Many of the New Deal programs of the industrial era are now as obsolete as they are entrenched in our two-party structure. To appreciate the depth of this disjuncture, we need only take a quick look at many of the inherited assumptions and institutions that both parties take for granted, and ask ourselves: Does it still make sense to go on organizing our society this way in the twenty-first century?
Let's begin with our basic social contract —an arrangement inherited from the mid-twentieth century— which is premised on an intergenerational public pension program and an employer-based health care system. At the birth of the New Deal, it made sense to structure Social Security as a transfer program in which current workers pay for current retirees —so long as the working-age population greatly outnumbered the elderly whom they subsidized. Indeed, the system worked remarkably well for the first generation of retirees to benefit from it. Today, however, the rapid growth in the ratio of retirees to workers threatens to bankrupt both Social Security and Medicare, or to impose crippling taxes on the young and the employed. What was the proudest achievement of the New Deal era is fast becoming a sobering liability in the information era.
At the height of the Second Industrial Revolution, when most employees aspired to lifetime employment with a single firm, it also might have made sense to link the provision of health care benefits to one's employer (although even then a series of American presidents tried and failed to create a single-payer universal health care system). In the turbulent economy of the early twenty-first century, however, when average job tenure is only three to five years and the proportion of contingent and part-time workers is high, does it really make sense to maintain this industrial era linkage between health insurance and employers? Doing so only makes changing jobs that much more disruptive, and breeds a profound sense of insecurity in a workforce that is increasingly oriented toward a free-agent model. Our basic social contract, then, is being undermined by the inescapable forces of demographics and economic change.
(Halstead & Lind: pp. 8-9)
While most other countries in the world aren't as affected by the problems concerning the health care system (they do, although in quite a distinct manner that we will discuss later), the issue of how to avoid the bankruptcy of our pension systems is certainly widespread in the advanced industrial world. The reality is that medical, social and economic advances have lengthened the average life expectancy of most people in our countries, which in turn (and coupled with the obvious fall in our birth rates) has increased the financial burden that our public pension plans represent for our Government finances. We can discuss forever how to solve this problem, whether the pension system needs to be fully or partially privatized (or not privatized at all), whether the retirement age needs to be pushed further or not, etc. However, what we cannot do is dismiss the problem and play the ostrich strategy. We cannot simply ignore the current state of affairs and pretend that if we look a different way the problem will get solved somehow. Today's public pension system in economically advanced nations is as unsustainable as our current levels of pollution and the release of global warming contributing gases. Denying the reality because we don't like it won't get us anywhere closer to the resolution of the problem.
So, what do Halstead and Lind propose? A return to FDR's original plan: a retirement plan that relies on what the retirees saved during their working life, more than on transferences from the younger to the older generations. They would establish a system of mandatory retirement savings backed by Government transfer payments in those cases where the individuals didn't manage to save enough. The Government would establish the bare minimum that individual citizens would have to take out of their paychecks and save towards retirement, and the future retirees would get to choose where to invest that money. In this sense, the system would be privately run but highly regulated by the Government. Additionally, the Government would also step in to supplement the retirement of those who didn't save enough in order to promote social justice. Altogether, then, is a mixed plan, a plan that cannot be legitimately labeled neither conservative nor liberal according to the traditional political distinction. A system not so different after all from the one that has already been implemented in Chile or Australia.
Now, the thorniest problem facing any attempt to move from the current system to the one laid out by Halstead and Lind involves how to finance the transition. After all, our retirees depend right now on the influx of money from those who are contributing to the system. If we were to allow those who are currently working to take the money away, save it and invest it somewhere else, who would finance the cost of today's retirees? As the authors point out, it's a problem that has already been faced by other countries where the transition took place. There are multiple ways to solve it: first of all, we can begin the means-testing part of the plan immediately (i.e., the Government would stop paying for those retirees who can afford to live comfortably from their own savings, which is something not currently happening); second, retirement age can be gradually extended; and, finally, the amount of money contributed to the Social Security by today's workers is actually larger than what would be needed to guarantee a decen retirement for them in the future, therefore allowing us to still use the difference to pay for today's retirees. Would all of this work? I don't know. I'd have to look at it with more time. However, it sounds reasonable and, above all, as Halstead and Lind rightly argue, there are countries that have already transitioned.
Let's finish this post with some brief comments about the national health care systems and their shortcomings, as I promised above these lines. Halstead and Lind discuss the problems currently affecting the US health system at length. In general, most of the issues they raise were solved a long time ago in Europe by what Americans quite often derisively refer to as socialized medicine. Socialized or not, the fact is that it solved the very issues Americans are dealing with right now. However, this shouldn't lead us to feel superior in any way for our publicly funded systems have a whole slew of different issues to deal with: excess of bureaucracy, inefficiencies, inability to choose between different types of service, etc. All these are issues that we should wonder about and strive to find solutions for. A creative approach, free of ideological prejudices, like the one taken by Halstead and Lind may do us some good here in Europe too.
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