Risk Assessment, Round 2

This week, the Prospect's Matthew Yglesias, Ezra Klein, and Mark Schmitt have been discussing The Great Risk Shift: The Assault on American Jobs, Families, Health Care, and Retirement -- And How You Can Fight Back with the book's author, Jacob Hacker of Yale University. See the first round of this exchange here.

Round 2:

  • Hacker, Friday

    Jacob Hacker, Friday:

    Matt, Ezra, and Mark are some of the most thoughtful commentators and writers I know, and so I'm grateful they've cast their keen eyes on The Great Risk Shift and found it illuminating. Despite kind words for the book, however, both Matt and Ezra appear to want something more -- in Matt's case, a more full-throated attack on inequality; in Ezra's, a deeper exploration of political power, or rather the lack of it among Americans facing the trends I describe (and the challenge of restoring it to them). Mark is more sympathetic to my focus on the “near-universal” experience of insecurity, and the universalist prescriptions that flow from it. But he rightly points out that there are some for whom insecurity is a thing of the past -- and, unfortunately, these insulated denizens of our economy's highest ranks have been running our country and driving our politics.

    I am tempted to simply say thanks, and resolve to treat these issues in more depth down the road. (I'm actually working on a book about inequality and American politics right now with my friend and frequent coauthor, Paul Pierson -- which we're tentatively calling Winner-Take-All Politics.) And yet I think that neither Matt nor Ezra do justice to the ways in which The Great Risk Shift demonstrates that Americans' rising economic insecurity is tied up precisely with the trends they describe and deplore. Why are Americans facing increased economic instability, rising health costs and growing gaps in insurance, the demise of guaranteed pension plans, increased job insecurity, and skyrocketing bankruptcy and consumer debt? Not because there are no solutions out there to these problems, as Matt and Ezra both know well. But because America's corporate and political leaders have given up on the idea that economic security is a basic foundation of opportunity, and indeed have actively tried to shift more risks onto workers and their families -- through, for example, defined-contribution pension plans (extravagantly subsidized through the tax code) and Health Savings Accounts and the proposed privatization of Medicare and Social Security. This, as Ezra suggests, is as much a political story as an economic one, and it's the story I tell in my book.

    It's also the story of American inequality over the past generation. What's distinctive about the dramatic increase in inequality in the United States is that it largely hasn't happened because of a growth in America's perennial poverty problem (though deep poverty -- defined as living below 50 percent of the federal poverty line -- has grown.) Rather, it is driven by the enormous gains at the top -- gains that have dwarfed the rise experienced even by the educated upper middle class. Indeed, you have to go all the way up to the 90th income percentile, according to a recent analysis, to reach the income strata that has received earnings gains over the last thirty-five years commensurate with the general growth of productivity in the economy. And even these fortunate folks at the 90th percentile have seen their income rise only modestly compared with those at the very top.

    The thesis of The Great Risk Shift flows directly from this striking pattern of inequality. It is that over the last generation, problems once confined to the working poor -- lack of health insurance and access to guaranteed pensions, job insecurity and staggering personal debt, bankruptcy and home foreclosure -- have crept up the income ladder to become an increasingly normal part of middle-class life. Personal bankruptcies are more than five times as common as they were a quarter-century ago. Mortgage foreclosures are up 400 percent since the early 1970s. Working-age adults with modest annual incomes ($20,000-$40,000) are nearly half again as likely to be medically uninsured than they were in 2000, with a staggering 41 percent going without coverage for all or part of last year. It is families in the middle who frequently fall between public and private protections in our jerry-rigged structure of economic benefits. And upper-middle-class families are increasingly facing the same sorts of insecurities, too -- their skills more fragile and their knowledge jobs more insecure than many of them ever expected.

    I see the problem this way not because it's a politically prudent frame, but because it's the truth. But I do think that insecurity is more likely than inequality to spur Americans and their leaders to action. Larry Bartels at Princeton and others have shown that Americans are aware of rising inequality and are concerned about it, but that they don't connect it to their everyday life. (Paul and I have argued that Larry overstates public support for top-heavy tax cuts, but his broader argument strikes me as absolutely correct.) Americans, moreover, are highly aspirational -- they believe in upward mobility and think they will experience it, even as they express broader economic views that are highly populist and increasingly pessimistic.

    This faith in opportunity can undercut concerns about inequality, but it shouldn't undermine concerns about economic security -- not just because security and opportunity go hand in hand in practice, but also because they go hand in hand in most people's minds. Ever since Loyd Free and Hadley Cantril argued in the late 1960s that Americans are “philosophical conservatives” and “operational liberals” (a point updated by the political scientists John Zaller and Stanley Feldman), it's been clear that Americans believe simultaneously that people should make it on their own and that they deserve basic protections, so long as those protections are seen as available to people “like them.”

    Mark, Ezra, and Matt are absolutely right, however, that this message needs to have a populist tone, not just a technocratic one. Some Americans are ridiculously secure -- they get golden parachutes and second and third chances, while most Americans don't. Corporations get limited liability. American families don't. Why didn't the 2003 prescription drug bill provide a strong foundation of security for elderly Americans drowning in prescription drug bills? Because it was a giveaway to drug companies and the insurance industry, and an expression of Republican animus toward broad-based insurance, exemplified by the bill's insistence on private drug plans and Health Savings Accounts -- costly choices that help account for the fact that “donut hole” has transformed from a tasty morsel into a major concern on the minds of the millions of elderly Americans who spend between $2,000 and $5,000 on prescription drugs (the window of costs in which drug-plan coverage disappears and for which senior citizens are forbidden by the 2003 law from buying supplemental protections).

    In the long run, insecurity is bad for the economy, as I argue in the book. But the real problem is that it's bad for most Americans, who've faced increasingly turbulent economic seas on waterlogged dinghies even as the fortunate few sail off to calmer waters on yachts.

    Matt, Ezra, and Mark do not say much about my prescriptions, but I think they're ideas that would unite us: reversing our top-down savings incentives, improving unemployment insurance and creating wage insurance, ensuring affordable health care for all, helping families balance work and child care, and thinking outside the box about how to provide new protections against catastrophic risks. It's no secret that all these programs provide disproportionate benefits to Americans at the bottom of the economic ladder, and unlike many programs that explicitly do this, they don't have huge gaps through which millions of Americans fall. We've expanded public health protections to every poor kid in America -- a great success story, in many ways, and proof that the moral concerns that Mark calls on us to articulate still resonate. And yet the share of kids without insurance is basically the same today as it was in the 1970s, because employers continue their steady retreat from the benefit obligations they took on in the past.

    Targeting the poor isn't going to deal with the growing gaps in our employment-based benefits, or spur a discussion of how we fix the American social contract, because these really are problems that directly affect the middle class, too. And if we can address the large share of the poor who are only intermittently poor -- who fall into poverty for a limited time because of divorce or job loss or financial crises -- then I think we will be better positioned to address the smaller but more desperate group who are truly stuck at the bottom. Reagan once said we fought a war on poverty and poverty won. Let's fight a war on insecurity. My firm belief is that poverty will begin to lose.

    Do I think political power is the ultimate issue? Yes. But power flows from purpose. We need to think big and be bold, and bring Americans to a larger cause whose tangible effects on their lives is both transparent and transparently positive. We need to reinvigorate a faith in what Michael Tomasky calls the “common good,” or what Alexis de Toqueville once evocatively termed “self-interest rightly understood.” The goal isn't, at bottom, any more complicated than the simple longing expressed by a middle-class woman who wrote me a few days ago to share her views: “I am tired of working for the economy. I want an economy that works for me.”

    Jacob S. Hacker is a Yale political scientist and fellow at the New America Foundation.

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