You Say You Want a Revolution?

I asked Paul Krugman, a Princeton economist, what he thought about the widespread perception that his colleagues are an incorrigibly conservative bunch. “Gosh,” he replied. “Economic theory definitely doesn’t make you laissez-faire by definition...For what it’s worth, the best-known economists of my generation (50ish) are mainly, though by no means entirely, moderate Democrats.”

After two disastrous Supply-Side-ista revolutions—Reagan and Bush II—I can understand why so many economists are fed up with the Republican Party. As Bush put it in Friday’s debate “Yeah, I’m worried. I’m worried. I’m worried about our country.” Fifty professors at the Harvard Business School and over 100 economists from other schools—including two Nobel Prize winners—are worried about our country too. That’s why they recently wrote a letter to Bush, slamming him for running up the deficit by recklessly “slashing taxes.”

But as the Bush-Cheney campaign website proudly declared the other day, they’re “Just Getting Started”. What would “Four More Years” mean for this country? Try a plan to create private Social Security accounts with money already promised to current retirees. That’s $1 trillion in transitions costs they don’t have a plan to pay for. Nor have Bush-Cheney mentioned what would happen to people whose investments in these private accounts went belly-up. This plan is part of their larger “Ownership Society” agenda, a cornucopia of giveaways for the rich, including high-deductible health savings tax shelters that only help the wealthy-and-healthy and the incremental abolition of taxation on savings income.

How will Democrats respond to this misguided revolution? On Social Security, they’ve tried to sic their dogma on Bush’s dogma. When Kerry flatly declared “I will never privatize Social Security,” he veered into black-and-white ideological thinking—W’s traditional territory. Just because Bush’s plan is flawed doesn’t mean Democrats can’t do better.

An investment-based system may be the best way to keep Social Security solvent. That’s why it was one option recommended by the Clinton-appointed Advisory Council on Social Security in 1997. The council called for a transitional 1.5 percent increase in payroll taxes to maintain retirees’ benefits while younger workers established personal accounts. (Maintaining benefits under the current system would likely require a much bigger hike.) Thoughtful economists have also recommended partial redistribution among the personal accounts to shield individuals from heavy investment losses. Mr. Bush’s plan, in contrast, is unfunded and dispenses with the core principle of social insurance.

If Democrats can avoid attacking windmills, there are more fundamental issues to be raised about the so-called “Ownership Society,” which mainly enriches those who already own a great deal. They have a chance to counter the Republican schemes by advocating an “Opportunity Society”: a commitment to giving every American an equal shot at owning a share of this nation’s wealth. Such equality of opportunity certainly doesn’t exist today.

If they had the resources to invest in themselves, more working Americans could earn a livable income, save and even become entrepreneurs. But many lack those resources, because they’re struggling just to get by. Nor can they borrow capital to fund their education or start a small business, because they don’t have any collateral. No amount of tax credits is going to help them out of this poverty trap—high taxes are not holding low-income families back. But this point is apparently lost on Mr. Bush, who was born with enough money, connections and incompetence to run several oil companies into the ground.

A Democratic “Opportunity Society” would target the roots of inequality, beginning with the vast gulf in education spending that divides affluent and poor communities. That would require a much bigger federal role in education funding. Such a society would invest in universal pre-school, generous paid-parental leave (for mothers and fathers) and health coverage for every child. (Kerry’s under-publicized healthcare proposals make great strides toward universal child health care. By framing that effort as part of a new pledge to level the economic playing field from the start, the challenger could galvanize support for his health plan.) An equal-opportunity America would empower low-income adults by extending loans for education and for starting small businesses, and by making job-training more available. (Bush’s miserly job-training program would spend about $1.70 per American.)

This vision could have broad appeal on both sides of the political spectrum. It would represent a coherent effort to attack the causes of poverty-—and it would do so by expanding opportunity, not the welfare state. That isn’t to say we should scrap the safety nets we have. The way to reduce welfare rolls isn’t to cut off those in need, but to invest in people before welfare becomes their only option.

Kerry knows it’s time to get tough on the president if we’re going to win this election—and he has been. But I will say this: 2004 is not the year for small ideas. In order not only to win this election, but to lay the grounds for a Democratic revival, we need the courage to redefine the ideas the Right has tried to monopolize, not run from them. And when opportunities for meaningful change present themselves, we must show the courage to fundamentally transform both our party’s vision and our nation.

Eoghan W. Stafford 06 is a social studies concentrator in Leverett House. His column appears on alternate Tuesdays.