Really Outdated Programs

[cross-posted, as usual, at TPMcafe.com]

It’s easy to make fun of Matt Bai; he"s a People magazine writer suddenly trying to write for Foreign Policy. His piece in yesterday"s Times magazine read like someone vaguely trying to repeat something he heard someone else say without quite understanding the point or asking questions.

But let’s try to take the point seriously. Bai says that instead of defending old programs, Democrats should rethink the social contract for an economy in which the conditions of work are very different from the "industrial-era" circumstances of lifetime employment with a single company.

Bai alludes to Social Security as one of the programs that needs to change. That’s obviously wrong. If anything, the security of the guaranteed benefit in Social Security is more necessary given the uncertainties of working life in the modern era than it was at the middle of the last century. The security against abject poverty that Social Security provides allows workers to take risks and seek opportunities with their careers and their other savings or investments that would not be possible if everything was at risk.

But Bai only mentions Social Security once, and it’s not clear that his main point is a lame case for privatization. So is his overall argument that we should rethink the social contract wrong?? No. One good response for Democrats to the banal argument that old programs are unsuited to the modern economy would be to identify those that really are outdated, and and focus on reforming them, rather than Social Security. Here are a few:

1. Unemployment Insurance. Surprisingly, because it’s the social program that college-educated journalists and wonks are most likely to be familiar with ("Vandelay Industries," anyone?) unemployment insurance gets almost no attention in these discussions. And yet it’s the program that most directly fits the outdated-industrial-age critique. Everything about the way the program works, from the high bar to eligibility, to the 26-week duration of benefits, to the business-labor board that runs the program in most states shows that this is not a compassionate program for the unfortunate. It’s a system for big industries like steel and autos to manage their labor costs through the business cycle. In cyclical downturns, they could park their employees on UI and bring them back in six months. In essence, employers socialized the cost of maintaining a flexible workforce. Not a bad system. But that was then. The era of the "temporary layoff" is over. When you lose a job, the job’s usually gone forever. When you get a new one, it may not last long enough for you to qualify for UI. And if you drop to part-time or take any time out of the workforce, you may never qualify for UI, which is why less than a quarter of working women are eligible. Finally, the system for extended benefits in recessions is hopelessly broken, which is why every recession brings a painful struggle to find money to pay for extended benefits.

2. Trade Adjustment Assistance. Much like UI, this one was designed for the auto and steel industries, facing challenges from imports in the 1970s. A group of workers has to show some proof that they lost their jobs because of imports. It doesn’t work well for plant closings or outsourcing of services, and certainly doesn’t help the millions of people who lose their jobs because of information technology or corporate cost-cutting. Nathan Newman has been trying to call attention to the Bush administration’s complete mismanagement of this program, which they would like to convert to a block grant to states.

3. Medicaid. There’s nothing wrong with Medicaid, but it is still built on the assumption that the people who need a health care safety net are the jobless poor. As we increasingly use it to fill the huge gaps in the employer-based health care system, its costs will seem to spin out of control and what was a smallish poverty program becomes a bigger and bigger part of the health system. A more comprehensive approach to health care should absorb Medicaid and guarantee decent care, not poverty-program care, for all adults and kids.

4. The Employer-Based Health Insurance Subsidy. Eduardo Porter of the New York Times did about as good a job of explaining this as can be done, also yesterday. In short, we spend about $130 billion to subsidize health insurance through employers. That subsidy is more valuable for more lavish insurance, and as employers increasingly drop health care for low-end workers, the subsidy is concentrated more and more on the wealthier, while it inflates the cost of health insurance for everyone. For $150 billion a year, experts say we could provide pretty decent universal health insurance. If there is any outdated relic of the industrial age, it’s employer-based health care.

I’m sure there are other programs that would fit the model even better. Maybe worker’s comp, but I don’t know anything about that program.

The Social Security fight is over. We shouldn’t get so spooked by the suggestion that modernizing old programs would reopen the privatization fight.