New Article: On Paul Ryan's World of Welfare Capitalism

Sep 13, 2012Mike Konczal

I have a new article at The Nation with Bryce Covert titled How Paul Ryan Would Decimate the New Deal. "Ryan’s vision for reforming the social safety net can be explained in three verbs: he wants to block grant Medicaid, voucherize Medicare and privatize Social Security.

I have a new article at The Nation with Bryce Covert titled How Paul Ryan Would Decimate the New Deal. "Ryan’s vision for reforming the social safety net can be explained in three verbs: he wants to block grant Medicaid, voucherize Medicare and privatize Social Security. Yes, Medicare, Medicaid and Social Security would likely still exist, but those changes would mean a profound difference for the average person who receives government benefits over his or her lifetime."

We walk through how a specific person would encounter these programs as they are administered currently and under Ryan's vision. We then talk about Gøsta Esping-Andersen's idea of "Worlds of Welfare Capitalism" and try to understand what a social-democratic welfare state would look like versus a classically liberal (read: libertarian) welfare state. We use that to formalize Ryan's vision as shredding the remaining social democratic parts of the New Deal and Great Society's welfare state and replacing them with a new, libertarian framework.

I just had my mind blown from encountering Gøsta Esping-Andersen's work about six months ago. So even if you are tired of debates about Paul Ryan's budget from the blogosphere, this might be a helpful way to approach the topic from a new angle. Hope you check check out the new article!

 

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How to Make Work Pay Again

Sep 13, 2012Richard Kirsch

The latest Census data prove that we need to start rebuilding the American middle class, and a new report shows how it can be done.

The latest Census data prove that we need to start rebuilding the American middle class, and a new report shows how it can be done.

Yesterday the U.S. Census Bureau reported that family income in the U.S. dropped to its lowest level in 16 years. The key thing in this news is that the drop is not just over the last three years, during the Great Recession. The squeeze on the middle class isn’t new, it wasn’t caused by the recession, and it won’t be fixed as we come out of the recession. If we’re going to rebuild the middle class, we need an agenda aimed at making work pay in the 21st century.   

That’s why I worked with more than 20 groups who understand the daily struggles of working families on a new report we’re releasing today, 10 Ways to Rebuild the Middle Class for Hard Working Americans: Making Work Pay in the 21st Century. The report is a road map for addressing the truth that we don’t just have a jobs problem; we have a good jobs problem.

Before we get to what we do about it, we need to confront the fact that even though the proportion of Americans with a college education doubled in the past three decades, the share of working people with a decent job dropped. Six out of ten (58 percent) jobs now emerging from the recession are low-wage. On top of that, the jobs projected to have the most openings between now and 2020 are mostly low-wage and require no more than a high school education. So there is no reason to think things will get better unless we act.

One set of solutions proposed in 10 Ways to Rebuild the Middle Class is to tackle the lack of support and protections for low-wage workers. A first step is to restore the minimum wage, which buys 30 percent less now than it did 40 years ago. The minimum wage for tipped workers is $2.13 an hour, the same as it was in 1991. One in five workers would get a pay raise if the minimum wage were increased. That includes workers who get paid just above today’s minimum wage, who would also benefit as the legal floor got raised.

Remarkably, four out of ten private sector jobs – including the great majority of low-wage jobs – do not give employees any paid time off if they are sick or need to care for an ill family member. In response, Connecticut and several cities have passed paid sick days ordinances. The federal government and states and localities should update basic labor standards to include this essential benefit to working families.

The report recommends tough enforcement, with meaningful penalties, of laws that unscrupulous employers now routinely flout. Many employers of low-wage workers routinely steal wages by not paying the minimum wage, not paying for overtime, or simply not paying workers at all. Other employers misclassify workers as “independent contractors” in order to get out of paying payroll taxes or benefits and hire “permatemps.” Worker safety and health is another area where measly penalties, weak enforcement, and widespread retaliation against workers who dare to speak up allow employers to keep low-wage workers in hazardous work conditions every day. 

It will take systemic solutions to address the broader problem of stagnant wages. A crucial step is to uphold the freedom of workers to organize a union by modernizing the National Labor Relations Act and stopping employers from harassing organizing efforts with virtual impunity. Nothing in our nation’s history has done more to bring workers decent pay, benefits, and dignity at work than organized labor. The factory workers of the mid-20th Century didn’t have a college education; they organized unions. The low-wage workers of the 21st Century – the housekeepers and janitors and home health aids and retail clerks – will only be able to get decent wages and become part of the middle class when they are able to effectively organize to bargain collectively.

Other proposals in the 10 Ways to Rebuild the Middle Class report would create new social insurance protections for the 21st Century, just as Medicare, Social Security, and Medicaid were key to fighting poverty and building the middle class in the last century. The nation took one major step in 2010 with the passage of the Affordable Care Act, which in 2014 will enable working families to get affordable health coverage even if they don’t get it on the job.

The report proposes two other steps to provide families more security in their work and in their retirement. Though today’s norm is for all the adults in a family to be in the workforce, only one in ten workers (12 percent) has paid family leave through work to care for a new child or a sick family member. A solution is to establish a national family and medical leave insurance program, similar to Social Security and successful programs in California and New Jersey, for workers to draw on when they are out on family leave.

To address the fact that pensions have been replaced by thread-bare 401Ks over the past 30 years, the report recommends establishing new pooled and professionally managed retirement plans for those who rely solely on Social Security and 401Ks, which would pay a defined amount – a pension – each month.

In addition to these and other steps, 10 Ways to Rebuild the Middle Class recognizes that a foundation of improving work is full employment. That is why we need to stop laying off public workers and outsourcing jobs overseas.  It's also why we should create millions of jobs now by investing in infrastructure and a green economy.

Rebuilding the middle class is about more than assuring that every working American can support his or her family with dignity and security. It’s about powering the economy forward in the 21st Century. The middle class is the engine of our economy, an engine that can only be rebuilt by making today’s jobs good and tomorrow’s jobs better.

Richard Kirsch is a Senior Fellow at the Roosevelt Institute, a Senior Adviser to USAction, and the author of Fighting for Our Health. He was National Campaign Manager of Health Care for America Now during the legislative battle to pass reform.

 

Construction worker image via Shutterstock.com.

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What Does Obama Really Stand For: Community or Small Government?

Sep 10, 2012Jeff Madrick

The president's convention speech focused on the power of community, but the details of his future policies remain sketchy at best.

The president’s acceptance speech in Charlotte last week emphasized his new theme of community and "being in this together." For all its mushy sentiment, this is a major victory for those like us at Rediscovering Government who have been talking about the need to revitalize the discourse about government for quite some time.

The president's convention speech focused on the power of community, but the details of his future policies remain sketchy at best.

The president’s acceptance speech in Charlotte last week emphasized his new theme of community and "being in this together." For all its mushy sentiment, this is a major victory for those like us at Rediscovering Government who have been talking about the need to revitalize the discourse about government for quite some time.

Obama hesitated to sound such a theme in the past. He seemed to run from potential charges of class warfare or favoring big government. He failed to boast about his stimulus plan and some of his investment programs. He hardly talked about his health care program. The conversation in America has changed, of course, partly because of the vice presidential nomination of an extremist, Paul Ryan, who wants to cut government spending to 16 percent of GDP. That’s about the 1950s level. 

But Obama has been moving in this direction for quite a while now. He still avoids the word "government," preferring "community." But he also nicely introduced the word "citizenship." Among Ronald Reagan’s most damaging legacies was, I think, that he undermined the meaning of being a citizen in America. To him, we did not belong to a nation. We belonged only to ourselves. It would be nice to bring the concept of citizen back.

I can’t overemphasize how useful it was for Obama to lay out this old but now new vision. Bill Clinton, who had proudly proclaimed the end of big government in 1996, also said similar things. There is now a distinct us versus them as the election season begins. “Us” is those who want to work together. "Them” is those who treat community as a drug we'll become dependent on. It is probably no accident that the Republican ticket is composed of men descended from rich parents. Lots of rich kids become effective leaders, but many don’t understand how tough it can be to have no one to lean on, to borrow from (as Mitt now famously suggested), or even to be taught by.

But having listened closely to the Obama speech, I am still hungry for more candor. Even a few days later, I have no idea what Obama plans to do over the next four years. We know he will care, and we know he will not take a pound of flesh from the poor or strivers to the middle class if he can help it, but what do we know about his future programs?

He was about as careful as Romney and Ryan were in Tampa to avoid any specifics. Will he propose a new stimulus if the economy teeters, or will he remain dedicated to a narrow deficit-cutting plan even during a weak economy? Does he think there is anything truly commendable about the Simpson-Bowles deficit-cutting plan he had sponsored (if then mostly ignored)? The plan disastrously aims to limit federal spending to 21 percent of GDP, its 40 year- average, even as the population ages, health costs rise, and we know pre-K education is urgently needed. It would cut Social Security sharply. But Obama mentioned it in his speech, and it has become the widely cited “bipartisan” model for fiscal responsibility. The public relations program in its favor is a stunner. It is not really bipartisan at all, of course. Both the Democrat Bowles and the Republican Simpson are devoted and extreme deficit hawks.

What line will Obama hold on Social Security? Will he significantly upgrade his proposals to invest in infrastructure? How about a higher minimum wage? Better labor laws? Is there a potential jobs program in the works? Serious education reform? Will he encourage a lower dollar to help manufacturing and propose ways to create a more level playing field in global trade? Will he propose a serious tax increase to pay for needed public investment and buttress entitlements programs once the economy is righted?

I can’t say it’s bad politics to ignore the details for now. The best case for Obama is that as his health reform law helps more people, he will build American confidence in government. Mitt Romney has already conceded as much, saying he will retain some of Obamacare. With some proof that governmnet helps under his belt, perhaps Obama can move forward. He can add to his health care program with a true public option and perhaps expansion of Medicaid reimbursements to providers, which are too low. He can also adopt more rigid cost controls, drug negotiating procedures, and firmer preventive medicine incentives. A more positive attitude toward government might awaken fresh ideas about educational reform. Perhaps we can put art and music programs back into schools and tackle universal access to the web. Maybe we can even build a universal pre-K system that is cheap and good, one of our most important needs.

I know Romney has only one major idea in his head: tax cuts. If at first they don’t succeed, try again. But of course, tax cuts did succeed for the wealthy, just not for the “community” of America.

What’s really in Obama’s head? Is he a limited government man at bottom, just another Third Way New Democrat? Or is he really a community government man? I don’t know, and that bugs me. Moreover, I am not sure we will find out before Election Day.

Roosevelt Institute Senior Fellow Jeff Madrick is the Director of the Roosevelt Institute’s Rediscovering Government initiative and author of Age of Greed.

 

Barack Obama image via Shutterstock.com.

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Yesterday's Wind? Paul Ryan's Speech Was Full of Hot Air.

Aug 30, 2012Jeff Madrick

Paul Ryan may have a reputation as a truth-teller, but his convention speech was far from the truth.

Paul Ryan may have a reputation as a truth-teller, but his convention speech was far from the truth.

Honest? Intellectual? Neither quality was on display last night when Paul Ryan gave his first major national speech to America and provided red meat to his fellow Republican conventioneers. Profoundly sarcastic about Barack Obama, taking one rhetorical swing after another about how the administration failed, he promised in soaring language that Mitt Romney and he would do far better, put America back to work, and save Medicare. How? Not a word. No mention of a plan, not even in broad strokes.

Perhaps Ryan was told to leave the plan to Romney during his acceptance speech. But of course, neither Romney nor Ryan has told us much about their plan at all. They will cut taxes, but will they close the deficit they so deplore and blame on Obama? The CBO says Ryan’s plan won’t do that for decades, and even that forecast relies on spending cuts and the closing of tax loopholes neither Ryan nor Romney will specify. This is honesty?

At the very least, Ryan could have told us why he believes in small government, not simply that he believes in it. He could have tried to present some evidence, theory, or even conjecture about how it limits growth. He could have sought a historical example or two of a better America. Of course, this would have been difficult. The facts don’t back him up.

Ryan said Obama was trying to sail on “yesterday’s wind.” The Republican chant about making the poor personally responsible for their own good is truly “yesterday’s wind.” Before Social Security, when workers were largely “responsible” for their own retirement, about half the elderly lived below the poverty rate. American policymakers paid too little attention to poverty until Michael Harrington wrote his book, The Other America, documenting how many poor there were. In the 1950s, before Lyndon Johnson’s War on Poverty, the poor had to get by on their own, as Republicans would have it today. The poverty rate then was 22 or 23 percent, but now America’s official poverty line is lower compared to median incomes than in most other rich countries.

If Ryan is what passes for intellectual in Republican circles, the party is in serious trouble. He is an ideologue. He espouses faith in a small government dogma, not theory or evidence. And we have heard this chorus for a century or two. Good thing the nation ignored it and built a set of social programs that were central to the development of a middle class -- civil rights for black people and women, free education, major transportation systems, and protection from workplace abuses, old age, and the scourge of being born into poverty.

As Ryan said about Obama, his facts are merely true because he states them. Last night, Ryan took two big cheap shots. He had the audacity to suggest Obama was to blame for an auto plant that GM closed before he took office, when in fact Romney was opposed to the Obama bailout of GM. And of course there was Obama's $700 billion “raid” on Medicare in order to provide coverage for others, mainly the poor and the young. Obama is cutting back reimbursements to providers and a subsidy for Medicare advantage. It won’t affect senior benefits. But the honest and intellectual Ryan did not explain this to us.

The Ryan charade is about to end. Ryan showed himself last night to be a politician willing to distort the facts and cynical enough about his audience’s intellectual capacity to provide no evidence, theory, or history to support his points even if he had them at his disposal. The Republicans’ rising star turned out to be a breath of stale air. 

Roosevelt Institute Senior Fellow Jeff Madrick is the Director of the Roosevelt Institute’s Rediscovering Government initiative and author of Age of Greed.

 

Paul Ryan image via Shutterstock.com.

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Memo to RNC Delegates: You Didn't Build It, But Feel Free to Pay Up

Aug 28, 2012Jordan FraadeSarah Pfeifer VandekerckhoveJeff Madrick

“We built this” is the phrase ringing throughout the (largely publicly funded) Tampa Bay Times Forum this week at the Republican National Convention. Though it is meant as a rebuttal to President Obama’s remarks earlier this summer emphasizing that government is the dynamic foundation and support system upon which all Americans rely, its use as a theme of the RNC is actually a critical illustration of the president’s point.

“We built this” is the phrase ringing throughout the (largely publicly funded) Tampa Bay Times Forum this week at the Republican National Convention. Though it is meant as a rebuttal to President Obama’s remarks earlier this summer emphasizing that government is the dynamic foundation and support system upon which all Americans rely, its use as a theme of the RNC is actually a critical illustration of the president’s point. To be clear, Obama was saying that “there are some things (like fighting fires or building infrastructure) that we (the government and its people) do better together,” such as constructing a multi-million dollar professional sports facility in downtown Tampa or, say, rebuilding the infrastructure and restoring public services to an entire city in the wake of a (relatively small) hurricane to the tune of millions of dollars. But if the 50,000-plus people visiting Tampa for the RNC this week really want to take credit for these enormous feats of collectively funded and supported work, we have helped them figure out just how big a check they’ll need to write.

As Media Matters pointed out last week, the Tampa Bay Times Forum was built in 1996 by the Tampa Bay Sports Authority, a public entity. Of the $139 million construction cost, 62 percent, or $84 million, was paid with public money – bonds backed by the City of Tampa and Hillsborough County, paid back through sales taxes, tourist development taxes, and ticket surcharges. More recently,  the Republican National Committee, which received over $18 million from the federally supported Presidential Election Campaign Fund, shared costs of over $500,000 with the Tampa Bay Lightning just to upgrade the arena’s sound system.

Additional preparation for the RNC cost the City of Tampa upwards of $2.7 million in beautification projects and infrastructure upgrades, like improving highways, redesigning signage, planting palm trees, and bringing a locally loved fountain back into use. Commuting from up to 90 miles away, RNC delegates will surely find these upgrades to be pleasant as they are introduced to the hallowed Tampa tradition of long, grinding commutes. Some delegates may even be transported around by a fleet of 400 city-chartered buses. Those same delegates who, like Florida Governor Rick Scott, are adamant about blocking any further government expenditures on mass transit are more than welcome to walk to the Forum (although a 2007 survey of cities found that Tampa has no walkable destinations, and 50 percent of the urban core is set aside for parking).

Downtown Tampa offers delegates benefits that come as a result of public investment in the city’s urban core (unless, of course, they choose to avert their eyes out of principled opposition to wasteful government spending on things like public art and higher education). The Riverwalk, a two-mile green space along the Hillsborough River, has already enticed the Tampa Museum of Art to relocate and freed up space for public events. The city received $11 million from the Obama administration to put the finishing touches on the project, and is spending $3 million to turn downtown’s Zack Street into a pedestrian thoroughfare with benches, landscaping, and street art. Finally, along the downtown riverfront, the University of South Florida’s new Center for Advanced Medical Learning and Simulation is the world’s largest medical facility that allows medical students to practice surgery without a patient. The center was built at a cost of $38 million and was partially paid for by Build America Bonds, an Obama administration program that provides capital for infrastructure projects and issued over $100 billion in bonds in its first year of operation. More wasteful government spending!

Of course, no event in Florida in August would be possible without hurricane season preparation. In anticipation of Tropical Storm Isaac’s imminent development into a hurricane, the RNC cancelled Monday’s convention activities. Though it’s not clear yet what cleanup the storm will require, similar strength storms generally cost FEMA millions in statewide recovery. When Tropical Storm Debby hit Florida earlier this summer, FEMA spent over $15 million on individual assistance.

For the 2,286 RNC delegates eager to claim they “built this” – whether it’s the Tampa Bay area infrastructure or social services, Tropical Storm recovery included, provided by the host town – we’ve done some math to help them determine just how much money they would have to personally shell out to validate such a claim. Diffusing a $15 million cleanup cost among 2,286 delegates would lead to a total of about $6,562 per delegate—a small price to pay to make sure the party can actually nominate a candidate for president. If we ask everyone visiting Tampa for the convention to pitch in—roughly 50,000 people, according to the RNC website (and yes, 15,000 members of the press, that includes you too)—each person would pay $300 to help clean up. Natural disasters aren’t cheap. Without coordinated government efforts to manage and clean them up, they would be even less so. To cover the roughly $100 million in Tampa Bay area beautification and service and infrastructure improvements, including the construction and upgrades of the Tampa Bay Times Forum, each delegate would need to pitch in an extra $43,745, or an extra $2,000 per visitor, and that doesn’t include myriad other costs going into this week’s events, including the nearly $50 million federal grant covering RNC security.

With this $15 million tucked away and set aside for hurricane cleanup and over $100 million secured for RNC-related infrastructure and beautification, Tampa and Florida taxpayers could go back to taking care of day-to-day expenses, like improving Medicare coverage in a city and state where the need for it is acute. Florida’s health care costs are well above the national average—it ranks 18th in per-capita health spending overall—but the state rockets to second place nationwide in Medicare spending with $11,893 spent per enrollee. The state also ranks second behind California in gross Medicare spending, with just over $39 million spent on the program. And while the Tampa and St. Petersburg hospital referral regions do not contain Florida’s highest per-enrollee Medicare expenditures, nor are the cities among Florida’s most elderly, the city’s age 50-64 population grew by 40 percent between 2000 and 2010. A city whose largest-growing age group is on the cusp of Medicare eligibility is hosting the convention of a party that has dedicated itself to ending the program as we know it.

There’s a larger-than-usual chance that your average Republican delegate will be a Medicare recipient, too. While the convention does not officially release information on the age of its delegates, several states do. North Carolina, Texas, and Connecticut, for example, are all sending delegations whose median age is 57 or 58. Any delegates who require medical care during the convention, hurricane or no, will have the option of visiting Tampa General Hospital, a downtown hospital affiliated with the public University of South Florida—but not, alas, with the for-profit hospital chain managed by Florida Governor Rick Scott in the 1990s and later found guilty of Medicare fraud. Tampa General is the city’s largest hospital, with an operating revenue of $1.1 billion in fiscal year 2011—a year before it was voted the best hospital in Florida by U.S. News and World Report. No doubt at least one Republican delegate, for some reason or another, will find a reason to visit the hospital and help contribute to this nonprofit, government-funded success story.

As for the delegates who stay healthy, we hope you’ll enjoy your stay and that your cheers of “we built this!” are worth the $50,307 you’ll have to refund the government for all the work it did to prepare the city on your behalf. And remember to set a little extra aside for tourist activities!

Jordan Fraade is a former member of the Roosevelt Institute | Campus Network.

Sarah Pfeifer is Manager of Programs for the Roosevelt Institute.

Roosevelt Institute Senior Fellow Jeff Madrick is the Director of the Roosevelt Institute’s Rediscovering Government initiative and author of Age of Greed.

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Social Security Does More Than Just Protect the Elderly

Aug 14, 2012Tim Price

On the 77th anniversary of Social Security, we're celebrating what has made the program so important and why it continues to be vital today. Tim Price writes that through survivors benefits, Social Security creates a widely shared safety net. Read the rest of our coverage here.

On the 77th anniversary of Social Security, we're celebrating what has made the program so important and why it continues to be vital today. Tim Price writes that through survivors benefits, Social Security creates a widely shared safety net. Read the rest of our coverage here.

A growing number of pundits and policymakers talk about Social Security almost exclusively as a luxury for greedy seniors. But as I learned when my father passed away a week before my high school graduation, Social Security is much more than just a retirement fund (though that is an extremely important function and has rescued millions of seniors from poverty). Through its survivors benefits, it provides some guarantee of security to families of all ages and creates a safety net that many never expect to need.

As my colleague Mark Schmitt has noted, survivors benefits were established four years after the original Social Security Act was passed, but today they are an integral part of the program. As of December 2011, they accounted for 11 percent of total benefits paid, covering 6.3 million people with an average monthly benefit of $1,190. Of the beneficiaries, over 1.9 million are children, with aged spouses and parents of deceased workers accounting for another 4 million. A report from the Children’s Defense Fund notes that the value of survivors benefits for a typical family is equivalent to a $433,000 life insurance policy.

These benefits help families to pick up the pieces when tragedy strikes, allowing them to pay the rent, put food on the table, and afford other necessities despite losing a breadwinner. In this way, Social Security not only prevents financial catastrophe from compounding personal grief, but also gives workers the comfort of knowing that they will still be able to provide for their families after they’re gone. No one knows this better than newly minted vice presidential candidate Paul Ryan, who saved up the benefits he received after his father’s death to pay his way through college so that he could one day run for Congress and draft a plan to dismantle Social Security.

Okay, maybe that’s not the best example. Instead, I’ll draw from personal experience. As noted above, my father passed away when I was only 17 years old. On the night I was supposed to be working on a second draft of my valedictorian speech, I instead sat with my mother in a waiting room in Richmond University Medical Center, waiting for a doctor to tell us what we both already knew. My father had suffered a massive heart attack at age 45; after years of poor health, it seemed both sudden and inevitable.

But after time of death was called and tears were shed, one of the hardest parts still remained. Delivering the news of a loved one’s death is always difficult, but it was especially painful knowing that one of the people we’d have to tell was my younger brother, Ryan. Ryan was 12 years old at the time, but due to his severe learning disabilities, he thought and behaved like a much younger boy. But to my surprise, even though he was understandably upset, his first instinct was to assure us that we would be okay because we’d stick together as a team.

Of course, it takes more than reassuring words to pay the bills, of which my father had left behind a considerable number. Though he’d retired as a sergeant from the NYPD several years prior to his death, the payment schedule that he chose for his pension meant that most of it disappeared with him. Then there were our expenses. Beyond basic utilities and a pile of credit card debt, my brother’s condition meant he needed special schooling and regular doctor’s appointments, and I was about to head off to a $40,000-a-year university. Luckily for us, we didn’t have to manage by ourselves. Despite the financial hole my father had dug in his latter days, his Social Security benefits allowed us to begin climbing back out.

Though I quickly aged out of my own survivors benefits, Ryan continues to receive them and relies on them heavily to this day. Now that he has turned 19 and left school, he will qualify for the Disabled Adult Child benefit along with 921,000 other men and women, many of whom have been diagnosed with similar intellectual disabilities that prevent them from finding gainful employment. As public health policy researcher Harold Pollack points out, the benefits are “hardly lavish,” but it’s comforting to know that if Ryan’s planned career as an international photographer doesn’t pan out (his goal is to one day photograph the Eiffel Tower), or if my mother and I are unable to provide for him ourselves, he can still fall back on the strongest safety net available.

One way or another, we will, as Ryan predicted, stick together as a team. But that team doesn’t just include the three of us. It encompasses all Americans, bound together by the Social Security system we’ve created, that we all share a responsibility to strengthen and defend, and that we may find ourselves relying on sooner than we think. Social Security isn’t just an “entitlement” designed to give us peace of mind in our old age, if we’re lucky enough to get there. When that luck doesn’t hold out, when the unthinkable comes to pass, it serves as a legacy and a promise to the loved ones we leave behind.

Tim Price is Deputy Editor of Next New Deal. Follow him on Twitter at @txprice.

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Social Security’s Enduring Legacy: Adaptability

Aug 14, 2012Mark Schmitt

On the 77th anniversary of Social Security, we're celebrating what has made the program so important and why it continues to be vital today. Mark Schmitt lauds it for its ability to provide security throughout tectonic shifts in our economy and society. Read the rest of our coverage here.

On the 77th anniversary of Social Security, we're celebrating what has made the program so important and why it continues to be vital today. Mark Schmitt lauds it for its ability to provide security throughout tectonic shifts in our economy and society. Read the rest of our coverage here.

If Franklin D. Roosevelt rejoined the living tomorrow, he probably wouldn't recognize Social Security, his greatest domestic legacy. That might sound like something a critic or skeptic of the program would say, as if it had broken faith with Roosevelt's vision or expanded far beyond its original intent.

But, in fact, what Roosevelt would see would be Social Security's greatest virtue: its adaptability to changing circumstances. Social Security has survived, thrived, and continued to provide a base level of economic security not only through big macroeconomic shifts (such as the inflation of the 1970s) but also the transformations and uncertainties in our individual and family lives. That adaptability and continuous reexamination and improvement is the quality most in keeping with the experimental, pragmatic nature of the New Deal.

Between 1935 and 2000, there were 30 major legislative changes to Social Security, roughly one every two years, under Republican and Democratic administrations. In 1939, it expanded its focus from the individual worker to the family, adding benefits for surviving spouses and young children. In 1950, it expanded to cover domestic and farm workers, whose omission was the atrocious compromise FDR had made to secure the support of Southern conservatives. In successive changes from 1954 through 1960, a disability program was created, and in the 1970s, benefits were indexed to inflation. Changes in 1977 and 1983 adjusted the financing of the program, changing the formula for benefits to reduce costs and build up more of a reserve (the Trust Fund) so that future retirees financed some of their own benefits. In 2000, the earnings test for Social Security recipients was eliminated. And while Social Security was created with the assumption of a male breadwinner, over 77 years it has been adjusted to account for the changing role of women in the workforce and the family.

The point of this history is a reminder that Social Security is not a fixed, unchanging thing, a jewel of the New Deal to be worshipped. Rather, it is an incredibly adaptive, responsive structure on which we've been able to build several different forms of economic and family security and adjust to radical changes in the economy, family, industry, education, and expectations over the years.

It's become routine to say that Social Security is an industrial age program that's ill suited, or at least needs to be modernized, to deal with information age challenges, but it's telling that this cliché never gets to specifics. It's true that the current era presents dramatic new challenges to economic security: household debt far larger than in the 1930s, 1950s, or even the 1980s (when most households didn't even have access to consumer credit); the rapid decline since 1979 in the number of defined-benefit pension plans; the disappearance of lifetime employment at a single employer; and, most recently, the high rates of long-term unemployment among people in their late 50s and early 60s. But for almost every one of these changes, there's an answer within Social Security that's as good as any other. We could address the insecurity around pensions by creating a universal 401(k) account, but we could do exactly the same thing, with far less complexity and hassle, simply by expanding Social Security. We could construct some new form of economic security for those who have lost their jobs in their late 50s and may never work again – or, as James K. Galbraith has proposed, we could make it less costly for people to take Social Security at age 62 (which a majority of recipients do anyway) and open up opportunities for younger workers.

There are also liberals who hold the position “never touch Social Security.” They, too, should recognize the record of adaptability and change throughout the history of the program. There are bad changes to the program (such as an abrupt increase in the eligibility age) and less bad ones. But one way or another, it's worth putting Social Security on a path that won't require a significant cut in benefits, or hike in payroll taxes, in 15 or 20 years. I'm not endorsing any specific plan here, but just pointing out that resisting any and all changes to Social Security is really a betrayal of the program's greatest strength.

There are programs that really are locked into a particular era and model of employment. Unemployment Insurance, for example, reflects some of the assumptions of the industrial era economy, such as a business cycle in which dips last about 26 weeks and workers return to their previous employer. But Social Security has a seamless versatility that has made it adaptable to all the massive shifts in the economy and our society since 1935. That, rather than any specific component of the program, is its greatest virtue and the reason that Social Security will endure. 

Mark Schmitt is a Senior Fellow at the Roosevelt Institute.

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Ignore the Deficit Hawks. Social Security is Easy to Fix.

Aug 14, 2012Jeff Madrick

On the 77th anniversary of Social Security, we're celebrating what has made the program so important and why it remains vital today. Jeff Madrick explains why Social Security's so-called fiscal crisis has been overblown and looks at the many simple solutions on the table. Read the rest of our coverage here.

On the 77th anniversary of Social Security, we're celebrating what has made the program so important and why it remains vital today. Jeff Madrick explains why Social Security's so-called fiscal crisis has been overblown and looks at the many simple solutions on the table. Read the rest of our coverage here.

Little is as distressing in the public discourse as the linking of the financial problems of Social Security and Medicare. It is a favorite ploy of the deficit hawks to claim we must reform our entitlement programs without distinguishing between the two. I am at a loss to explain this. It is clearly ideological -- small government no matter who gets hurt. But Social Security payouts will rise from roughly 5 percent of GDP to 6 percent at worst down the road, while Medicare will rise by much more.

Nevertheless, poorly educated pundits, willing to believe the self-proclaimed centrist view that we cannot tax our way to solvency, demand Social Security reforms from selfish baby boomers. Monique Morrisey of the Economic Policy Institute does good work on this. Moreover, there is even a detailed Senate report on the issues that requires only a little updating. Maybe journalists should read it before they write about the subject. Its title is rather self-explanatory: “Social Security Modernization: Options to Address Social Security Solvency and Benefit Adequacy from the Senate.” 

First, remember that Social Security provides nearly 60 percent of the elderly more than half of their income. Seventeen percent receive all their income from Social Security, mostly households headed by elderly women. Most remarkably, and it would be nice for young people to register this, the poverty rate measured by the federal government for the elderly was 35 percent in 1959. As Social Security became more generous, it was reduced to 10 percent, about where it stands today. This is one of the great social achievements of our time.

Now for that future financing gap. It's true that payroll taxes won’t cover all the benefits to be paid in 25 years or so, as the ratio of the elderly to workers rises and life expectancy grows. But a more important and lesser known cause of this future gap is inequality of income. Tax revenues are reduced because incomes have stagnated for so many. Due to an earnings cap above which taxes are not collected, now about $110,000 a year, combined with the rapid rise of incomes for high-end earners, some 17 percent of aggregate earnings are not covered by the payroll tax. In 1980, only 10 percent were not covered.

But the solvency gap, as we might call it, is not very large, amounting to only 2.67 percent of GDP. How can that be closed? Pretty darned easily. For example, the cap can be eliminated. This would close almost the entire gap if high-end earners do not receive higher benefits. It will still close four-fifths of the gap if they do.

Another way to close the gap would be to raise payroll taxes by 1.1 percentage points, from 6.3 percent to 7.6 percent. This would entirely close the solvency gap. Or the tax could be raised by a little more than 1 percentage point in 2020 and another percentage point in 2052, also eliminating the solvency gap.

A combination would also work. If the cap were raised to cover 90 percent of all workers, for example, it would close about 25 percent of the gap. Thus, a tax increase to close the rest would be smaller. Alternatively, the payroll cap on employees could be limited to 90 percent and eliminated altogether for employers. This would just about eliminate the gap.

There are many other options and permutations, but any claim that a pragmatic increase in taxes cannot close the gap is utterly wrong. 

Let’s also keep in mind that Social Security solvency is based on a 75-year forecast. Any increase in the rate of growth over what is expected will reduce the gap significantly. Now to really be pie in the sky, there is also the possibility of investing in the economy to enable it to grow faster—investing in infrastructure, education, and so on. More equality of income would also reduce the solvency gap. For those eager for major benefit cuts because we can’t be sure about growth, well, they can be quite modest if coupled with tax increases. But they are not necessary now!

Medicare is a different issue. In sum, the nation pays about twice as much for what it gets from health care than it should compared to other countries. This is the domestic problem of our time. I think Obamacare may start us down the road to control these costs, especially if we ultimately add a public option at something like Medicare rates. That’s where pundits and deficit hawks should focus their attention. Instead, they like picking on Social Security, our single greatest achievement. Why?

Roosevelt Institute Senior Fellow Jeff Madrick is the Director of the Roosevelt Institute’s Rediscovering Government initiative and author of Age of Greed.

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To Paul Ryan, Faith is Fact

Aug 13, 2012Jeff Madrick

Paul Ryan is a true believer in right-wing economics, but his reputation as a courageous truth-teller doesn't stand up to scrutiny.

Paul Ryan is a true believer in right-wing economics, but his reputation as a courageous truth-teller doesn't stand up to scrutiny.

Mitt Romney’s choice of Rep. Paul Ryan as a vice presidential candidate has raised the decibel level of the anti-government movement dramatically. We started Rediscovering Government at the Roosevelt Institute to balance such ahistorical and destructive views, and Ryan’s is among the most extreme. If we are to think the best of Ryan, it is this: He believes in what he says. But what he says is a matter of faith, not of evidence.

Ryan’s budget proposal, which propelled him to the headlines a couple of years ago, would return government spending to 16 percent of GDP, the same the size it was in 1950, before Medicare or Medicaid were created or Social Security expanded enough to lift the majority of the elderly out of poverty. He would basically privatize Medicare, providing an inadequate subsidy to enable the elderly to purchase plans on the open market. He once proposed to change Social Security in a similar way, but that is now apparently on the back burner. He will deeply gut Medicaid and would almost entirely cut out all other government spending in coming decades, except for defense, which he seems to adore. This includes students loans, veteran programs, infrastructure spending, R&D, and so on.

Despite all this, he would not balance the budget, because the tax cuts he proposes are so extreme that even his social spending cuts won’t pay for them for a generation. Indeed, the size of his tax cuts seems to get lost in some analyses. They are bigger than Romney’s, really whoppers. There was a casual promise that they would be partly financed by closing tax loopholes, but as with Romney, we have yet to see details. 

Most Democrats seem to be rejoicing. They are probably right. Romney’s choice shows just how lost he really is. Unable to ignite his campaign merely by citing the unemployment numbers against Obama while hiding all kinds of secrets about his own life, he threw up his hands and chose Ryan, who one presumes he thinks will energize the base. Now that the race is about Medicare and tax cuts—and not jobs so much anymore—the Democrats believe they’ve got Romney.

But it’s worth thinking about why Ryan is so popular with many Republicans. He is thought of as honest, willing to tell difficult truths, and courageous. These are qualities few politicians exhibit today. He is genial. He promises major change, not just incremental change. Could this perception create a groundswell of support? I think there is reason to be wary of overconfidence.

But there's reason to question Ryan's supposed honesty. Sharply lower tax rates will not create renewed prosperity and jobs. Under George W. Bush, America experienced the slowest rate of job creation in the postwar period. Under Ronald Reagan, whom the conservatives revere as a great success, unemployment and deficits remained high, and wages stopped growing for the next 20 years. George H.W. Bush had to live with Reagan’s broken promises for his difficult four years in office. Republicans are promoting a myth, and Ryan pretends with the best of them.

His honesty is suspect for other reasons than that it is so destructively naive. Ryan has to know how easy it is rile up some people by playing to their prejudices. His tax cuts, which will help the rich more than the rest, will be paid for by the poor through cuts to such programs as food stamps and Medicaid. These are Ronald Reagan’s famous takers, not givers. It is code for people of color, for lazy good-for-nothings, for the welfare recipients who supposedly almost singlehandedly brought down America in the 1980s and much of the 1990s. Ryan appeals to the angry, the bitter, and the vindictive. Is this honest?

Finally, he is taking the easy road, not the hard road. Is it courageous to give huge tax cuts to the well-off? Is it honest to claim that tax cuts will reignite prosperity in America? He is promising painless growth. Sound familiar? Shades of the 1980s and Reagonomics? He leaves the tough stuff for the gym, where he apparently works out religiously.

Like Ayn Rand, his philosophical idol who believed in the individualist superman, Ryan believes faith is fact. Philosophy is easier when it doesn’t come down to earth and stays among the fictitious supermen. Ryan isn’t even close to earth. He cites Jefferson, of course, but Jefferson was an arch regulator of land sales by the government, a guarantor of education, a violator of the Constitution when he (thankfully) bought the Louisiana Territories, and a skeptic of manufacturing. He used government to end the British leftovers of primogeniture, which entailed that estates could not be broken up and the eldest heir would inherit all. His party members at the state level built the canals and developed free primary education, all before 1850. Jefferson believed in ordinary people, which is why he wanted them to have their own parcel of land at affordable prices. Land for Jefferon is Amartya Sen’s capability guarantee in our modern world. Today that means education, a minimum wage, and a minimum amount of health care.

Not so for Ryan. He wants to let the poor fend for themselves, trusting that the rich will create jobs for them. Forced responsibility will save the day. Can such nasty over-simplification work? I don’t think so, but I worry. How does one effectively respond to airy promises based on bitter feelings and easy scapegoats? He is promising faith, not facts. Let’s as a people at least demand some evidence and expose that fantasy as a lie.

Roosevelt Institute Senior Fellow Jeff Madrick is the Director of the Roosevelt Institute’s Rediscovering Government initiative and author of Age of Greed.

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Federal Spending Is Not Trapped by the Social Safety Net

Aug 2, 2012James K. Galbraith

Setting the record straight on the math around entitlement programs.

Setting the record straight on the math around entitlement programs.

The nub of Bill Keller's recent essay on why Social Security, Medicare, and Medicaid must be cut is a graph – taken from a report by a group called Third Way – that compares federal “investments” with “entitlements,” showing that one is in decline and the other is on the rise. As a baby boomer, former Executive Director of the Joint Economic Committee, and an economist concerned with military matters (I chair the Board of Economists for Peace and Security), my antennae went up immediately.

Note, as Keller acknowledges, that the federal budget counts weapons systems as “investments.” Back in the 1960s, we were building nuclear bombers, submarines, missiles, and warheads; today we are downsizing that arsenal, happily unused. Does Mr. Keller really think that those “investments” had anything much to do with economic growth? If so, he's misinformed.

Even today, military procurement is around 40 percent of total federal “investment” – $221 billion out of about $540 billion in 2011, according to the Special Analyses in the Budget. Whatever you think of the F-35 and F- 22, it's just silly to add that number to (say) federal aid to education, another component of investment. The sum is not a gauge of anything.

On the budget, Mr. Keller then asserts that “the arithmetic simply doesn't work.” He does not explain, but no matter; he's again misinformed. How do we know? Partly because the markets have full confidence in the US fiscal position – evidenced by record low long-term interest rates. And if you don't trust the markets, you can also look at the numbers, as I do here.

In reality, an older population is partly the result of the great success of Social Security, Medicare, and Medicaid, which have since the early 1970s protected elderly Americans from destitution. Naturally, they live longer. And as the elderly become more numerous, the payout of the programs that support them must rise. There is nothing wrong with this. And it is wholly sustainable. The right measure is the share of total spending on this population in total GDP; Social Security (OASDI) was under 4.5 percentage points in 2009 and is projected to rise to 6.5 percent over the next 75 years. By what conceivable argument is this a crisis? (For a detailed discussion of the question of “burden” see my testimony to the Federal Accounting Standards Advisory Board, February 25, 2009, co- authored with Warren Mosler and Randall Wray, available on request.)

Mr. Keller's proposal for a higher retirement age deserves a word. Today, a very high share of Social Security recipients take the early retirement option at 62. Raising the “retirement age” is just a benefit cut for these most vulnerable, lowest-paid workers. It's the cruelest and most dishonestly presented of all so-called Social Security “reforms.”

As for health care costs: yes, they should be controlled. But to attack Medicare specifically is to target the elderly for cuts simply because they happen to have a public insurance program. Keller's proposals would (mostly) apply to Medicare and non-Medicare funded care alike, which is a step in the right direction -- taking us away from the notion of “entitlement reform” in this area. But he is not careful enough to admit this.

These are simple points, whose validity I believe anyone can judge.

James K. Galbraith is the author of 'The Predator State: How Conservatives Abandoned the Free Market and Why Liberals Should Too'. He teaches at The University of Texas at Austin.

 

Social Security image via Shutterstock.com.

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