Social Democratic America (3 page)

Some will sympathize with the ends I propose but favor different means. Suggestions include shifting to a smaller and more targeted public safety net, expanding our existing private safety net, privatizing service provision, revitalizing families and communities, putting the brakes on globalization, promoting manufacturing, strengthening unions, expanding profit sharing, mandating a high wage floor, instituting a basic income grant, and facilitating asset building. I consider each of these in
chapter 4
. Some of them might help. But none, I conclude, would be as effective in addressing economic insecurity, inadequate opportunity, and slow income growth as the public programs I listed earlier.

What about the politics? America has more public insurance than we did a century ago, but given the structure of our political system and the divisiveness of our contemporary politics, is it reasonable to expect that we'll go farther? I believe it is.

Policy makers, drawing on reason and evidence, and perhaps with a push from organized interest groups or the populace, will recognize the benefits of a larger government role in pursuing economic security, opportunity, and rising living standards and will attempt to move the country in that direction. Often they will fail. But sometimes they'll succeed. Progress will be incremental, coming in fits and starts. But it will have staying power. New programs and expansions of existing ones will tend to persist, because programs that work well become popular and because our policy-making process makes it difficult for opponents of social programs to remove them. Small steps and the occasional big leap, coupled with limited backsliding, will have the cumulative effect
of significantly increasing the breadth and generosity of government social programs.

This is not a prediction about the timing or conditions under which specific policy advances will occur. It's a hypothesis about a probabilistic process. Over the long run, new programs occasionally will be created and existing ones occasionally will be expanded, and these additions and expansions are unlikely to be reversed.
²⁶

This is, in fact, an apt description of the history of American social policy over the past century. Many advances occurred when Democrats held the presidency and both houses of Congress, but not all.
²⁷
Some came during bad economic times, others in healthier conditions. In some instances labor unions were strong proponents, in others not. Sometimes support from key sectors of business was critical, but not always. Some changes hinged on interparty compromise, while others didn't.

Two features have been common to all expansions of US social policy. One is problem solving: policy makers attempt to figure out a useful course of action given needs, aims, resources, and available knowledge.
²⁸
The other is policy persistence: policy advances tend to stick, partly because they become popular and partly because the American policy-making process is laden with “veto points” that make it easy for a minority to block proposed policy changes. Problem solving and policy persistence are likely to continue. Over time, they will produce a rise in the size and scope of government social programs in the United States.

There are potential obstacles: Americans don't like big government, the rhetoric used by modern opponents of big government can be persuasive, the left may increasingly struggle to get elected, the balance of organizational power in politics has swung to the right, and the structure of our political system hinders progressive policy change. Given these obstacles, is a social democratic future for the United States just an ivory tower fantasy? I don't think so.

The typical American is ideologically conservative but programmatically progressive. It's true that we aren't fond of the idea of
big government. But when it comes to specific programs, we tend to be strongly supportive.

Opponents of big government contend that it frequently fails to achieve its objective, makes things worse, or jeopardizes other desirable aims. A generous public safety net, they say, makes the poor worse off in the long run by discouraging employment. High taxes weaken the economy. These arguments, termed the “rhetoric of reaction” by Albert Hirschman, can seem persuasive. But they are subject to empirical scrutiny, and their sway is likely to diminish as scientists expose their flaws with more and better data.

A significant expansion of public social programs in coming decades hinges on electoral success by Democrats, but some think their fortunes are dimming. They have lost support among working-class whites, a key element of the New Deal coalition that dominated American government from the 1930s through the 1970s. Yet Democratic presidential and congressional candidates have fared well with a new electoral base of urban professionals, women, African Americans, and Latinos. Will a flood of private money into election campaigns, encouraged by the Supreme Court's 2010 Citizens United v. Federal Election Commission ruling, doom the Democrats? Maybe, but private campaign contributions have been growing in importance for several decades, and so far the Democrats have managed to keep up. And while demographics, electoral coalitions, and campaign funding certainly matter, the state of the economy tends to be the chief determinant of the outcome of national elections. If Democrats manage the economy reasonably well when they are in charge, they are likely to remain electorally competitive.

Some contend that the key determinant of American policy is the strength of organized interests outside the electoral arena, where the balance of power has shifted to the right. Businesses and affluent individuals have mobilized, while the labor movement, the key organized interest group on the left, has steadily declined in membership and, arguably, in political influence. Yet this has slowed, not stopped, the advance of social policy. Unless
the balance of power shifts farther to the right, the advance is likely to continue.

Finally, as I noted earlier, the veto-point-heavy structure of America's political system makes it relatively easy for opponents to block policy change. Given this structure, the recent disciplined obstructionist approach by the Republicans is a threat to the forward march of social policy. But only if it continues, and history suggests it won't.

If we extrapolate from the past century, the most likely course for American social policy is continued advance. Political obstacles old and new may slow progress, but they won't halt it.

Economic and social shifts that threaten economic security, opportunity, and shared prosperity are likely to continue. In fact, they may worsen. If that happens, an expansion of social policy won't guarantee improved outcomes. Aggressive government action might not be sufficient to offset these trends. But it will help. Outcomes will be better than if public programs remain in their current state.

In
chapter 2
, I examine our failure to ensure economic security, opportunity, and shared prosperity. In
chapter 3
, I propose a set of policies to address these maladies. In
chapter 4
, I consider potential objections and alternatives. In
chapter 5
, I explore the politics.

The book offers an evidence-based case for the desirability and feasibility of an expanded government role in providing economic security, enhancing opportunity, and ensuring rising living standards in the United States. There are grounds for concern but also for optimism. The bad news is that economic and social shifts
have made life more difficult than it should be for many ordinary Americans. We aren't doing well enough in protecting against risk, providing everyone with the opportunity to thrive, and ensuring that economic growth benefits us all. The good news is that we can and likely will do better. We know what policies can help, and history suggests we will, in time, make more and better use of them.

ECONOMIC SECURITY, OPPORTUNITY
,
and shared prosperity are integral to a good society. We aren't doing as well as we should. In fact, since the 1970s we've been going in the wrong direction.

To be economically secure is to have sufficient resources to cover our expenses. We achieve economic security with a stable and sizable income, with assets that can be sold or borrowed against, and with insurance.

From the 1930s through the mid-1970s, economic insecurity decreased for virtually all Americans.
¹
Incomes grew steadily for most households, reducing the share with low income and facilitating the purchase of private insurance. More Americans became homeowners, thereby accumulating some assets. And a raft of government laws and programs—limited liability law, bankruptcy protection, Social Security old-age benefits, unemployment insurance, statutory minimum wage, AFDC (Aid to Families with Dependent Children, which later became TANF), Social Security disability benefits and Supplemental Security Income (SSI), Medicare and Medicaid, food stamps, EITC, and disaster relief, among
others—provided a safeguard against various financial risks, from business failure to job loss to poor health to old age.
²

Since the 1970s, according to a number of knowledgeable observers, the tide has turned. Economic insecurity has been rising.
³
Paul Osterman sounded the alarm in his 1999 book
Securing Prosperity
, in which he noted the increasing frequency of job loss.
⁴
In 2006, Louis Uchitelle echoed this argument in his book
The Disposable American
.
⁵
In
The Great Risk Shift
, published the same year, Jacob Hacker pushed the assessment beyond job loss to suggest that severe income decline has become more common and that private and public insurance against risks such as poor health and old age have weakened.
⁶
Peter Gosselin reached a similar verdict a few years later in
High Wire
.
⁷
A survey by the Rockefeller Foundation in early 2007, prior to the 2008–9 “Great Recession,” found more than 25 percent of Americans saying they were “fairly worried” or “very worried” about their economic security.
⁸

A rise in economic insecurity is what we would expect given the changes in the American economy over the past several decades. Competition among firms has intensified as manufacturing and some services have become internationalized. Competitive pressures have increased even in sectors not exposed to competition from abroad, such as retail trade and hotels, partly due to the emergence of large and highly efficient firms such as Walmart. At the same time, companies' shareholders now demand constant profit improvement rather than steady long-term performance.

These changes force management to be hypersensitive to costs and constraints. One result has been the end of job security, as firms restructure, downsize, move offshore, or simply go under.
⁹
Another is enhanced management desire for flexibility, leading to greater use of part-time and temporary employees and irregular and unstable work hours. This increases earnings instability for some people and may reduce their likelihood of qualifying for unemployment compensation, paid sickness leave, and other
supports. Employers also have cut back on the provision of benefits, including health insurance and pensions.

Private insurance companies are subject to the same pressures. And they now have access to detailed information about the likelihood that particular persons or households will get in a car accident, need expensive medical care, or experience home damage from a fire or a hurricane. As a result, private insurers are more selective about the type and extent of insurance coverage they provide and about the clientele to whom they provide it.

The period since the 1970s also has witnessed commitments by prominent American policy makers to ensure that, in Bill Clinton's expression, “the era of big government is over.” From Ronald Reagan to Clinton to George W. Bush and even Barack Obama, recent presidents have expressed a preference for scaling back government expenditures. The 1996 welfare reform, which devolved decision-making authority for America's chief social assistance program to the states and set a time limit on receipt of benefits, embodies this commitment. Tellingly, the number of TANF recipients and the amount they receive have declined sharply since the reform.

Finally, family protections against economic insecurity are weaker for some segments of the American population. Having a second adult who has a paying job (or can get one) in the household is a valuable asset in the event of income loss.
¹⁰
Later marriage and more frequent divorce mean that a larger share of Americans has little or no family buffer.

Economic insecurity is a product of low income, significant income decline, or inadequate insurance. To get a complete picture, we would need a single data source that captures each of these elements for a representative sample of American households, and does so consistently over time. Unfortunately, such data don't exist. Instead, the information is available in bits and pieces. In what follows, I put the pieces together to gauge the extent of economic security and its trend over time.