The Audacity of Hope

provided, and the lower the cost. Sometimes, though, we can’t buy insurance for certain
risks on the marketplace—usually because companies find it unprofitable. Sometimes
the insurance we get through our job isn’t enough, and we can’t afford to buy more on
our own. Sometimes an unexpected tragedy strikes and it turns out we didn’t have
enough insurance. For all these reasons, we ask the government to step in and create an
insurance pool for us—a pool that includes all of the American people.
Today the social compact FDR helped construct is beginning to crumble. In response to
increased foreign competition and pressure from a stock market that insists on quarterly
boosts in profitability, employers are automating, downsizing, and offshoring, all of
which makes workers more vulnerable to job loss and gives them less leverage to
demand increased pay or benefits. Although the federal government offers a generous
tax break for companies that provide health insurance, companies have shifted the
skyrocketing costs onto employees in the form of higher premiums, copayments, and
deductibles; meanwhile, half of small businesses, where millions of Americans work,
can’t afford to offer their employees any insurance at all. In similar fashion, companies
are shifting from the traditional defined-benefit pension plan to 401(k)s, and in some
cases using bankruptcy court to shed existing pension obligations.
The cumulative impact on families is severe. The wages of the average American
worker have barely kept pace with inflation over the past two decades. Since 1988, the
average family’s health insurance costs have quadrupled. Personal savings rates have
never been lower. And levels of personal debt have never been higher.
Rather than use the government to lessen the impact of these trends, the Bush
Administration’s response has been to encourage them. That’s the basic idea behind the
Ownership Society: If we free employers of any obligations to their workers and
dismantle what’s left of New Deal, government-run social insurance programs, then the
magic of the marketplace will take care of the rest. If the guiding philosophy behind the
traditional system of social insurance could be described as “We’re all in it together,”
the philosophy behind the Ownership Society seems to be “You’re on your own.”
It’s a tempting idea, one that’s elegant in its simplicity and that frees us of any
obligations we have toward one another. There’s only one problem with it. It won’t
work—at least not for those who are already falling behind in the global economy.
Take the Administration’s attempt to privatize Social Security. The Administration
argues that the stock market can provide individuals a better return on investment, and
in the aggregate at least they are right; historically, the market outperforms Social
Security’s cost-of-living adjustments. But individual investment decisions will always
produce winners and losers—those who bought Microsoft early and those who bought
Enron late. What would the Ownership Society do with the losers? Unless we’re willing
to see seniors starve on the street, we’re going to have to cover their retirement expenses
one way or another—and since we don’t know in advance which of us will be losers, it
makes sense for all of us to chip in to a pool that gives us at least some guaranteed
income in our golden years. That doesn’t mean we shouldn’t encourage individuals to
pursue higher-risk, higher-return investment strategies. They should. It just means that
they should do so with savings other than those put into Social Security.