Voters Will Defend Economic Security Against Painful Reforms

At the risk of sounding simple-minded, I’d like to advance a proposition that will strike most readers as blindingly obvious—a political movement that doesn’t solve or at least alleviate the problems we encounter in daily life will fail. This is why Bruce Bartlett’s broader understanding of freedom is so crucial. Those benighted Europeans, suffering under an overweening welfare state, is in fact feel pretty free, and often enough pretty affluent. Reform has thus proven difficult if not impossible. Even an Angela Merkel, so committed to a sweeping program of market liberalization as recently as a few months ago, has surrendered to the stultifying consensus.

And if we take a moment to look beyond comforting abstractions, it’s easy to see why. Your average middle-class European is constrained in many ways a middle-class American is not, but chances are she’s not afraid of seeing her child catch a flu because she happens to be between jobs. Simply put, you can’t take something away without giving something else in return. Root-canal reforms that sharply reduce economic security will be resisted unless you can make the compelling case that there is some compensating benefit, a light at the end of the tunnel.

That, unfortunately, is exactly what President Bush failed to understand in his ill-conceived effort to revamp Social Security.

Embracing an incremental reform like Early Retirement Accounts would have built a constituency for reform over time while also encouraging workers to delay retirement, killing at least two birds with one stone. The same goes for the creation of Swedish-style notional accounts. Best of all would have been a measure that replaced the job-killing payroll tax with a consumption tax that hit the affluent (including affluent retirees) hardest. Instead, President Bush promised … well, he promised more risk and benefit cuts, right when anxiety over the death of corporate pensions was at its peak. A diabolical scheme to discredit entitlement reform couldn’t have been more brilliantly executed.

Or take Arnold Schwarzenegger’s effort to check the power of public sector unions through a measured, poll-tested set of centrist reforms. Why did it meet so ignominious a defeat? In the end, the protections of public sector workers were seen as the only way for middle-class families to thrive in California’s high-cost cities and suburbs. Instead of tackling the root causes, the spiraling costs of housing and health care, many voters felt Schwarzenegger was going after the little guy.

To understand the future of American politics, you need only look at the alarming number of American families who’ve gone bankrupt thanks to a temporary lack of medical insurance, or for that matter inadequate insurance coverage. We could very well conclude that the adults in question were imprudent, and thus deserve their fate. But most Americans—me included—see them as victims of a chaotic, dysfunctional system, a system that, incidentally, bears no resemblance to a functioning marketplace. Our broken borders are indeed a source of anger and frustration among rank-and-file Republicans and Democrats, but the health care crisis overshadows immigration by a mile, and will continue to do so until a real solution is at hand. Given time, the majority of voters who see the status quo as unacceptable, on economic and on moral grounds, will press for action. By default, that will mean moving towards a far larger, far more intrusive role for the federal government in providing medical care. Jacob Hacker’s ingenious Medicare Plus proposal represents one possible future, in which a very large share of the middle class becomes more or less satisfied clients of the social services bureaucracy.

Is this the only alternative? Of course not. One can easily imagine a market-oriented reform that goes far beyond Mitt Romney’s innovative proposal to offer more choice, more transparency, and more quality.

Because the health sector is such a large and fast-growing sector, thanks in large part to rising affluence, you can rest assured that the effects of a comprehensive overhaul would ripple through the economy. Employers, for one, will be very pleased, the tremendous burden of maintaining a welfare state in miniature having been removed, a step that might even prove a spur to job creation. It would certainly be a spur to social mobility. There’s only one problem. Any effective reform—including a market-oriented reform—would mean spending more money than we currently spend. Not much more, particularly if—as David Frum suggests—we factor in the enormous tax subsidies we now channel to the very rich, but certainly more. That means expanding government’s visible share of GDP, at least in the short term.

The same goes for a number of proposals that would, taken together, decisively shift the political balance from the partisans of social democracy (who are growing stronger by the day) to the partisans of economic freedom (who are fading fast). A real ownership society that includes all citizens requires, whether we like it or not, a measure of redistribution. Do conservatives have “the nerve to propose real redistribution,” as Newt Gingrich himself memorably put it? That is an open question. To insist that President Bush’s real problem is “spending like a drunken sailor” when tax revenues have collapsed and government spending is, as liberal budget hawk Jonathan Chait has observed, lower than it ever was between 1975 and 1996 is just silly.

It’s not the spending. It’s the opportunism, the lack of a vision.

Were we headed in the direction of more freedom, as we were during the variously tax-cutting, tax-hiking Reagan years, perturbations in government’s share of GDP would matter very little.

I’ve already gone on long enough. When I return, I’d like to question the notion that government can’t do much about the instability of family life. For now, let me just say that there is quite a lot government can do, first and foremost by not making matters worse.

Also from This Issue

Lead Essay

  • Republicans and the Flight of Opportunity by David Frum

    In this month’s provocative lead essay, bestselling author and former Bush speechwriter David Frum considers whether the time has come and gone for the small government heirs of Goldwater, Reagan, and Gingrich. His answer: “the day in which we could look to the GOP to have an affirmative small-government vision of its own has I think definitively passed.” Government slashing types have never been more than an active minority in the GOP, Frum argues, and there is little chance that Republicans going forward will repudiate the spirit of the big-government Bush agenda. The small-government conservative’s best hope is that, like the defunct Whigs and Progressives, elements of their ideas and ideals will survive as a part of the political consensus.

Response Essays

  • The Forecast is Grim – So What Are We Going to Do About It? by Bruce Bartlett

    Bruce Bartlett, author of Impostor: How George W. Bush Bankrupted America and Betrayed the Reagan Legacy, agrees with Frum’s gloomy assessment of the prospects for small government and argues that conservatives and libertarians often compound the problem by failing to understand the magnitude and political intractability of the government’s non-discretionary entitlement programs. Slashing government is not “as easy as waving a magic wand.” Bartlett warns of the danger of resigning in frustration and calls for “a serious debate among libertarians and small government-types on a realistic political strategy for achieving their goals.”

  • Renewing the Mandate by Ross Douthat and Reihan Salam

    Ross Douthat and Reihan Salam argue that although a renewed push for smaller government isn’t in the cards, Republicans can realistically hope to win reforms that promote “freedom, self-reliance, and individual initiative”—values at the core of the small-government movement. In the current climate, Douthat and Salam write, “simply calling for the rollback of government appeals only to those already in the winner’s circle of American life…” So, they argue, Republicans “need to accept that government will remain large in the short run … while pursuing long-range strategies that will produce a more opportunity-friendly, less statist America.”

  • Where There Is No Vision, the People Perish by David Boaz

    Cato executive vice president David Boaz argues that the Republicans have failed Reagan’s vision, offering their own brand of meddlesome statism as an alternative to the Democrats’. Although there is in the U.S. a constituency for limited government, Boaz argues, it needs a leader. The task for “advocates of liberty and limited government” is to “make ready the ideas, the platform, the networks that could serve a political leader who wanted to take on the task of clearing away the late 20th century’s accumulated burden of bureaucratic systems, unfunded liabilities, overextended military commitments, and usurpations of the responsibilities of free citizens.”

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