The Great Risk Shift

My last column ended by asking, “What are the big issues?” and “more importantly ….how should they be framed?”

One of the “big issues” if not “the biggest issue” is described in a book by Jacob S. Hacker, a political science professor at Yale. That book is entitled, “The Great Risk Shift.
            In his book Hacker evokes a general theme, which is summarized in a single sentence from the book, as follows: “Over the last generation….we have witnessed a massive transfer of economic risk from broad structures of insurance, including those sponsored by the corporate sector as well as by government onto the fragile balance sheets of American families.”
            For evidence to support that proposition and theme, Professor Hacker cites with clear opprobrium the growing volatility of family and individual incomes, escalating bankruptcies and foreclosure rates, the collapse of defined-benefit corporate pensions, and the swelling ranks of Americans without health insurance, which he collectively describes as the consequences of “America’s sweeping transformation away from away from an all-in-the-same boat philosophy of shared risk toward a go-it-alone vision of persons responsibility.” Hacker then attributes this transformation to the “Personal Responsibility Crusade” which has previously been labeled by others with less emphasis on its negative effects as “Reaganomics” or “The Opportunity Society.”
 In fact this exact same historical trend which is described by Professor Hacker in arguably apocryphal terms is welcomed by Mr. Brink Lindsay, Vice President for Research at the Cato Institute and author of “The Uncertain struggle for Global Capitalism” when he joyfully proclaims, “Out of the stagflation and malaise of the 1970’s emerged a new and improved American economic system – less regulated and unionized, more globalized and entrepreneurial than the old triumvirate of Big Government, Big Business, and Big Labor that preceded it.” Mr. Lindsay then summarily sweeps aside Professor Hacker’s writing and concerns by attributing them to the general reaction of the “political left,” which ever since the advent of “the improved American economic system,” described as Reaganomics in the 1980’s has devoted a considerable portion of it’s intellectual energy to poor mouthing the ensuing prosperity.”
             While Mr. Lindsay sees the rapid rise of 401(K) Plans, the creation of Health Savings Accounts and the proposal to replace traditional Social Security benefits with “Personal Retirement Accounts” as positive developments of the new and “improved” “entrepreneurial American economy” designed to replace tired and worn out institutions and a malaise-infected culture which were reducing the level of our prosperity.” Professor Hacker sees these exact same trends as unfairly and more importantly in this election year, unwisely, shifting economic risk to families and individuals at a cost that they cannot afford to their physical and mental health as well as their economic security.
            Mr. Lindsay of the “Libertarian Right” candidly acknowledges that Professor Hacker of “The Political Left” is correct in reaching his factual conclusion that intensified competitive pressures have increased the tempo of what Mr. Lindsay refers to as “creative destruction.” That is “turnover in the ranks of Fortune 500 companies and elsewhere have accelerated, and layoff rates (especially for white collar workers) are up.” Significantly, Mr. Lindsay then further concedes that if what he labels as the slippery term “economic security” “means security from potentially disruptive change, we probably do have less of it than before.”
            It strikes this writer that the use of the term “creative destruction” which Mr. Lindsay does not hesitate to use to describe people losing their jobs, fearing the loss of their jobs, as well as their confidence about their economic future and that of their families is considerably more “slippery” then the term “economic security” which about as accurately as the English language permits describes those same acts and anxieties. In any case the shift of these risks and the costs of that shift to the health, welfare, and security of individuals and their families is real and deeply felt no matter what words we use to describe them.
            The political issue, then, is what is the tradeoff? What benefit do individual citizens and their families receive in return for accepting (with their votes) “The Great Risk Shift” and enduring the additional economic insecurities and anxieties which have accompanied it during the last 28 years? The shift results from the policies of all but the eight years of the “Clinton Presidency” which arguably interrupted/paused the shift or at least slowed it from the 1992-2000. The “Great Risk Shift” has been the public policy of all of the Republican Administrations during that period of time.
            The resolution of this issue is not as clear as we might expect or even that we might desire. If the polls are correct, then after the last two elections in which the voters appeared to be concerned more with national security issues than with economic security issues, this election may be well decided by economic issues including the “Great Risk Shift” which has taken place without any electoral scrutiny or even focus on it. That should change this year barring another terrorist attack on the homeland.
            As the issue develops and in this column, we will consider the full depth and breath of the “trade-offs” between economic “security” and “prosperity.” What risks and trade-offs are associated with the policy-status-quo, a return to the pre-1980 era which Professor Hacker describes as an age of “economic stability and risk-sharing” as well as what new markets and institutions for the 21st century could we develop that we have not developed which could mitigate or even reduce some of the biggest risks faced by the American People. These questions will certainly not be framed in this way for the debate and paid political commercials aired by the candidates. But they should be answered directly.

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