In his ethnography (PDF) of Grover Norquist’s weekly breakfast meetings, Thomas Medved tells us how Newt Gingrich sold reluctant conservatives attending the meeting on Medicare reform.
The debate up to this point functioned largely as a prologue for the day’s special guest, former Speaker of the House Newt Gingrich. Here to mediate between the fiscal conservatives who disliked the bill and the free-market conservatives who saw in it the seeds of health care privatization, Gingrich spoke out in favor of the Medicare reform act. His primary message to the group was that they must start “thinking like a majority” by accepting the logic of incremental progress. That’s how the welfare state was built, he said, and that is how it must be dismantled. Citing his own efforts to “stop Hillary-care” and promote the Contract With America as examples of incremental progress, Gingrich said Medicare reform is a step toward a more conservative country because it “moves you toward choice.” Gingrich saw other benefits in the legislation as well. He cited in particular a major “shift in plate tectonics” now that the American Association of Retired Persons (AARP), the largest voluntary organization in America, was on the Republican side of an issue and against the Democrats. And there was yet another hidden advantage: Gingrich predicted that the bill’s passage would “break up the collectivist language” of union members because when employers adopt the strategy of giving Health Savings Accounts to their non-union employees, the unions would start fighting for them. In general, Gingrich said, we can “migrate Medicare” rather than destroy it by creating choices that baby boomers will take advantage of.
“Creating choices” is an interestingly ambiguous term. As discussed in Jacob Hacker’s book, people who have signed up to Health Savings Accounts (which were around before the Medicare legislation) seem to be much less happy than those who have traditional coverage; they presumably wouldn’t ‘choose’ them if there were better options on the table. Nonetheless, the number of Health Savings Accounts is growing. Over a quarter of large employers said that they would offer them in 2006, and larger employers such as Walmart are increasingly trying to move away from traditional plans to HSAs, which discourage workers with health problems from staying with the firm, and hence save them money. The choice offered here is to accept a worse deal from your employer, or quit and hope that you’ll somehow find something better somewhere else. Not much of a choice. Yet nonetheless, when the mantra of ‘choice’ is invoked by the right, it often refers exactly to choices of this kind. There’s something weird going on.
Jacob Hacker wants to unravel this weirdness. He’s a political scientist – his major empirical contribution in the last few years has been to describe the mechanisms (PDF) through which Gingrich and others have deliberately sought to undermine welfare state institutions, inch by inch. In writing about this, Hacker has enlarged our understanding of how institutional change takes place. But this book isn’t an exercise in descriptive social science. It does help explain how the right’s renewed emphasis on ‘personal responsibility’ is less an exercise in increasing choice, and more a means of transferring risk away from large collective actors (such as governments or firms) to individuals, who typically have far fewer resources to deal with disaster when it happens. But Hacker is trying to change the political debate, to push back against current ways of framing these issues, and in so doing, to redefine the intellectual terrain. This is why the book was attacked so vigorously (and incoherently) before it was published, by people like Brink Lindsay and Glenn Reynolds . If Hacker’s framing of politics succeeds in taking hold, it will make it much more difficult to chisel away the foundations of the American welfare state than it has been in the past, and correspondingly make it easier to expand welfare state principles to new areas.
Hacker’s account is twofold. First, he looks at the various ways in which risk has increased over the last few decades. Jobs: Hacker discusses how expectations of stable employment have nearly disappeared, how part time and temporary work have increased, and so on. He argues, as others have argued, that ‘flexible’ jobs don’t necessarily increase choice for employees, because these work arrangements are typically set up “for the convenience of employers, not workers.” Part time work may in principle be a boon for mothers with young children – but not when the firm changes your schedule according to its week-to-week needs, and fires you if you can’t make it in. Families: having a family increases your risk of going bankrupt, and involves massive, and increasingly risky investments in housing and education. Old age: as defined benefit pension plans become vanishingly rare, individuals take on more and more risk through defined contribution plans, which will do well if the stock market does well, and do badly if it doesn’t. Health: health care has become ever more expensive, posing greater risk both to the uninsured and the insured (and people move back and forth between these groups far more often than most people realize).
At least some of this increase in risk is secular – it’s hard to trace it back to specific decisions made by particular people or groups. But what isn’t hard to trace back are the decisions made by policy makers to exacerbate these risks by aiding and abetting the transfer of risks to individuals rather than countering it. This is the second prong of Hacker’s argument. We know that policy makers could have done differently – they have done differently in other countries. But in the US, thanks to Gingrich and others like him, government has sought to increase individuals’ exposure to risk rather than to decrease it, typically under the mantra of increasing ‘choice’ or ‘freedom.’ Thus, for example, the abovementioned individual Health Savings Accounts. Thus too, the effort to tear down Social Security, and replace it with a system of ‘private’ or ‘personalized’ (depending on which buzzword works better with focus groups) accounts, regardless of the enormous switchover costs. Instead of trying to mitigate risk, government under conservatives has sought to pile ever more risk on individuals, even if the fiscal consequences are horrendous.
Hacker argues that not only are these policies ideologically loaded – they transfer risk from corporations to the middle and working classes – but they don’t make any sense in their own terms. High degrees of personal risk are a hindrance rather than a spur to beneficial economic activity. If people perceive that their jobs are risky, they’re likely to underinvest in specialized training (here, there is a well established literature in political economy which suggests that an extensive welfare state goes hand-in-hand with the development of specialized skills). Personal investments in education are less attractive if the rewards from education are highly uncertain. In the book’s conclusion, Hacker briefly describes a variety of policies that might help mitigate personal risks, including his own proposal for Medicare Plus.
Despite this short discussion of policy options, The Great Risk Shift isn’t really a book that is aimed at the professionals who write about health care, pensions etc, or at scholars, although it relies extensively on findings by both policy wonks and academics. It isn’t intended to contribute to specific policy debates, but to transform very broad public arguments. To my eyes at least, it seems very clearly intended to claw back territory from what Hacker describes as the Personal Responsibility Crusade by making policy makers deal with the problems of risk, and by making ordinary people realize that the economic risks that they face haven’t descended from the skies. In large part, those risks are the result of conscious, deliberate choices made by conservative policy makers (and sometimes by centrist Democrats) both indirectly to help pave the way for the transfer of risk to individuals, and not to intervene when government could play an important role in mitigating risk.
Which is all to say that this book is going to succeed or fail to the extent that it changes wider public debates. As an unreconstructed social democrat, I wholeheartedly hope that it succeeds; while there are bits of Hacker’s argument (such as his explicit discounting of the issue of economic inequality) that I disagree with, on the whole, I think that this is a highly valuable, and indeed potentially explosive book. This said, there are some issues that I’d like to see Hacker deal with more explicitly. Some of these concerns are with nuances – I can understand why they didn’t make it into a book that’s trying to reach a wider audience. But I would like to see him address them (perhaps if he is intending to write follow up pieces for a more academic or technical-policy oriented audience). In no particular order:
(1) Tyler Cowen’s critique. Cowen provides a much more serious libertarian response to Hacker’s arguments than does Brink Lindsay, agreeing thoroughly with Hacker’s arguments on pensions, but disagreeing to a greater or lesser extent on his other claims. Cowen points to theoretical linkages that need to be drawn out, and to conflicts over empirical data. As stated above, I can see why much of this nuance didn’t make it into the book (although some at least of the issues are addressed in Hacker’s other work) – but I would like to see more on this.
(2) Risk and economics. Hacker points to the role that economists’ arguments about moral hazard etc have played into the politics of risk transfer. In my view, he is correct both on the political importance of these arguments, and on the degree to which some policy makers and economists have overstated their applicability. Nonetheless, there is something there – moral hazard isn’t an empty concept, and people do respond (albeit not as predictably as most economists would claim) to incentives. If we agree with Hacker’s core claim about the need to transfer risk from individuals to the collective level, are there ways to do this that at least mitigate problems of moral hazard?
(3) Risk and conservatism. Hacker’s arguments suggest that the language of personal responsibility had its beginnings in economic thinking about insurance (see esp. pp. 47-53). I think that this is only partly true. There’s a second, quite independent line of thinking about personal responsibility that doesn’t have much at all to do with incentive problems, and a lot to do with ideas about individual character. Take, as a paradigmatic example, David Frum’s arguments in Dead Right. Frum is dismissive about arguments from economic incentives, claiming that they offer too much succour to those who would increase government spending. Instead, he focuses on the purportedly negative impact of the welfare state on personal character.
If the old American culture and the old American character were rational responses to the riskiness of life, you cannot alleviate that riskiness and expect the old character and the old character to persist. The children of a self-made man are different from their father: more optimistic, often more generous, more sensitive, and more tolerant, but less careful, less hard-working, less self-controlled. In the same way, the citizens of a socially-insured America will act and think differently from the citizens of self-reliant America. If you prefer the old character, it is wishful thinking to duck out of the struggle to return to the older way of life that brought that character into being.
Now, when stated as baldly as that, this is a remarkably unattractive and not especially coherent philosophy. We need more risk, and lots of it to build character! But something like this claim drives a lot of conservative writing about the evils of the welfare state – not that it offers the wrong incentives, but that it deforms personal character. While this may not be an especially persuasive argument to non-conservatives, I’d have liked to have seen Hacker’s book address it. It’s an important strain of current arguments against the welfare state. It’s also a big, fat target.
Enough already. This is a good, smart, polemical book. It deserves a wide readership, so that next time a Newtoid starts talking about this or that appalling piece of legislation ‘increasing choice’ or ‘personal responsibility,’ he or she will be called on it. Even if George Lakoff and others’ arguments about political framing are rather reductive, political debate is shaped profoundly by the language that it is conducted in and the concepts that it invokes. This is a fiercely and tightly argued effort to change those concepts. I hope it succeeds.