Live At Your Own Risk

For three decades, the gap between the rich and everyone else has grown in the United States. At the same time, working people have faced greater economic uncertainty, their incomes have fluctuated more dramatically, and both employers and governments have cut back on measures such as pensions and health insurance that helped mitigate the uncertainties of life. Yale political scientist Jacob Hacker calls this the great risk shift – transferring the burden of risks in life from collective institutions to individuals.

Hacker observes that ​“Social Security, Medicare, private health insurance, traditional guaranteed pensions – all sent the same reassuring message: someone is watching out for you, all of us are watching out for you, when things go bad. Today, the message is starkly different: You are on your own.”

The greatest victims of this shift are the poor, and the biggest beneficiaries are the rich. However, in The Great Risk Shift, Hacker uses statistics and illuminating anecdotes to show how the shift also threatens the ​“middle class.”

Many of the same changes in the economy increase both inequality and risk. However increased individual exposure to economic uncertainty raises slightly different political questions. It endangers and often wreaks real hardship on many who thought their lives were secure. These middle class workers found their health insurance was inadequate, their jobs were off-shored, or, like many Enron employees, their 401(k) retirement accounts collapsed with their employer.

As a result, Americans are increasingly anxious. Everyone except the rich are at risk, and no individual solution, including education, can adequately compensate for the insecurities that loom over Americans’ lives.

Hacker’s important and illuminating book – with its call for creating an ​“insurance and opportunity society” – should inform every discussion of progressive political strategy in the coming decade. More expansive social insurance may not be a full progressive program, but it is a compelling rejoinder to what Hacker calls the Personal Responsibility Movement. 

Two other new books hit on similar themes from different angles. In All Together Now, Jared Bernstein, a senior economist at the Economic Policy Institute, offers a trenchant critique of the economic, political and moral shortcomings of conservative social and economic policy that he dubs YOYO, or ​“you’re on your own.” He wittily contrasts them a progressive strategy that recognizes that ​“we’re in this together,”: WITT. 

In The American Dream vs. The Gospel of Wealth, former Amherst College economist Norton Garfinkle, now chairman of the Future of American Democracy Foundation, succinctly describes the way American history has alternated between two visions of the nation’s economy. Abraham Lincoln articulated the American Dream that, as Garfinkle summarizes it, ​“all Americans will have the opportunity through hard work to build a comfortable middle-class life” so long as government acts, as Lincoln said, ​“to clear the path” for their progress. In contrast to this dream, steel baron Andrew Carnegie espoused the Gospel of Wealth: in the interests of a growing economy, government should get out of the way, let the rich prosper and leave everyone else to the fate of the marketplace – a vision revived under Reagan and refined by George W. Bush. 

An unchecked market destabilizes national economies. Hacker shows how risk has grown on several different fronts for most Americans, starting with incomes, which have become much more unpredictable from year to year. Conservatives see such instability as the result of flawed personal choices, but Hacker shows that even risk-averse people experience wild income swings. The right also blames divorce, but divorce rates were declining as economic instability climbed. Alternatively, conservatives argue that economic insecurity is merely a sign of social mobility, but social mobility has actually decreased in the United States, and many wealthy countries with more generous social insurance programs have higher social mobility than the United States.

Corporate attacks on workers and conservative policies both contribute to the growing insecurity. For example, workers are now much more likely to have personal retirement accounts than traditional pensions that pay a defined benefit. The result: both less equality and higher risk at retirement. And despite their setbacks, conservatives are still pushing for private accounts that would do the same to Social Security. Yet Social Security remains a shining example of how insurance provided through government can efficiently reduce risk, enhance social welfare and modestly boost equality, often far better than private insurance can.

After doctors, businesses and conservatives blocked national health insurance in the New Deal era, the private, employer-based system that arose instead has in recent decades become less comprehensive, more expensive and less dependable. Today, roughly half of individuals filing bankruptcy do so for medical reasons, and three-fourths of those filing had insurance at the start of their illness. But the right wants to shift even more responsibility to individuals with Health Savings Accounts and other ​“consumer driven” health insurance.

Hacker notes that the combined public-private safety net system in the United States is ​“more expansive” than in many European countries. But because private interests so distort our system, it is less able to deliver equal protection. 

Even the family, Hacker notes, is less of a ​“haven in a heartless world” (in the words of Christopher Lasch). Because families have needed two incomes to cover necessities, especially as men’s wages have declined in real terms, women’s work is no longer a buffer for hard times. Instead, credit cards and other debt become the family safety net, putting family finances at even further risk.

Hacker blames the shift on ​“ideology.” But as important as right-wing, free-market ideology has been, his own analysis points to corporations and capital markets as the driving force. The corporate offensive, starting in the ​’70s, coincided not only with the rise of free-market fundamentalism but also with the growing impact of globalization. The shift in risk ultimately stems from a shift in economic and political power.

Hacker offers many ingenious policies to help reduce and share risks, from wage insurance to Medicare Plus (which moves Medicare towards universal health insurance) and an intriguing plan for Universal Insurance against economic catastrophe. He argues that freeing individuals and families from financial risks can make it easier for them to take on other risks, such as getting an education, that ultimately help the economy. 

Bernstein and Garfinkle place an even greater emphasis on the economic benefits – such as growth and investment – that would result from greater government intervention to promote equality and to share risks. Free-market fundamentalism does not deliver as well, even on its preferred terms of jobs, growth and investment, as does a more egalitarian social economy aimed at raising living standards for everyone. 

In the end, questions about economic policy involve more than investment or GDP growth, important as those may be. They involve morality and politics, like whether economic policies strengthen democracy. And on that count, all three writers make convincing cases that when dealing with the great risk shift, and making real the American Dream, it’s essential to remember, ​“we’re all in this together.”