chairman of the Joint Chiefs of Staff, said the strikes should be more selective. Robert Gates, then the defense secretary, warned that angry Pakistani officials could cut off supplies to U.S. troops in Afghanistan. Clinton warned that too many civilian casualties could strengthen opposition to Pakistan’s weak, pro-American president, Asif Ali Zardari.

The CIA countered that Taliban fighters were legitimate targets because they carried out cross-border attacks on U.S. forces, according to the former official. In June, Obama sided with the CIA. Panetta conceded that no drone strike would be carried out when Pakistani officials visited Washington and that Clinton and Munter could object to proposed strikes. But Obama allowed the CIA director to retain final say.

Last November, the worst-case scenario that Mullen, Gates and Clinton had warned of came to pass. After NATO airstrikes mistakenly killed 24 Pakistani soldiers on the Afghanistan-Pakistan border, Kayani demanded an end to all U.S. drone strikes and blocked supplies to U.S. troops in Afghanistan. At the same time, popular opposition to Zardari soared. After a nearly two-month lull that allowed militants to regroup, drone strikes resumed in the tribal areas this past January. But signature strikes are no longer allowed — for the time being, according to the former senior official.

Among average Pakistanis, the strikes played out disastrously. In a 2011 Pew Research Center poll, 97 percent of Pakistani respondents who knew about the attacks said American drone strikes were a “bad thing.” Seventy-three percent of Pakistanis had an unfavorable view of the United States, a 10-percentage-point rise from 2008. Administration officials say the strikes are popular with Pakistanis who live in the tribal areas and have tired of brutal jihadi rule. And they contend that Pakistani government officials — while publicly criticizing the attacks — agree in private that they help combat militancy. Making the strikes more transparent could reduce public anger in other parts of Pakistan, U.S. officials concede. But they say some elements of the Pakistani government continue to request that the strikes remain covert.

For me, the bottom line is that both governments’ approaches are failing. Pakistan’s economy is dismal. Its military continues to shelter Taliban fighters it sees as proxies to thwart Indian encroachment in Afghanistan. And the percentage of Pakistanis supporting the use of the Pakistani Army to fight extremists in the tribal areas — the key to eradicating militancy — dropped from a 53 percent majority in 2009 to 37 percent last year. Pakistan is more unstable today than it was when Obama took office.

A similar dynamic is creating even worse results on the southern tip of the Arabian Peninsula. Long ignored by the United States, Yemen drew sudden attention after a suicide attack on the USS Cole killed 17 American sailors in the port of Aden in 2000. In 2002, the Bush administration carried out a single drone strike in Yemen that killed Abu Ali al-Harithi, an al Qaeda operative who was a key figure in orchestrating the Cole attack. In the years that followed, the administration shifted its attentions to Iraq, and militants began to regroup.

A failed December 2009 attempt by a militant trained in Yemen to detonate a bomb on a Detroit-bound airliner focused Obama’s attention on the country. Over the next two years, the United States carried out an estimated 20 airstrikes in Yemen, most in 2011. In addition to killing al Qaeda-linked militants, the strikes killed dozens of civilians, according to Yemenis. Instead of decimating the organization, the Obama strikes have increased the ranks of al Qaeda in the Arabian Peninsula from 300 fighters in 2009 to more than 1,000 today, according to Gregory Johnsen, a leading Yemen expert at Princeton University. In January, the group briefly seized control of Radda, a town only 100 miles from the capital, Sanaa. “I don’t believe that the U.S. has a Yemen policy,” Johnsen told me. “What the U.S. has is a counterterrorism strategy that it applies to Yemen.”

The deaths of bin Laden and many of his lieutenants are a step forward, but Pakistan and Yemen are increasingly unstable. Pakistan is a nuclear-armed country of 180 million with resilient militant networks; Yemen, an impoverished, failing state that is fast becoming a new al Qaeda stronghold. “They think they’ve won because of this approach,” the former administration official said, referring to the administration’s drone-heavy strategy. “A lot of us think there is going to be a lot bigger problems in the future.”

The backlash from drone strikes in the countries where they are happening is not the only worry. In the United States, civil liberties and human rights groups are increasingly concerned with the breadth of powers Obama has claimed for the executive branch as he wages a new kind of war.

In the Libya conflict, the administration invoked the drones to create a new legal precedent. Under the War Powers Resolution, the president must receive congressional authorization for military operations within 60 days. When the deadline approached in May, the administration announced that because NATO strikes and drones were carrying out the bulk of the missions, no serious threat of U.S. casualties existed and no congressional authorization was needed. “It’s changed the way politicians talk about what should be the most important thing that a nation engages in,” said Peter W. Singer, a Brookings Institution researcher. “It’s changed the way we in the public deliberate war.”

Last fall, a series of drone strikes in Yemen set another dangerous precedent, according to civil liberties and human rights groups. Without any public legal proceeding, the U.S. government executed three of its own citizens. On Sept. 30, a drone strike killed Anwar al-Awlaki, a charismatic American-born cleric of Yemeni descent credited with inspiring terrorist attacks around the world. Samir Khan, a Pakistani-American jihadist traveling with him, was killed as well. Several weeks later, another strike killed Awlaki’s 16-year-old son, Abdulrahman al-Awlaki, also a U.S. citizen. Administration officials insisted a Justice Department review had authorized the killings but declined to release the full document.

“The administration has claimed the power to carry out extrajudicial executions of Americans on the basis of evidence that is secret and is never seen by anyone,” said Jameel Jaffer, deputy legal director of the American Civil Liberties Union. “It’s hard to understand how that is consistent with the Constitution.”

After criticizing the Bush administration for keeping the details of its surveillance, interrogation and detention practices secret, Obama is doing the same thing. His administration has declined to reveal the details of how it places people on kill lists, carries out eavesdropping in the United States or decides whom to detain overseas. The administration is also prosecuting six former government officials on charges of leaking classified information to the media — more cases than all other administrations combined.

Administration officials deny being secretive and insist they have disclosed more information about their counterterrorism practices than the Bush administration, which fiercely resisted releasing details of its “war on terror” and established the covert drone program in Pakistan. Obama administration officials say they have established a more transparent and flexible approach outside Pakistan that involves military raids, drone strikes and other efforts. They told me that every attack in Yemen was approved by Yemeni officials. Eventually, they hope to make drone strikes joint efforts carried out openly with local governments.

For now, keeping them covert prevents American courts from reviewing their constitutionality, according to Jaffer. He pointed out that if a Republican president followed such policies, the outcry on the left would be deafening. “You have to remember that this authority is going to be used by the next administration and the next administration after that,” Jaffer said. “You need to make sure there are clear limits on what is really unparalleled power.”

To their credit, Obama and his senior officials have successfully reframed Bush’s global battle as a more narrowly focused struggle against al Qaeda. They stopped using the term “war on terror” and instead described a campaign against a single, clearly identifiable group.

Senior administration officials cite the toppling of Muammar al-Qaddafi as the prime example of the success of their more focused, multilateral approach to the use of force. At a cost of zero American lives and $1 billion in U.S. funding, the Libya intervention removed an autocrat from power in five months. The occupation of Iraq claimed 4,484 American lives, cost at least $700 billion, and lasted nearly nine years.

“The light U.S. footprint had benefits beyond less U.S. lives and resources,” Rhodes told me. “We believe the Libyan revolution is viewed as more legitimate. The U.S. is more welcome. And there is less potential for an insurgency because there aren’t foreign forces present.”

In its most ambitious proposal, the administration is also trying to restructure the U.S. military, implement steep spending cuts and “right-size” U.S. forces around the world. Under Obama’s plan, the Army would be trimmed by 80,000 soldiers, some U.S. units would be shifted from the Middle East to the Pacific, and more small, covert bases would be opened. Special Forces units that have been vastly expanded in Iraq and Afghanistan would train indigenous forces and carry out counterterrorism raids. Declaring al Qaeda nearly defeated, administration officials say it is time for a new focus.

“Where does the U.S. have a greater interest in 2020?” Rhodes asked. “Is it Asia-Pacific or Yemen? Obviously, the Asia-Pacific region is clearly going to be more important.”

Rhodes has a point, but Pakistan and its nuclear weapons — as well as Yemen and its proximity to vital oil reserves and sea lanes — are likely to haunt the United States for years.

Retired military officials warn that drones and commando raids are no substitute for the difficult process of helping local leaders marginalize militants. Missile strikes that kill members of al Qaeda and its affiliates in Pakistan and Yemen do not strengthen economies, curb corruption or improve government services. David Barno, a retired lieutenant general who commanded U.S. forces in Afghanistan from 2003 to 2005, believes hunting down senior terrorists over and over again is not a long-term solution.

“How do you get beyond this attrition warfare?” he asked me. “I don’t think we’ve answered that question yet.”

PHOTO: A supporter of religious and political party Jamaat-e-Islami flashes the victory sign in front of an image of a drone, during a rally against drone attacks in Karachi, June 4, 2011. REUTERS/Athar Hussain

Mitt Romney’s declaration that he wasn’t concerned about “the very poor” was lampooned by Republicans and Democrats alike this week. But his next statement in a CNN interview is the one that could determine the fate of his candidacy.

“I’m concerned about the very heart of America,” Romney said, adding later: “My focus is on middle-income Americans.”

With astonishing speed, the 2012 presidential election is becoming a referendum on how best to help the American middle class. So far, Romney’s solutions are likely to be far more pleasing to the Republican base than the general electorate.

Reduce corporate taxes by 25 percent. Increase oil and gas drilling. Repeal Obamacare and Dodd-Frank. Cut non-security discretionary spending by 5 percent. Weaken unions. And reduce the federal workforce by 10 percent.

Where, Democrats contend, is the benefit to the middle class?

The conservative answer reflects the yawning ideological gap that will become more apparent in the months ahead. While Obama and Democrats call for the federal government — and society as a whole — to ensure that individuals have the opportunity to increase their social mobility, Romney and Republicans concentrate on broad economic growth.

“Republicans are focused much more on having a rising tide that lifts all boats, even if it lifts more yachts than dinghies,” said Scott Winship, a fellow at the Brookings Institution. “It’s very striking when compared to Obama’s very individual focus on human capital and a federal role in increasing it.”

As he has done in his approach to foreign policy, Romney is trying to channel his inner Reagan in economic policy. While Democrats contend that George W. Bush’s use of supply-side, unregulated, trickle-down economics caused the Great Recession, Reagan’s economic doctrine is alive and well on the right.

“Most of our problems now relate to this asset bubble that formed; it wasn’t so much what Bush did or didn’t do,” Winship argued. “The ’80s in retrospect were not a bad period economically. I think it’s hard to argue that trickle-down will end up hurting the poor or reducing middle-class opportunities.”

Winship and some conservative economists also go a step further. In a series of recent posts, they question a central liberal narrative: that middle-class wages have stagnated since Reagan’s presidency. Terry Fitzgerald, an economist at the Federal Reserve Bank of Minneapolis, has argued that the rapid postwar growth of the American middle class has slowed over the last 30 years, but the middle class has still increased in size.

“From 1947 to 1975, was very fast growth,” Fitzgerald told me. “It was slower since then, but it hasn’t been stagnation.”

Fitzgerald argued that economic studies showing little increase in the median income of American households are skewed by social changes, not only economic ones. Beginning in the late 1970s, high divorce rates reduced the percentage of American households made up of married couples from 63 percent in 1976 to 50 percent in 2006. Single-parent families earn far less than two-parent families, Fitzgerald argues, and drive down the median income.

Richard Burkhauser, a Cornell University economist, contends that the value of benefits families receive from the government and employers are also not included in studies showing meager increases. When the value of these benefits is included, he argues, the stagnation of middle-class incomes disappears.

Liberal economists scoff at such findings. They say a comprehensive study by the non-partisan Congressional Budget Office included such factors and still found tepid middle-class wage growth since 1979. Jared Bernstein, a former chief economic adviser to Vice-President Joseph R. Biden Jr., said supply-side economics failed in the 1980s and the 2000s and would fail again.

“Not only did it fail to reach the vast majority of American families, it actually contributed to the worst recession since the Great Depression,” Bernstein told me. “I can say with complete confidence that the supply-side, deregulate, trickle-down model is a failed model.”

“When I look at all the Republican candidates,” he added, “this is still at the heart of their thinking.”

Meanwhile, Romney, who is trying to unseat an incumbent, embraces a suffering-middle-class narrative. Doing otherwise would be political suicide. The bogey-man, he argues, is government intervention. Top-down economic growth will ease Middle America’s woes, not government programs.

Obama, on the other hand, regularly unveils new federal initiatives that he says will reduce the cost of college, make it easier for homeowners to refinance, and return manufacturing jobs to the United States. The philosophical difference could not be more profound — or more reminiscent of the 1980s.

One or two of Romney’s ideas are close to those of Obama. Unlike every other Republican candidate, the former Massachusetts governor supports instituting automatic increases in the federal minimum wage to keep pace with inflation. And he talks about the central role that increasing American exports and retraining workers could have in reviving the middle class in a globalized economy. But the similarities end there.

Romney argues that the federal government should get out of the job-training business, for example, and devolve all such efforts to the states. Asked for a specific step that would aid the middle class, Andrea Saul, a campaign spokesperson, cited a Romney proposal to eliminate all interest, dividend and capital-gains taxes for people earning less than $200,000. She argued that the philosophy of Barack Obama, not Ronald Reagan, was gutting America’s middle class.

“President Obama’s big government policies have been disastrous for the middle class,” Saul said in an email Thursday. “Mitt Romney is focused on helping those middle-income Americans who have been hurt worst by the Obama economy.”

In the months ahead, we’ll see if Middle America buys it.

PHOTO: U.S. Republican presidential candidate and former Massachusetts Governor Mitt Romney mingles with the crowd after speaking at a campaign stop in Eagan, Minnesota, February 1, 2012. REUTERS/Craig Lassig



Update: The December job numbers released this morning continued the same trend described in yesterday’s column. Of the 200,000 new jobs created last month, 78,000 – or nearly 40 percent — were in transportation, warehousing and retail, sectors known for low pay and seasonal hiring. In a far more positive sign, manufacturing gained 23,000 workers in December after four months of little change. A vast expansion of that trend would benefit the middle class tremendously.

WASHINGTON — Between now and November, middle class Americans are going to hear an enormous amount of bragging about job creation.

Mitt Romney will tout his role in the creation of Staples, The Sports Authority and Domino’s, three firms that he says created 100,000 jobs. Barack Obama will say 2.9 million jobs have been created since March 2010, and highlight a surge of 140,000 new private sector jobs in November.

The central question for middle class Americans, however, is: What quality of job is being created? The November job surge, for example, occurred primarily in retail, leisure and hospitality, sectors known for low wages. The other high-growth areas were professional services and health care, where higher education is a central determinant of income. Manufacturing and construction, one of the few areas left in the American economy where members of the middle class without elite educational pedigrees can find strong wages, were moribund. The following chart from the Bureau of Labor Statistics breaks down the numbers.

In a rare moment of bipartisan agreement, Republicans and Democrats both recognize the problem. After years of Democratic politicians complaining about a lack of social mobility for Americans, The New York Times reported this morning that Republican candidates are complaining about the problem as well.

Presidential candidate and former Pennsylvania Senator Rick Santorum warned this fall that movement “up into the middle income is actually greater, the mobility in Europe, than it is in America,” according to The Times. Wisconsin Congressman Paul D. Ryan, a leading House conservative, recently wrote that “mobility from the very bottom up” is “where the United States lags behind.”

The story reported that at least five large studies in recent years have found the United States to be less mobile than comparable nations. A Swedish research project found that 42 percent of American men raised in the bottom fifth of incomes stay there as adults. In Denmark, the number was 25 percent. In Britain, it was 30 percent. At the same time, only 8 percent of American men at the bottom rose to the top fifth. That compares with 12 percent of the British and 14 percent of the Danes.

A Canadian study found that just 16 percent of Canadian men raised in the bottom tenth of incomes stayed there as adults, compared with 22 percent of Americans, The Times reported. Similarly, 26 percent of American men raised at the top tenth stayed there, but just 18 percent of Canadians.

Economists argue that a central tool in reviving the middle class – and creating social mobility – is the creation of better-paying middle class jobs. Like so much else, that task is enormously complex. Scholars say the reduction in pay is the product of worldwide economic trends, from technological change to globalization, that are difficult to counter. Harry Holzer, an economist at Georgetown University, tracked which parts of the economy featured high paying jobs over time. The percentage of well-paying jobs provided by the manufacturing sector fell by half – from roughly 27 percent in 1992 to 13.5 percent in 2003.

Holzer notes that the nature of business in the United States changed over the last several decades. In the past, large, capital-intensive manufacturing companies faced relatively little competition from overseas and depended on workers in the United States.

“Big, stable, highly profitable and not very competitive means a bigger pie,” Holzer said in an interview. “The simplest thing to do is to cut a bigger slice of the pie for workers.”

That business model has disappeared. Globalization caused American firms to face fiercer competition from foreign companies. And technological change allowed American firms to ship manufacturing overseas but still tightly monitor quality. Overall, companies have gained the upper hand on workers, who are increasingly easy to replace.

Paul Osterman, an MIT professor, agreed that those dynamics are irreversible. But he argued that some changes in American business norms unnecessarily accelerated the elimination of middle class jobs. Executives once praised for creating jobs are now rewarded for eliminating them.

“Think about who gets their picture on the cover of Fortune.” he said. “It used to be the ones that were admired were the ones who treated their workers as a family. Now it’s all about re-engineering, downsizing and shareholder value.”

Osterman said research shows that companies have reduced the amount of training they give their workers. He advocates tax incentives that would encourage companies to retrain employees.

Jared Bernstein, a senior fellow at the Center on Budget and Policy Priorities and a former economic adviser to Vice President Joe Biden, said the U.S. should not repeat the mistake it made after the last two downturns: building a recovery on a financial bubble.

“A lot of money shuffling at the top, a lot of arbitrage, which has very little to do with adding productive capacity to your economy,” he said. “A better way would be to add jobs that produce value, manufacturing jobs.”

He advocated that the American government adopt a manufacturing policy similar to the one Germany employs, where public-private partnerships target areas where German firms could gain global market share. Such an approach is anathema to many, though not all, business leaders.

The political debate, meanwhile, remains polarized. Democrats see government jobs as a tool in strengthening the middle class, arguing that police, teachers and sanitation workers stabilize the economy. Republicans see government jobs as relentlessly growing cancer that stifles the private sector.

Bureau of Labor Statistics data shows that overall government employment steadily grew from the 1940 to the 1970s, according to Bernstein. Since then, it has declined slightly.

Chart: Jared Bernstein, Data: Bureau of Labor Statistics

Hoping for constructive debate in a presidential election year is naive. And bipartisan commissions are notoriously ineffective. But I wish the National Academy of Sciences or some other nonpolitical group could be tasked with creating a Simpson-Bowles-like effort to examine ways to create better paying jobs. GE’s Jeffrey Immelt and other American executives who have doubled-down on American manufacturing could be included. So could retired Democrats and Republicans willing to move beyond party orthodoxy.

Study after study shows that a dearth of high-paying jobs is dividing our society, politics and middle class. We are falling behind the Canadians, British, and Europeans, as well as the Chinese and Indians. An honest debate over what mix of approaches might save us would be a godsend.

On Tuesday, Barack Obama declared the debate over how to restore growth, balance, and fairness to the American economy the “defining issue of our time.”

“This is a make-or-break moment for the middle class,” he said in a Kansas speech, “and for all those who are fighting to get into the middle class.”

The following day, Republican front-runner New Gingrich said Mr. Obama “represents a hard left radicalism” and is “opposed to capitalism and everything that made America great.” The answer, he said, was slashing taxes and the size of the federal government.

The arrival of the middle class at the center of the American political debate is a step forward, but Obama and his conservative rivals steered clear of an ugly truth. Revitalizing the American middle class in a transformed global economy is a staggeringly complex task. And neither Democratic nor Republican orthodoxy alone is the answer.

A recent study by MIT professors Frank Levy and Thomas Kochan laid out the depth of the problem. Rising blue-collar employment after World War II allowed the United States to create what Obama called “the largest middle class and the strongest economy that the world has ever known.” Now that those factories have moved en mass overseas, the U. S. faces a far more arduous undertaking.

Levy and Kochan argue for a new “social compact” that includes a public-private partnership where the United States’ unparalleled venture capital and research university systems create high-end design, production, marketing and distribution jobs. Reforming profit sharing, unions, higher education, on-the-job training and tax law would create higher-skilled American workers who benefit from company performance along with senior executives. They cite the training, innovation and profit-sharing practices of Wegman’s, Cisco and Google as examples.

By contrast, Obama’s most specific legislative proposal in his speech was a payroll tax cut funded by a surtax on millionaires. Economists say the cut is a helpful short-term stimulus, but the key to strengthening the middle class over the long-term is the difficult task of creating stable, well-paying jobs.

The United States is not alone. Economies around the world are experiencing the same income disparity and stagnation in middle class wages. The reasons for the change – and the potential solutions to America’s economic woes – lie in the American middle class reinventing its place a changed global economy.
Sweeping technological changes over the last twenty years have altered traditional economic dynamics. The Internet has created network effects in extreme, with hundreds of millions of worldwide users making Amazon, Facebook and other companies extraordinarily valuable in extremely short periods. At the same time, global, computer-driven financial markets produce staggering profits and losses at unprecedented speed.

A study released Monday by the Organization for Economic Cooperation and Development found that the primary cause of income disparity in the U.S. and its 33 other members was technological change. A historic integration of financial and trade markets, fueled by technology, created an unprecedented worldwide demand for highly skilled workers in those fields. As a result, a select group of CEOs, traders and others – the so-called one percent – became fabulously rich fantastically quickly.

At the same time, technology is dividing the middle class. A November study by researchers at Stanford and Brown found that the number of middle class neighborhoods in the United States were shrinking as income disparity widened.

To the dismay of the middle class, technological innovation is sending jobs overseas but not reducing costs at home.  Education and health expenses in the United States, for example, continue to steeply rise. As The Economist recently noted, the middle class is squeezed from two sides, with wages dropping and living costs rising.

Our tired, polarized politics have not caught up with these changes. The Democratic party’s failure to dramatically reform Medicare and Social Security, for example, undermines its argument that government can be effective. At the same time, the global elite’s prosperity is not magically trickling down as supply-side Republicans predicted.

Finding a way forward is not easy. No one, including me, knows how to reinvent the American middle class. The workings of a rapidly, evolving globalized economy remain poorly understood. And the challenges American society faces are generational.

Obama’s goals and vision for the middle class, in general, are far more inventive than those of conservative Republicans. The Republican right, oddly enough, has become more doctrinaire, utopian and out-of-touch with global realities than the “Marxist” Obama administration. Criticism that the president glosses over the country’s staggering fiscal problems, twists figures and issues vague proposals are legitimate, but the conservative right too often offers simplistic, naive and ideological answers to enormously complex dynamics.

Over time, the American middle class can innovate, moderate and educate its way back to prosperity. Public-private partnerships can create high-quality schools and jobs. American made high-end goods and services can be exported to China and other growing economies.

The American middle class should not fear technological change or increasing global competition. Instead, we must forge a new politics at home and a new place in a transformed world economy.

PHOTO: U.S. President Barack Obama speaks about the economy and a payroll tax cut compromise during a visit to Osawatomie High School in Kansas December 6, 2011. REUTERS/Kevin Lamarque