The Reality-Based Community

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.

Posted at 09:39 PM | TrackBack (0) | |
Thread: 2007 Democratic Agenda