Opinionator: Now What, Liberalism?

Tom Edsall on politics inside and outside of Washington.

Tags:

Autor, David, Democratic Party, Disability Insurance, Kotkin, Joel, Liberalism (US Politics), Mead, Walter Russell, Richard Freeman, Taxation, United States Economy

The argument of the political commentator Walter Russell Mead that the United States has reached an end-stage death match between liberal constituent groups has received widespread attention, especially in the conservative blogosphere.

Mead, who teaches at Bard College, contends that

The core institutions, ideas and expectations that shaped American life for the sixty years after the New Deal don't work anymore. The gaps between the social system we inhabit and the one we now need are becoming so wide that we can no longer paper over them.

In many respects, liberalism is a fat target. Dozens of city and state public employee pension plans are on the verge of bankruptcy – or are actually bankrupt – from Rhode Island to California; in 2010, a survey of 126 state and local plans showed assets of $2.7 trillion and liabilities of $3.5 trillion, an $800 billion shortfall. The national debt exceeds $16 trillion.

Mead labels the "institutions, ideas and expectations" of contemporary liberalism the "blue model":

In the old system, most blue-collar and white-collar workers held stable, lifetime jobs with defined benefit pensions, and a career civil service administered a growing state as living standards for all social classes steadily rose. Gaps between the classes remained fairly consistent in an industrial economy characterized by strong unions in stable, government-brokered arrangements with large corporations—what Galbraith and others referred to as the Iron Triangle. High school graduates were pretty much guaranteed lifetime employment in a job that provided a comfortable lower middle-class lifestyle; college graduates could expect a better paid and equally secure future. An increasing "social dividend", meanwhile, accrued in various forms: longer vacations, more and cheaper state-supported education, earlier retirement, shorter work weeks, more social and literal mobility, and more diverse forms of affordable entertainment. Call all this, taken together, the blue model.

While American business abandoned the blue model long ago, especially the notion of providing secure employment and defined benefit pensions on retirement, American government, in Mead's view, has not. Costs "are now exploding according to the immutable logic of demographic and actuarial facts, and it is clear that the government can't pay them into the future."

Hmm. I e-mailed Mead to ask what a functional, "post-blue" model of the liberal state might look like, and he wrote back:

Apologies that I don't have a fully formed alternative social model ready to drop on a grateful nation, but whatever insights I come up with I will be happy to share on the blog. Believe me, I am working on it. Creating the policy framework to capture the full power of modern information processing capability to raise social productivity is a big part of it.

Finding that Mead is far less radical in his thinking than his critique of contemporary liberalism would suggest, I thought I would move on to more quantitatively inclined analysts of social insurance regimes. So I contacted two economists, Richard Freeman of Harvard and David Autor of M.I.T.

Freeman directly addressed critics of big government:

As long as we have big problems — climate change, terrorism and terror states with nukes, threats of pandemics, adjusting to China, India catching up with us, etc. — and have big banks that can destroy economies and big companies which can harm us per cigarettes and pollutants — I do not see what shield we have but government. The solutions to these problems are collective ones, which mean government.

What is troubling is that governments are flawed, influenced by special groups, and so on. But, Freeman wrote

I would rather be ruled by an elected government than the top 1000 billionaires on Forbes' list — so I don't think the issue is big government but the way government operates and hope that technology and information and media offer some chance for us to get a better handle over what big government does. Also I am not sure what you can shrink that would not open space for other big entities less limited by law and less sensitive to reaction of people.

Autor is a nationally recognized expert on the federal disability program, Social Security Disability Insurance, which he (and many others) consider to be "malfunctioning." Autor writes that "it's inducing a lot of desperate people to choose government dependency over work." Given this line of analysis, Autor might be expected to be a critic of liberalism. By e-mail, I asked him "Is the disability program a prime example of the dysfunctionality of liberalism, or is it a unique problem not characteristic of the liberal agenda?"

His reply:

It's neither. It's an example of a program that was set up to do a lot of good and still does a lot of good, but one that has not changed with the times. Republicans are as complicit in this policy failure as Democrats. Neither has had the stomach to touch the program since the early 1980s, following Carter's and then Reagan's disastrous attempts at reforms. Every advanced country needs and has a disability program. But not all of them are on the same unsustainable trajectories as the U.S.' program. Countries that are far more liberal than the U.S., like the Netherlands, have had the wisdom and courage to reform their disability systems to stem abuses while maintaining needed social insurance.

Autor argues that a reformed disability program should be a part of a structure of safety net programs that would provide a level of security that

arguably makes the public more not less receptive to accepting disruptive changes in market conditions. If the safety net is effective and voters understand that, they can safely support policies that have long-run benefits and short-run costs without putting themselves at personal economic peril.

In one significant respect, Autor agrees with Mead's sense that government is no longer responding as flexibly and vitally as it needs to:

We're going to have a social safety net. The question is whether we're going to have a rigid set of institutions and incentives that have been ossifying since the 1950s, or whether we're going to belly up to the bar and modernize these systems in light of how the world has changed and what we've learned from economics and social policy in the intervening half century.

Joel Kotkin, a fellow in urban design at Chapman University, faults the contemporary left from a different angle. Using apocalyptic language similar to Mead's, Kotkin argues that the Democratic Party and the left are dominated by what he calls "gentry progressives": largely white, well-educated, culturally liberal urbanites.

In an essay published by Forbes a month after Obama's decisive re-election, Kotkin wrote:

The now triumphant urban gentry have their townhouses and high-rise lofts, but the service workers who do their dirty work have to log their way by bus or car from the vast American banlieues, either in peripheral parts of the city (think of Brooklyn's impoverished fringes) or the poorer close-in suburbs. This progressive economy works for the well-placed academics, the trustfunders and hedge funders, but produces little opportunity for a better life for the vast majority.

Kotkin makes the case that the celebrated Obama coalition uniting well-educated, often upscale liberals, with such struggling, often disadvantaged constituencies as single women, racial and ethnic minorities, and the young is fragile at best:

The class issue so cleverly exploited by the president in the election could prove the potential Achilles heel of today's gentry progressivism. The Obama-Bernanke-Geithner economy has done little to reverse the relative decline of the middle and working class, whose share of national income has fallen to record lows. If you don't work for venture-backed tech firms, coddled, money-for-nearly-free Wall Street or for the government, your income and standard of living has probably declined since the middle of the last decade.

Entitlement reform, a darling of gentry progressives who share Mead's fear that "costs are now exploding according to the immutable logic of demographic and actuarial facts," is perhaps the quintessential case study of the inclination of the progressive elite to disregard the distributive consequences of their reform initiatives. Take the case of those calling for gradual reduction in Social Security benefits – either by raising the retirement age or switching to a "chained" Consumer Price Index (a revised inflation index which cuts government spending by reducing annual cost of living adjustments).

Who would be most affected? Those in the bottom 20 percent of the elderly who depend on Social Security for 84 percent of their annual income, and those in the next quintile dependent on Social Security for 83 percent of their income. At the beginning of 2012, the average Social Security benefit was $1,230 a month, or $14,740 a year. For 35 percent of elderly white beneficiaries, for 42 percent of Asian-Americans, for 49 percent of blacks, and for 55 percent of Hispanics, Social Security represents 90 percent or more of total income.

In the current debate over financing the cost of income support forolder Americans, the chained C.P.I. proposal has more political support than the progressive alternative of raising the current $110,100 cap on the amount of income subject to the payroll tax. Low-income Social Security beneficiaries are not equipped to absorb cuts in benefits that a switch to a chained consumer price index would entail; on the other hand, according to the centrist Tax Policy Center, raising the cap on income subject to the payroll tax could completely cover Social Security costs into the foreseeable future without reducing benefits.

Obama's victory and the growing evidence of an emerging majority Democratic coalition pose the danger that the left will take false comfort. The demographic forces currently powering the Democratic Party in no way guarantee a resilient coalition assured of a long-term competitive advantage.

In addition to the glaring class conflicts between the party's upscale cultural liberals and the larger body of Democratic voters with pressing material needs, there are a host of potential fissures.

In cities from Los Angeles to Chicago to Houston, African-Americans are competing with Hispanics and others for government jobs, good schools, good neighborhoods, political power and basic resources. Republicans are looking toward these tensions to see how their party can capitalize on them.

Insofar as austerity advocates force Obama and Democrats in the House and Senate to accept budget cuts, similar ethnic and regional conflicts will plague the party, undermining political unity.

The determination of the Obama administration and many of its Congressional allies to raise taxes on the affluent is not, in political terms, cost-free. The Democratic Party has made huge gains – although short of a majority – among upper-income voters, and inasmuch as Democratic tax policies threaten the standard of living of this cohort, upscale left partisans may get cold feet.

The much larger hurdle facing contemporary liberalism is the need to reconfigure the welfare state in ways that maintain popular support while addressing a host of conflicting forces:

The aging of the population is steadily reducing the ratio of workers to retirees, expanding the "dependency ratio," even as global competition drives governments worldwide to reduce corporate and individual taxes, cutting off the revenues to finance social welfare spending.
Other demographic trends, particularly the erosion of supportive extended family networks and the rising numbers of single elderly, serve to increase the demands for benefits from the welfare state.
Austerity policies enacted in response to high deficit and debt levels have resulted in increased voter suspicion of the "undeserving" poor and of "free riders" who are perceived as getting more out of government programs than they pay in, weakening support for the welfare state. Similarly, means testing old-age income security initiatives – particularly Social Security –would inevitably undermine universal support.

Liberalism now faces the job of paying for its own success in helping people live longer. The progressive ethos, currently embattled, has a proud history. What is uncertain is whether a durable social consensus can be mobilized in the face of the global economic pressure to reduce taxes and limit the scope of government. The Democratic left faces a daunting, but not necessarily insurmountable, obstacle.