Ezra Klein: So let’s begin with the economy.
We're in a point where the economy is growing.
We have very high corporate profits.
We have a record stock market, and yet for
decades now we've not been seeing significant
wage increases for the American people.
How have we gotten to a point where we can
have high corporate profits, and businesses
can be doing so well, but the workers don't
necessarily share in that prosperity?
Barack Obama: Well, this has been at least
a three-decade-long trend.
And this was a major topic in my State of
the Union address.
We obviously came in at a time of enormous
crisis, and the first task was making sure
we didn't have a complete global economic
meltdown.
The steps we took, whether making sure the
financial system was functioning — saving
the auto industry, encouraging state and local
spending.
All those things made a difference in buoying
the economy, and then it’s been a hard but
steady slog to the point where now we're growing
at a robust pace and unemployment has come
down faster than any time in the last 30 years.
In some ways we're now back to the position
where we can focus on what is this longer-term
trend, and that is a larger and larger share
of wealth and income going to the very top,
and the middle class or folks trying to get
into the middle class, feeling increasingly
squeezed because their wages have stagnated.
Now, there are a whole bunch of reasons for
that.
Some of it has to do with technology and entire
job sectors being eliminated: travel agents,
bank tellers, a lot of middle management,
because of efficiencies with the internet
and a paperless office.
A lot of it has to do with globalization and
the rest of the world catching up.
Post-World War II, we just had some enormous
structural advantages because our competitors
had been devastated by war, and we had also
made investments that put us ahead of the
curve, whether in education or infrastructure
or research and development.
And around the ‘70s and ‘80s and then
accelerating beyond that, those advantages
went away at the same time as, because of
technologies, companies are getting a lot
more efficient and one last component of this
is that workers increasingly had less leverage
because of changes in labor laws and the ability
for capital to move and labor not to move.
 You combine all that stuff and it’s put
workers in a tougher position.
So our job now is to create additional tools
that, number one, make sure that everybody's
got a baseline of support to be able to succeed
in a constantly moving economy.
Whether it’s healthcare that survives job
loss, whether it is making sure we have child
care that allows a two-working-household-family
to prosper while still caring for their kids.
Having a certain baseline in terms of wages,
through the minimum wage.
So that's one set of issues.
A second set of issues then becomes: how do
we make sure that everybody has the tools
to succeed in an economy where they constantly
have to adapt?
And how do they move up the value chain, essentially
because they can work in higher-wage, higher-skill
professions, and were able to compete for
those jobs internationally?
Then the third thing is making sure that we
have an economy that's productive.
Now if we do all those things, then what I'm
confident about is that we can continue to
lower the unemployment rate, increase the
participation rate, and continue to grow and
increase productivity.
We're still going to have a broader, longer
term, global question and that is: how do
we make sure that the folks at the very top
are doing enough of their fair share?
The winner-take-all aspect of this modern
economy means that you've got some people
who just control enormous amounts of wealth.
We don't really resent their success, on the
other hand just as a practical matter, if
we're going to pay for schools, roads, et
cetera, and you've got you know, fifty people
or eighty people having as much wealth as
three billion, you know you're going to have
problems making sure that we're investing
enough in the common good to be able to move
forward.
 So that's a long term question.
 But right now, there's some very specific
things we can do that can makes a difference
and help middle class families.
And that's why I called it middle-class economics.
 
Ezra: To focus a bit on that long term question,
does that put us in a place long term where
redistribution becomes, in a sense, a positive
good in and of itself, that you have an economy
or potentially you have the government playing
the role not of powering the growth engine
which is what a lot of what had to be done
after the financial crisis, but of making
sure that while that growth engine is running,
that it is ensuring that enough of the gains
and prosperity is shared that the political
support for that fundamental economic model
to remain strong?
Obama: That's always been the case.
I don't think that's entirely new.
The fact of the matter is that relative to
our post-war history, taxes now are not particularly
high or particularly progressive compared
to what they were, say, in the late ‘50s
or the ‘60s.
And there's always been this notion that for
a country to thrive, there are some things,
as Lincoln says, that we can do better together
than we can do for ourselves.
And whether that's building roads, or setting
up effective power grids, or making sure that
we've got high quality public education, that
teachers are paid enough, the market will
not cover those things.
And we've got to do them together.
Basic research falls in that category.
So that's always been true.
I think that part of what's changed is that
a lot of that burden for making sure that
the pie was broadly shared took place before
government even got involved.
If you had stronger unions, you had higher
wages.
If you had a corporate culture that felt a
sense of place and commitment so that the
CEO was in Pittsburgh or was in Detroit and
felt obliged, partly because of social pressure
but partly because they felt a real affinity
toward the community, to re-invest in that
community and to be seen as a good corporate
citizen.
 Today what you have is quarterly earning
reports, compensation levels for CEOs that
are tied directly to those quarterly earnings,
you've got international capital that is demanding
maximizing short term profits.
And so what happens is that a lot of the distributional
questions that used to be handled in the marketplace
through decent wages or health care or defined
benefit pension plans, those things all are
eliminated.
And the average employee, the average worker,
doesn't feel any benefit.
So part of our job is what can government
do directly through tax policy?
What we’ve proposed, for example, in terms
of capital gains.
That would make a big difference in our capacity
to give a tax break to a working mom for child
care.
And that's smart policy, and there's no evidence
that would hurt the incentives of folks at
Google or Microsoft or Uber not to invent
what they invent or not to provide services
they provide.
It just means that instead of 20 billion dollars,
maybe they've got 18.
Right?
 But it does mean that mom can go to work
without worrying that her kid's not in a safe
place.
 
We also still have to focus on the front end.
Which is even before taxes are paid, are there
ways that we can increase the bargaining power
and the -- making sure that an employee has
some ... measurable increases in their incomes
and their wealth and their security as a consequence
of an economy that's improving.
 And that's where issues like labor laws
make a difference, that's where, say in shareholder
meetings,and trying to change the culture
in terms of compensation at the corporate
level.
Those things could make a difference.
And there's been some interesting conversations
globally around issues like inclusive capitalism
and how we can make it work for everybody.
Ezra: When you drill into that pretax portion,
one thing you can find in wages is health
care costs.
Obama: Yeah.
Ezra: And when you drill deeper into the health
care costs, one thing you find is that a major
piece of why Americans pay so much more is
that when we go to a hospital, an MRI, or
an appendectomy, or even a bottle of cholesterol
drugs, just costs much more for an American
to buy than it does in Germany, in Japan,
in Canada, in Great Britain.
Why do you think Americans pay so much higher
health care prices than folks in other countries?
Obama: Well, you know there are a lot of theories
about this.
But I think the evidence points to a couple
of key factors.
One is that we've got a third-party system.
Mostly we've got a system where everybody
gets their health insurance through their
employers.
Obviously the Affordable Care Act, Obamacare,
helps to cover the gap for those who aren't
in that system.
But for those of us who have an insurer, we
don't track it.
And the market then becomes really opaque
and really hard to penetrate.
Health providers are able to, I think, charge
without much fear that somebody's looking
over their shoulders and asking well why does
this cost that much?
So that's part of it.
That's one of the reasons the Affordable Care
Act, a lot of the attention’s been on making
sure that the uninsured have peace of mind,
and people who currently have insurance but
at some point might lose it or have pre-existing
conditions are going to have it, that's obviously
the moral basis for what we did.
But people haven't been paying as much attention
to the delivery system reforms that we're
trying to institute through the Affordable
Care Act as well.
I can't take credit for all four years of
the lowest health care inflation in the last
fifty, that we've seen since the Affordable
Care Act passed.
Some of the trends I think were already on
their way.
But we are accelerating a lot of reforms,
for example.
What do we do to make sure that instead of
paying a doctor of a hospital for just providing
a service, let’s make sure that they're
being rewarded for a good outcome?
Which may mean in some cases fewer tests or
a less expensive generic drug, or just making
sure that all your employees are washing your
hands so that you're cutting the infection
rate, or making sure that hospitals are reimbursed
when there's a lower readmissions rate, as
opposed to when they're doing more stuff.
And using Medicare as a lever, I think, is
creating an environment in the health care
field where we can start getting better outcomes
and lower costs at the same time.
There are still going to be those who argue
that unless you get a single-payer system,
you're never going to get all the efficiencies.
There's certain areas like drugs where the
fact that Congress has not been, and the Republican
Party in particular, has been resistant to
letting drug makers and Medicare negotiate
for the lowest price.
It results in us paying a lot more than we
should.
 But if we're paying four, five, six, eight
percent more than other countries for the
same outcomes, I'd be pretty happy where we're
only paying two or three percent more.
Because that represents hundreds of billions
of dollars and means we can do a lot with
that money.
Ezra: When you talk about Medicare as a lever,
Medicare tends to pay a lot less per service
than private insurers by a margin.
Before single payer there's also this idea
you hear occasionally of letting private insurers
band together with Medicare, with Medicaid,
to jointly negotiate prices.
Do you think that's a good idea?
Obama: You know, I think that moving in the
direction where consumers and others can have
more power in the marketplace, particularly
when it comes to drugs, makes a lot of sense.
 Now you'll hear from the drug companies
that part of the reasons other countries pay
less for drugs is they don't innovate.
We essentially through our system, subsidize
the innovation and other countries are free
riders.
There's probably a little bit of truth to
that but when you look at the number of breakthrough
drugs and the amount of money that drug companies
now are putting into research and where they're
putting it, a whole lot of it is actually
in redesigning, modestly, existing drugs so
they can renew patents and maintain higher
prices and higher profits.
That's not entirely true... but there's some
of that.
So there is a lot of savings that could be
achieved while still making sure that our
drug industry is the best in the world, and
will still be making a healthy profit.
Ezra: To turn a bit towards politics, at this
point according to the polls, you are the
most polarizing president really since we
began polling, but before you the record was
set by George W. Bush, and before George W.
Bush the record was set by Bill Clinton.
It seems that there's something structural
happening there in terms party polarization
and the way it affects approval ratings and
cooperation with presidents.
In your State of the Union you struck back
at critics who say that the idea of healing
some of these divisions is naïve or impossible.
So when you welcome your successor into office,
what would you tell them there is worth trying
to that you think that can still work, that
would reduce the polarization?
Obama: Well, there are a couple of things
that in my mind, at least, contribute to our
politics being more polarized than people
actually are.
And I think most people just sense this in
their daily lives.
Everybody's got a family member or a really
good friend from high school who is on the
complete opposite side of the political spectrum.
And yet, we still love them, right?
 Everybody goes to a soccer game, or watching
their kids, coaching, and they see parents
who they think are wonderful people and then
if they made a comment about politics suddenly
they'd go, 'I can't believe you think that!'
 But a lot of it has to do with the fact
that a) the balkanization of the media means
that we just don't have a common place where
we get common facts and a common world view
the way we did twenty, thirty years ago.
And that just keeps on accelerating, you know,
and I'm not the first to observe this but
you've got the Fox News Rush Limbaugh folks
and then you've got the MSNBC folks and the
-- I dunno where Vox falls into that, but
you guys are I guess for the brainiac nerd
types.
But the point is that technology which brings
the world to us also allows us to narrow our
point of view.
That's contributed to it.
Gerrymandering contributes to it.
There's no incentive for most members of congress,
on the House side at least, in congressional
districts, to even bother trying to appeal.
And a lot of it has to do with just unlimited
money.
So people are absorbing an entirely different
reality when it comes to politics, even though
the way they're living their lives and interacting
with each other isn't that polarizing.
So my advice to a future president is increasingly
try to bypass the traditional venues that
create divisions and try to find new venues
within this new media that are quirkier, less
predictable.
You know yesterday I did three interviews
with YouTube stars that generally don't spend
a lot of time talking about politics.
And the reason we did it is because they're
reaching viewers who don't want to be put
in some particular camp, on the other hand
when you talk to them very specifically about
college costs or about health care or about
any of the other things that touch on their
individual lives, it turns out that you can
probably build a pretty good consensus.
Now that doesn't ignore the fact that I would
love to see some constitutional process that
would allow us to actually regulate campaign
spending the way we used to, and maybe even
improve it.
I'd love to see changes at the state level
that reduce political gerrymandering.
So there's all kinds of structural things
that I'd like to see that I think would improve
this, but, you know there’ve been periods
in the past where we've been pretty polarized.
I think, there just wasn't polling around.
As I recall there was a whole civil war, that
was a good example of polarization that took
place.
Ezra: Do you think if we don't get some of
those structural reforms, and more to the
point if we continue along this path, in terms
of where the parties are in Congress, are
there ways to govern with polarization?
It occurs to me that your argument when you
came to office, but before you, Bush was a
"uniter not a divider" and before him Clinton
who was going to moderate and change the Democratic
party with his sort of Third Way approach,
the last couple of presidents have come to
office promising the way they would get things
done is to reduce polarization.
Is there an argument or an approach that can
be made to govern amidst polarization?
Obama: A couple observations.
 Number one is that in American history,
even during the so-called golden age where,
you know, you had liberal Republicans and
conservative Democrats and there was deal
cutting going on in Congress.
Generally speaking, big stuff didn't get done
unless there was a major crisis or you had
-- and/or you had big majorities of one party
controlling the Congress and a president of
the same party.
I mean that's just been the history.
There have been exceptions, but that's often
been the case in terms of big muscle movements
in the political system.
And you know, my first two years in office
when I had a Democratic majority and Democratic
house and Democratic Senate, we were as productive
as any time since Lyndon Johnson.
And when the majority went away stuff got
blocked.
Probably the one thing that we could change
without a constitutional amendment that would
make a difference here would be the elimination
of the routine use of the filibuster in the
Senate.
Because I think that does, in an era in which
the parties are more polarized, it almost
ensures greater gridlock and less clarity
in terms of the positions of the parties.
There's nothing in the constitution that requires
it.
The framers were pretty good about designing
a house, a senate, two years versus six year
terms, every state getting two senators.
There were a whole bunch of things in there
to assure that a majority didn't just run
rampant.
The filibuster in this modern age probably
just torques it too far in the direction of
a majority party not being able to govern
effectively and move forward its platform.
And i think that's an area where we can make
some improvement.
Ezra: One of the powerful things that's happened
as polarization has increased politically
is it's begun structuring people's other identities.
The one I'm particularly interested in here
is race.
If you look back at polling around the OJ
Simpson verdict or the Bernhard Goetz shooting
in New York, Republicans and Democrats you
basically couldn't tell them apart.
Now you look at the Zimmerman verdict or you
look at what's going on in Ferguson and opinion
on racial issues is very sharply split by
party.
 Do you worry about the merging of sort of
racial and partisan identity?
Obama: I don't worry about that because I
don't think that's going to last.
I worry very much about the immediate consequences
of mistrust between police and minority communities.
I think there are things we can do to train
our police force and make sure that everybody
is being treated fairly.
And the task force that I assigned after the
Ferguson and New York cases is intended to
produce very specific tools for us to deal
with it.
But over the long term, I'm pretty optimistic
and the reason is because this country just
becomes more and more of a hodge-podge of
folks.
Again, this is an example where things seem
very polarized at the national level and media
spotlight, but you go into communities -- you
know one of the great things about being president
is you travel through the entire country and
you go to Tennessee and it turns out that
you've got this huge Kurdish community.
And you go to some little town in Iowa and
you see some hasidic Jewish community, and
then you see a bunch of interracial black
and white couples running around with their
kids.
And this is in these little farm communities
and you've got Latinos in the classroom when
you visit the schools there.
 So people are getting more and more comfortable
with the diversity of this country, much more
sophisticated about both the cultural differences
but more importantly the basic commonality
that we have.
And you know the key is to make sure that
our politics and our politicians are tapping
into that better set of impulses rather than
our baser fears.
And my gut tells me, and I've seen it in my
own career and you see it generally, a politician
who plays on those fears in America, I don't
think is gonna over time get a lot of traction.
Even, you know, it's not a perfect analogy
but if you think about how rapidly the whole
issue of the LGBT community and discrimination
against gays and lesbians has shifted.
The Republican party, even the most conservative,
they have much less ability I think to express
discriminatory views than they did even 10
years ago.
And that's a source of optimism.
It makes me hopeful.
Ezra: On Obamacare, something that members
of your administration have always said, and
I think you may have said, there's been a
lot of language about it being a good start,
a platform to begin building.
It's full of experiments, the idea is that
there will be learning, and there will be
change.
It's been going -- now we're in the second
year of open enrollment -- what would you
like to see, if Congress were able to take
up a bill, to tweak, to improve, to change,
to build on that platform.
What specifically from what you wanted in
there originally or what we've learned since
it's actually been in operation.
How would you like to see it improved?
Obama: Well, I'm not sure, Ezra, that we've
got enough years of it being in place to know
perfectly what needs to be improved, where
there's still gaps.
 It's been a year.
So far the verdict is that this thing's working
for a lot of people.
 You've got 10 million people who've been
enrolled, you've got more folks who've been
signed up for the expanded Medicaid coverage,
you've seen health care inflation stay low
or actually be significantly lower than before
the ACA was passed, satisfaction with the
insurance seems to be high.
We haven't seen major disruptions to the medical
system that a lot of people had predicted.
So, there's a lot of stuff that's working.
Over time, I think seeing if we can do more
on delivery system reform, making sure that
we fill the gaps in those states that haven't
expanded Medicaid.
The big problem we have right now with Obamacare
is that it was designed to make sure that
some subset of people qualified for Medicaid
and that's how that's how they were going
to get coverage, and others were going to
go into the exchanges because they had slightly
higher incomes.
And because of the decision of the Roberts
court that we couldn't incentivize states
to expand Medicaid the way we had originally
intended, you’ve got a lot of really big
states, you've got tens of millions of people
who aren't able to get their Medicaid coverage.
And so there's this gap.
And that's probably the biggest challenge
for us.
The good news is in dribs and drabs, much
as was true with the original Medicaid program,
you're starting to see Republican Governor
and Republican State Legislatures realize
that we're cutting off our nose to spite our
face.
We've got an ideological objection to us helping
our own constituencies and our own health
care systems.
And to their credit, you've got folks like
John Kasich in Ohio and Snyder in Michigan
and now, most recently the governor up in
Alaska and others who are saying ‘You know
what this is the right thing to do.
Let’s go ahead and expand it.’
So until that kind of settles, I don't think
we'll fully know where there's still gaps
in coverage, what more we still need to do.
But I think that so far, at least, the performance
of the plans itself, not the website in the
first three months but the performance of
the actual plans, you know has at least met
and perhaps exceeded a lot of people's expectations.
The website, by the way, works great now.
Ezra: I'm going to tag out and let Matt in.
Thank you very much for taking the time, sir.
Obama: Thank you, really enjoyed it.
