June 14, 2011
To the Members of the 112th Congress:
In his first debate with Stephen Douglas in 1858, Abraham Lincoln said, “In this and like communities, public sentiment is everything. With public sentiment, nothing can fail; without it nothing can succeed.”
Seven score and 13 years after those debates we are now engaged in a great political contest over whether the welfare state established by the New Deal and built up continuously since 1932 can long endure. Its growth over the past eight decades and the financial crisis confronting it today suggest the need to qualify Lincoln’s rule: Public sentiment may ensure political success for a policy, but it does not rule out governmental failure. Indeed, a policy can be a governmental failure precisely because it is a political success.
It is our pride as Americans that our government must answer to our consent. If we insist on consenting to bad government, it will be very hard for a democratic government to be good. When Lincoln was speaking of public sentiment, he knew that it was a public he had to persuade to do the right thing, a public with many strong inclinations to do the wrong thing. His point was that this is the most important job a politician has in a democracy—to persuade the people to do the right thing.
In a New York Times public opinion poll last year, 76 percent of all respondents agreed that “the benefits from government programs such as Social Security and Medicare [are] worth the costs of those programs.” Even 62 percent of those who said they support the “tea party” movement thought so! It’s hardly a surprise that public sentiment supports these programs, the mainstays of our welfare state.
The governmental problem is that the benefits of these programs are not only worth what they cost, but worth far more than they cost. According to a recent study, a husband and wife, each born in 1915 and each earning the average wage during their working years, would have retired in 1980 having paid a total of $190,000 in Social Security taxes and $15,600 in Medicare taxes. That couple could expect to receive, on average, $446,000 in Social Security benefits and $132,000 in Medicare benefits. Depending on health and longevity, some couples received more and some less but the average benefits from the two programs would have totaled $578,000.
We shouldn’t be surprised that government programs become highly popular when, in effect, they hand out $372,400 checks rather than gold watches to new retirees. Being popular isn’t the same as being sustainable, however, and the popularity of Social Security and Medicare has gone a long way to help them become unsustainable. The New Deal’s architects and advocates believed that rapid economic and population growth would make it possible to perpetuate social insurance programs’ large windfalls. There’s no prospect, however, for the economic growth that would allow the federal government to pay out in the first half of the 21st century the kind of social insurance benefits that Americans came to expect in the second half of the 20th. And as to population, everyone knows that people these days are having fewer children or, in many more cases now than in the past, none at all. As a result, we see the formation of a demographic bulge, with a disproportionately large number of older people receiving benefits from social insurance programs and a disproportionately small number of younger people paying taxes to finance those benefits.
We have no choice, then, but to address the financial imbalances built into our welfare state. The Democratic Party, defined since 1932 by championing the cause of an ever-larger welfare state, wants government spending to be the independent variable that determines tax levels. The Republican Party, home to New Deal opponents in the 1930s and New Deal skeptics ever since, wants government spending to be the dependent variable determined by taxes. Democrats hope that when push comes to shove, and we can no longer borrow our way out of the welfare state’s rickety financing, the people will come to the conclusion that large reductions in welfare state benefits are unthinkable, and they will support the large, widely applied tax increases that will certainly be needed to continue and expand our social insurance programs. Republicans have the opposite hope—that when voters come to realize the size of the tax increases needed to sustain our welfare state they will, at long last, be amenable to the kind of big reductions in government spending that have been ballot box losers for nearly a century.
America’s welfare state has grown for the past 80 years because people like its benefits. There are two reasons it hasn’t grown even faster. The lesser one is that people had some qualms, now largely forgotten, about the legitimacy of having the government redistribute wealth from some people to others. The more politically consequential reason is that people like getting what the welfare state provides much more than they like paying for what it costs.
The Democratic Party has worked hard for many years to reassure people that generous welfare state benefits really are compatible with modest taxes, or ones that only very rich people and large corporations will have to worry about. There are two problems with this reassurance. First, it’s not true: a welfare state like the comprehensive ones in most European countries requires the kind of heavy, widely applied taxes common in Europe. Second, the fact that Democrats have always gravitated to the far-fetched argument that we can have New York’s social welfare system and South Dakota’s taxes suggests they’re afraid that most Americans won’t vote for the comprehensive welfare state Democrats advocate if the price is shown in big print on the first page, rather than buried in a footnote. Those fears form the foundation of the Republicans’ hopes that the welfare state we’ll end up with—if its costs are honestly reckoned and realistically shared—will be much smaller (and much smarter) than the one we have now.
We Americans celebrate our capacity to govern ourselves. Here certainly is a test of our capacity. The government can’t solve this problem without the help of the people, because the right government can’t get elected unless we the people are wise enough to elect those who are committed to make the choices that are necessary. Are we? Can we be persuaded to be?