The Long Term

In my last long posting, I tried to set out what I see as the short-term agenda for Democrats, by which I mean over the next two years. Here I’m going to take a relatively short stab at the long-term story (by which I mean the four years starting in 2009, presuming that Dems do what I suggest in the earlier post and increase their majorities in Congress and win the White House).

In a 2/3 insightful essay, Ross Douthat and Reihan Salam generally agree with Jacob Hacker that the economic issue that most seriously effects persuadable voters is insecurity, rather than absolute, average income. Insecurity, or at least the perception of it, also seems to be spreading, so that it is the kind of widespread condition that one can build serious policy-making on. Hacker has lots of interesting suggestions for how to deal with it, all of which are pretty plausible, where I’m concerned. His basic point is that there’s only one really sound way to deal with insecurity, which is to spread risk and insure it socially. That is, the Bush “ownership society” stuff–medical savings accounts, private accounts in Social Security, etc.–that Douthat and Salam suggest as the proper Republican solution to insecurity actually increase insecurity by narrowing the risk pool that individuals are in. The real policy solution is to spread risks widely, especially where doing so doesn’t have any significant moral hazards associated with it.

So, the most logical Democratic response is to start rebuilding our basic tools of social insurance. To do so, however, Democrats need to begin convincing the public that social insurance, rather than generally ineffective solutions like immigration control (which I think is a good idea, overall, but not because it increases insecurity) and trade protection (which is a bad idea because it is likely to reduce economic growth without substantially reducing insecurity) is the way to go. To do so, Democrats need to use their institutional control over the next two years on two dimensions. First, agenda-setting–Democrats need to hold hearing after hearing, combined with the efforts of extra-governmental organizations, to get citizens to think about economic security as the dominant framing of the basic policy problem. Second, “alternative-specification”–they should combine the agenda-setting program with as much activity as possible rebuilding the public’s faith in social insurance. As it is, social insurance programs are pretty popular–with all the criticisms of them out there, Social Security and Medicare are still widely valued. The trick for Democrats is to convince the public that the social insurance approach of these programs is the primary tool that should be applied to the economic security problem that they increasingly experience in their own lives.

Democrats will never succeed in their primary goal, which is rebuilding the infrastructure of shared risk, until they convince the public that social insurance is the only available tool that is likely to work. That is why they should avoid accepting half a loaf solutions that only make things more complex without actually solving the problem (like trying to somehow resuscitate employer-based insurance, which narrows the risk pool at the firm level when the market is making quite clear that this is no longer viable).

My sense is that this could also be sold to at least some Centrist-type Democrats if it is presented as an alternative to responses to economic security that only gum up the dynamism of the economy that is necessary for growth. Social insurance is such a powerful way of dealing with economic security primarily because it doesn’t try to undo the flexiblity, innovation and efficiency produced by markets, but simply compensates for and smooths out the dislocations that they produce. That is, social insurance is the most market-friendly, plausible solution, and it may take pressure off the dumber, growth-damaging populist solutions that inevitably are introduced as ways of dealing with the problem.

Finally, social insurance has the advantage of being highly institutionalized–once you create social insurance programs, they are very hard to reverse, which is not the case with efforts to reduce outsourcing, erect trade barriers, increase the minimum wage (which I don’t think is terribly destructive, but also is not likely to make much a difference if it’s kept below the point where it will create serious economic damage) regulate big-box employers, etc. A social insurance response, in short, is likely to last for decades, if not indefinitely.

For details on the problem and the solution, I strongly urge you to read Hacker’s (very readable!) The Great Risk Shift, which you can buy here or in your local bookstore, if you still use one.

Author: Steven M. Teles

Steven Teles is a Visiting Fellow at the Yale Center for the Study of American Politics. He is the author of Whose Welfare? AFDC and Elite Politics (University Press of Kansas), and co-editor of Ethnicity, Social Mobility and Public Policy (Cambridge). He is currently completing a book on the evolution of the conservative legal movement, co-editing a book on conservatism and American Political Development, and beginning a project on integrating political analysis into policy analysis. He has also written journal articles and book chapters on international free market think tanks, normative issues in policy analysis, pensions and affirmative action policy in Britain, US-China policy and federalism. He has taught at Brandeis, Boston University, Holy Cross, and Hamilton colleges, and been a research fellow at Harvard, Princeton and the University of London.

7 thoughts on “The Long Term”

  1. Perhaps the long term lesson to take away from this election is that the soccer moms and dads have joined the rest of the disenfranchised in undestanding that they are in less danger of dieing from a terrorist attack than living in their SUV. The Iraq War is killing the children of mostly the poor and is destroying the economic engine that keeps the midle class from becoming poor. The Reaganian fairytale that we all can be millionares is evaporating with the housing bubble and out-sourcing and the people who have worked and trusted all these years are watching the billionares waltz away with everything and are starting to say "hey, where's my share?".

  2. The growing insecurity and its fix, increasing the risk pool are great. I would suggest that we also accentuate the history of the middle class rise. Unions are gone and with the global labor market will not return – although perhaps they just need to go global as well… I hear China is opening up to unions now (have they heard Woody Guthrie? – maybe Arlo can have a second career.)
    I opened up my college Samuelson text and there, pasted in the front cover was a chart of the long term business cycle. It smoothed out since the 1940s. That period also saw the power days of unions and the rallying of social legislation like social security – which according to FDR spread the wealth around. Then there was the GI Bill which spewed educated entrepreneurs into the economy.
    Simply ask the question, what was the golden age of American economy? Then ask why it was so? The answer is the spreading around of the wealth. Why does that work? Because it creates a wide and deep demand for goods and services. It is time to push the demand economy as versus the supply economy. It is demand that drives supply. Heck, even Adam Smith knew that.

  3. One of the biggest economic engines in my rural NY county is the university I work for, along with the hospital. Health care costs have been an increasing burden on these institutions over the last decade & a national health care plan would get support from everyone from the university prez & the hospital CEO right through the institutions to the custodians. Everyone has recognized that health care costs are costing them personally. Somebody on this site mentioned using the VA as a model & that might get around the old "socialized medicine" canard.

  4. "Finally, social insurance has the advantage of being highly institutionalized–once you create social insurance programs, they are very hard to reverse"
    I think nothing illustrates the fundamental, root difference between conservatives and liberals, better than this remark: The fact that a change is likely to be irreversable if made is a point in it's favor? Only for somebody who can't take seriously the possiblity that they might be mistaken…

  5. And Brett's remark illustrates perfectly the one-sided nature of today's degraded conservatism, which puts an almost infinite value on the stability of current institutions, including those that have outlived their usefulness, but has only contempt for the need for stability in the new institutions that we must create to deal with new problems. Especially in risk-spreading institutions, half of their value is destroyed at once if they are seen to be potentially ephemeral. That's why the Prudential chose the Rock of Gibraltar as its symbol.

  6. Yeah, but the Prudential manages to be stable without destroying all alternative social institutions in order to assure that you either insure with the Prudential, or go naked.
    Changes CAN be managed so that if they turn out badly, you can back out of them. I repeat, irreversability is only a virtue if you don't take seriously the possiblity that you might make an irreversable *mistake*.

  7. I'm sort of with Mark, and sort of with Brett.
    I think that any program to increase security will be easier to pass, and easier to sustain, if it is carefully designed to not directly damage social networks, and to not serve as a transfer from those with social networks to those without. Social Security has damaged social networks, but the damage was limited. AFDC and school consolidation were intended to destroy social networks, and did so very effectively–to the great damage of society.

Comments are closed.