The Great Society's Next Frontier

(AP Photo/Susan Walsh)

A copy of H.R. 3200, America Affordable Health Choices Act of 2009, sits on the desk of House Energy and Commerce Committee Chairman Henry Waxman, a Democrat from California.

As The Washington Post’s Ezra Klein declared shortly after voters re-elected President Barack Obama, one of the major winners last week was health-care reform. With Democrats holding on to the Senate and the White House, Republicans will be unable to repeal the law before all of its provisions go into effect in 2014—after which, the theory goes, the public will come to accept that government has the responsibility to ensure health care is available for all. 

This is the end of a long battle for progressives: Health care has been the major missing piece of our welfare state for nearly a century, and for decades making it part of our system of social insurance has been a primary goal of politicians, think tanks, and activists. With this piece of the progressive puzzle in place, the natural question to ask is, What’s next for the welfare state?

One useful way of thinking broadly about what the welfare state should provide comes from Lane Kenworthy, a sociologist and political scientist at Arizona State University. According to Kenworthy, the welfare state should accomplish three things: It should act as a safety net, providing a basic level of security for the poor and protecting citizens from sharp declines in income or unanticipated expenses; like a springboard, it should create opportunities for upward mobility; and, like an escalator, it should ensure that living standards rise across the board as the economy grows. Below are ways that liberals could fix the holes in the current safety net, expand opportunity, and make sure a growing economy benefits everyone.

 

Safety Net

In a recent paper, Yale political scientist Jacob Hacker and Yale law student Nathaniel Loewentheil give an outline of the holes in the current safety net that need patching. The two pieces in need of the most attention? Health care and retirement security.

Democratic Senator Tom Harkin called Obamacare a “starter home” that will require future work. The program will still leave millions without health insurance, and it may fail, due to its complicated design, to contain costs. Introducing a public option into the state exchanges when they come online in 2014 would go a long way toward controlling costs. As Hacker notes, a public option will build on the successful parts of Medicare while serving as a simple, affordable benchmark that private plans would need to compete with on both costs and quality. Outside of Obamacare, Medicare reform will require budget goals and payment reforms, which is essential for containing spending without shifting costs onto consumers.

The system for retirement security will also need some fixes. Policy wonks talk about the “three-legged” stool of retirement: Social Security, employer-retirement accounts, and personal savings. Government needs to step in to counter the decline of the traditional company pension.  The government currently gives large tax breaks to private retirement savings accounts like 401(k)s, breaks that overwhelmingly go to the top 20 percent of workers. It could instead use its resources to provide a universal IRA with an automatic enrollment to all Americans, as well shifting 401(k)s over to a public-private, defined-benefit plan. This would boost the savings of those with less income while also providing greater retirement security. 

Despite conservative claims, there’s no immediate crisis in Social Security finances. If a solution is needed, it is important to remember that as inequality has grown, the “cap” on Social Security taxes has reduced the program’s tax base. Eliminating it, or extending it to, say, capital-gains income would reduce any potential long-term Social Security shortfall.

Another way to boost our current safety net is by expanding the parts that don’t reach everyone. For instance, unemployment insurance has kept millions of people out of poverty in this recession and functions as an important tool of macroeconomic stabilization by getting money into people’s hands when the economy tanks. Unemployment insurance, however, only covers around 40 percent of the unemployed due to a variety of state-level eligibility rules. The Government Accountability Office (GAO) found that low-wage workers, in particular, are half as likely to receive unemployment insurance. Expanding unemployment insurance would provide greater security to those with more precarious employment who don’t currently qualify.

 

Springboard

Total equality of opportunity is a phantom goal. What the welfare state should accomplish, according to Kenworthy, is making sure each person has the most opportunity possible. As our economy continues to change, commitments to developing opportunities for people will require investment in education as well as a commitment to gender equity in the workplace.

Given that women are more likely to work jobs that don’t provide health insurance, Obamacare already helps with gender equity in the workplace. The next step is to require policies protecting family leave. The United States, Swaziland, and Papua New Guinea are the only three countries in the world that do not have guaranteed paid leave for new mothers. Paid leave makes it easier for mothers to return to work after a child is born as well as to maintain and continue their careers. It can also be expanded to cover both parents, a move that will strengthen women’s access to the labor market even more. 

Providing universal pre-K is another important step in ensuring all Americans have the most opportunity available. As New America fellow Dana Goldstein writes, “If we want to fight poverty and equalize educational opportunity, we cannot ignore the disparities that develop before a child ever enters the public education system.” According to University of Chicago economist James Heckman, early educational intervention produces both positive and long-lasting effects on school achievement, job performance, and social behaviors for children from disadvantaged backgrounds. Universal preschool should be universally available for children age three and older, and feature well-trained teachers working with small groups of children, focusing on a full range of development. This will also benefit women who want to work, creating opportunities for both those women and the children who will gain access to much-needed early education. 

 

Escalator

The final component of strengthening the social safety net is the escalator, making sure that as we become a richer country, rising growth benefits all workers. Since the late 1970s, wages for the median worker have stagnated while inequality has skyrocketed. How can the welfare state help ensure that growth is broadly shared and the economy works for the benefit of all? This difficult question will likely take decades to tackle, and there are already three conflicting ideas about what should be done.

Kenworthy argues that the best way to address inequality is to aggressively expand tax credits like the earned income tax credit (EITC), which boosts the wages of lower-income workers—particularly those with children. It is a form of wage subsidy that encourages work because one needs to be in the labor force to take advantage of it.  Given trends in the global economy, Kenworthy argues that even if we get unemployment below 4 percent, it is unlikely that wages at the bottom end of the distribution would grow. Instead, he calls for using the EITC to subsidize wages. The EITC, he argues, could be used to boost wages even in the middle class, say, for workers making up to $80,000, and indexed to increases in GDP or average worker compensation. This would use the tax code to boost the stagnant wages of average Americans.

Another approach would create an unconditional basic income (UBI) that rises with GDP growth. The proposal gives every legal resident a cash stipend, usually targeted around the poverty level. This income is universal, so everyone gets it regardless of their income or work status, and it is unconditional. A UBI has support from across the political spectrum. Those on the left argue it will create greater egalitarianism by increasing the bargaining power of workers, force employers to find innovations that eliminate difficult and unpleasant work, and recognize the value of de-commodified caregiving and other cooperative, non-labor activities. Some on the right argue that it would allow for the removal of many government programs that either provide assistance or public services directly, folding them all under one that works entirely through cash payments.

These two approaches differ in one key respect: The EITC requires work participation, whereas the UBI would go to everyone whether they work or not. Kenworthy worries about the political and employment effects of providing everyone a basic income. That could make it politically unpopular while also affecting the tax revenues necessary to fund it.

Besides these two proposals, policymakers have suggested boosting wages directly by intervening in the labor markets. Policies that focus on “predistribution,” to use Hacker’s term, include a higher minimum wage, better rules for unionization, curbing the ways that big business uses the government to increase its profits (finance, copyright), as well as a greater emphasis on full employment. Predistributionists argue that additional, large-scale redistribution is politically difficult and fragile, particularly when workers have fewer resources and less organizational strength to demand and sustain it. In the end, though, predistribution and redistribution are likely to complement each other rather than cancel each other out.

The 40-year conservative project to dismantle the welfare state has failed. Ronald Regan couldn’t reduce the size of the government (even his own), and the reactionary plans of George W. Bush and Paul Ryan to privatize Social Security and bleed out public health care have been rejected by voters.  The slow-motion implosion of the conservative movement means that an abstract notion of a minimal state with no social insurance is not coming.

As Kenworthy notes, people value insurance more as they grow richer. Insurance provides protection against both the unknown and bad luck. And the welfare state is how social insurance is provided in the United States. As such it will take on a larger, not a smaller, role as our country grows richer. With the promise of health care completing the project of the 20th-century welfare state, liberals need to envision how to meet the needs of a new century. 

Comments

Unbelievable. There is no safety net left to repair for the poor. The fact that we still hear "liberals" talking about "repairing the holes in the safety net" shows that either they are oblivious to much of what has happened in recent decades, or more likely, that the very poor are simply no longer regarded as a legitimate part of the US population. This new "New Deal" is about appealing to the bourgeoisie alone, the more fortunate in a nation with limited resources. We are seeing the corruption of the New Deal, by a government that is of, for and by ONLY those above "a certain class." This is a New Deal country club style, exclusively for the golden middle class, a new social gated community to keep the "lower class" out. This shouldn't be such an issue to the middle class; after Clinton took a machete to the safety net for the poor, the life expectancy of our poor has been on a downhill slide, and fewer live long enough to benefit from Social Security/Medicare. Now that we cut the rungs off of that proverbial ladder out of poverty, people continue to fall out of the middle class while fewer and fewer are able to get back out of poverty, ensuring the continued shrinking of the middle class. This means all the more resources for the Americans who matter.

It is sad but true that many poor often single women are doing a very poor job of raising children. To many children are bought up in chaotic homes fail to provide the basic social, intellectual, emotional or nutritional support children need.

By the time these children reach kindergarten, it is difficult or impossible to turn their lives around. The sooner society supports a child, the more effective it can be in seeing that he or she can live a decent life.

A dollar spent on pre-natal care and parenting skills training is probably more effective than 10 dollars spent on special education of 100 dollars spent on incarceration. Stepping is sooner to prevent problems is also the right thing to do.

After reading the article, I get the impression that "fixing the holes" MEANS restoring the safety net we (briefly) had that protected the poor. Actually, to continue the metaphor, we never finished knitting the net, before you-know-who (bad luck to say Lord V's name) started slashing the threads that were already there. One of the proposals in the "escalator" category would be an excellent replacement for some of the safety net and springboard programs: the UBI (known as the GAI, or guaranteed annual income, when Nixon (yes, Nixon!) first proposed it, before morphing into the EITC). As long as the UBI only goes up to the poverty level BY ITSELF, the right wing objections can be rebutted: can anyone other than the small minority of absolute losers think that they are "gaming" the system by settling for a POVERTY level existence ON PURPOSE? And is it better to let those losers support themselves by CRIME, or to swallow our righteous indignation and support them until they wise up? Yet people who suffer bad luck in losing a job, or being BORN into poverty, could do better temporarily on that than on NOTHING (legal, anyway) other than charity from friends or family who are not much better off themselves.

Yes, there does seem to be too much emphasis on what these programs do to help the middle class, because that is what it takes to SELL them politically. But a health care plan that ensures people can get medical help, in which doctors are encouraged to prod them gently into healthier living, along with a UBI to afford healthy food, public exercise facilities so the poor can get fitness assistance without expensive spa bills, good public transit so they can GET TO the good grocery stores and fitness facilities, etc. would protect the CURRENTLY middle class if they should ever need them.

Public education was meant to be a springboard, but today should include either college or a good college-transferrable technical or trade school; also, modernized job search assistance at unemployment centers (not just, how many random applications did you fill out last week? which actually HURTS chances of being hired in some fields), and retraining for people GOOD IN THEIR OLD JOB whose old job WENT AWAY, would help with the springboard.

But the ESCALATOR parts of the New Deal, protection of labor unions, minimum wage, anti-discrimination laws that actually work, enforcement of wage and hour laws, AND protection for banking, credit card and small investment consumers against "gotcha" fees and dirty tricks, need to be implemented and/or brought back; and could be paid for by higher marginal tax rates on upper incomes, closing BIG loopholes (one being carried interest, which treats financial ADVISER FEES as capital gains, AS IF the adviser had risked his own money!), and taxing only LONG TERM profits as capital gains. Oh, and for SS and Medicare, raise the cap on FICA payroll taxes (or better yet, make it a doughnut hole; pay on earned income up to the current, or a slightly higher, limit, THEN pay on ALL forms of income above, say two million a year).

But none of this will help unless we make our economy ECOLOGICALLY sustainable. I have sent the White House a suggestion for a means by which frivolous fossil fuel use could be made more expensive, while protecting the incomes of lower and middle income workers whose commutes would be made more expensive than their paychecks otherwise. If you hear about the ERG tax-and-rebate plan, that's my idea. If we don't do something soon, buy some oceanfront property in Valdosta, GA (check the map).

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