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Published on: March 23, 2010
The Shadows Grow

The blue social model posted a big win today as President Obama signed the Senate’s health care bill into law .  I think it’s a bad bill that locks the United States more tightly into a medical system that is unsustainable in the medium term, and it is grossly unfair to the young.  But extending […]

The blue social model posted a big win today as President Obama signed the Senate’s health care bill into law .  I think it’s a bad bill that locks the United States more tightly into a medical system that is unsustainable in the medium term, and it is grossly unfair to the young.  But extending health insurance to tens of millions of Americans is not the worst thing in the world, and while doing the right thing in the wrong way isn’t always helpful (look at George W. Bush’s efforts to promote democracy in the Middle East, for example), the bill could have been a lot worse than it is.

However, extending the old blue social model further into health care is not going to help matters.  On the contrary, it advances the very painful day of reckoning this country faces when the bill for the unsustainable promises we’ve made comes due.  Even as the House-passed health bill was making its way to the Senate, the financial system was flashing warning signs.

One was this story by Daniel and Brian Keogh on Bloomberg; Berkshire Hathaway two year debt is now paying a lower interest rate than Treasury securities of a similar maturity.  In other words, investors think that Warren Buffet is a better credit risk than Barack Obama.  Over at the Wall Street Journal, meanwhile, Andrew Biggs was making the case that public employee pension funds in this country are underfunded by $3 trillion and that in order to conceal the true dimensions of the problem, the fund managers are assuming unrealistic rates of return on their portfolios.   John P. Lipsky, first managing director of the IMF, warned that the rich countries generally and the United States in particular will have to cut spending sooner rather than later.

Obama_Signature_Health_Care

There is more bad news.  New York State is delaying tax refund checks because of worse-than-expected cash flow problems.  Harrisburg, Pennsylvania is flirting with bankruptcy.  State budget deficits across the country are spiraling out of control.

This is not, I fear, the beginning of a new era of expansive government programs and extended benefits.  It’s the start of something darker as our dysfunctional political system grapples with unsustainable deficits.  Reading those dark financial stories made me think of something out of  Charles Baudelaire: the first stanza to Les Hiboux ( The Owls), one of the haunting sonnets in Les Fleurs du Mal.

Sous les ifs noirs qui les abritent,
Les hiboux se tiennent rangés,
Ainsi que des dieux étrangers,
Dardant leur œil rouge. Ils méditent.

It’s hard to capture the sense of massed, impending menace in translation:

Sheltered beneath the black yews,
The owls sit in rows,
Like strange gods,
Red eyes darting, they meditate.

This, I fear, is what our financial markets are up to these days.  We spend and make happy plans; they wait ranged in rows in the black yews, red eyes alert, watching, thinking.

I’m glad that President Obama had a domestic political victory this week; a loss on health care would have crippled his presidency.  The world is too dangerous and there is too much time remaining in his term for me to welcome the idea of a weak American president right now.  I’m sorry, though, that so little was done to make our health care system more sustainable even as it becomes more accessible.

It brings me back to some of my earlier posts on the collapse of the blue social model and the failure of intellectual imagination among America’s policy wonks.  There is a lot of talk about thinking ‘outside the box'; we need people who can think outside the blue.  How can we harness our society’s unprecedented technological resources to address critical social problems and needs at a radically reduced cost?

Les Hiboux

Replacing expensive skilled human labor with information technology is the key to national economic prosperity and human progress in the decades ahead.  Reconfiguring our medical, governmental, legal and university systems (to name only the largest and most obvious targets) to take full advantage of new technology and new productivity is the only way to meet our society’s rising needs for these services going forward.

Creating a marketplace that rewards innovation in these fields, funding basic research in the application of technology to social issues, and developing new ideas about how to re-engineer our society to take advantage of the immense potential coming on line: those are the primary tasks for the next generation of policy makers and creative thinkers.

If we get that stuff right our health care system will improve and access to it will grow, however we organize it financially.  If we get that stuff wrong our health care system — and these other systems as well — will founder on our inability to afford the cost of what we need no matter how cleverly we strategize about how to pay for it.

I cannot overemphasize how important this is.  Peter Hartcher has an excellent piece today that argues that America’s increasingly unsustainable debts will cripple the country’s ability to play its world role.  I don’t think we are quite there yet, but if you keep edging closer to the cliff, sooner or later you will get too close.

show comments
  • WigWag

    Mead invents a catchy little phrase to describe the Democratic victory in the health care debate; he dubs it the “blue social model.”

    I’m new to this blog so I haven’t read Mead’s previous posts on the subject but I wonder whether he’s referred to the Republican approach as the “red social model” (that’s somewhat ironic isn’t it?)

    Is Mead suggesting that the United States would be a wealthier nation or a nation with brighter economic prospects had social security or medicare not been enacted?

    If the Republican Party were less moribund, less reactionary and less in bed with its most right wing constituents it might have an alternative to offer instead of blind allegience to the free market.

    While the “blue social model” may have flaws, it has produced unprecedented prosperity and security for tens of millions. And what we do know is that the free market simply doesn’t work when it comes to health care. When demand for health care is price inelastic the idea that the free market might provide an adequate solution is just plain wrong.

    Is technology really the solution to all of this? I’m skeptical.

    One more thing; as long as Mead mentioned the Peter Hartcher piece it should be pointed out that Hartcher makes some puzzling comments. He quotes Niall Ferguson who blames debt for the downfall of the British, Russian, Hapsburgh and Ottoman Empires.

    That’s hogwash. The Hapsburgh and Ottoman Empires collapsed because of a little conflict called World War I; it took the combined calamity of two world wars to bring down the British Empire. Are we really supposed to believe that the the Tsars fell during the Bolshevik Revolution because they were so deeply in debt?

    Give me a break

  • http://www.daylightresearch.com Steve

    I will pass along an observation made by Robert Prechter: The current recession is the result of the end of the first true mania of the post WWII era in the US. When manias end, valuations tend to go back to where they were at the start of the mania or lower. Where did the mania in stocks begin? In housing?

    If you look at the chart of the Dow, it starting going verticle in 1995 at 4,000. To my recollection, that’s when housing started its climb too. Can you imagine what the world would look like if those valuations because current? But it seems to me that they must just like it seems to me that normal valuations must prevail.

    Are we creeping toward the edge of the cliff or are we currently in mid-air like Wiley Cayote?

  • CFB

    Sorry, Mr. Mead.

    The last thing the political class currently in control of this country wants is to replace “expensive skilled human labor with information technology.”

    Their power depends on the expansion of two classes of people: the unemployable, dependent underclass; and the low-skilled, employed government worker class. Do you have any idea how many hundreds of thousands of government workers will be hired to implement this monstrous healthcare bill? And all of them will vote “blue,” to adopt your parlance. Their salaries and luxurious benefits will be paid by those of us (fewer and fewer in number) employed in the private sector.

    So enjoy your satisfaction that the president was not ‘crippled’ by a loss on the healthcare question while you can. Because I think you’re absolutely right about the signs on the horizon. They don’t bode well.

  • vanderleun

    “The world is too dangerous and there is too much time remaining in his term for me to welcome the idea of a weak American president right now. ”

    Ah, Mead, we are having our little joke right now, n’cest pas? I am sure it cannot have escaped your attention that “the world” already knows we have a weak, very weak, and very easily manipulated President.

    But then again perhaps you have noted a shaking in the boots in Russia, North Korea, China, Iran, Venezuela, Argentina, Somalia, Pakistan, et. al. that I have missed. Perhaps you can, in some future note, enlighten all present as to the “strengths” of this president.

  • Jules Mopper

    Well, this post was front-loaded with proto-conservative whinging, but the last half was OK. But the big question: how is Obamacare part of the blue model? It panders to every private-sector group, failing to bring down costs in the process. How is this utterly corporatist law part of the “Blue Model?”

    It almost seems like Mr. Mead just screams “BLUE MODEL!!” at policies he doesn’t like.

    Here’s another howler: “Investors think that Warren Buffet is a better credit risk than Barack Obama.” Sorry, Walt, they think Buffet doesn’t have a demagogue-induced cash-flow problem. Moody’s was talking about lowering the US bond rating – sometime in the future – because they don’t think we can muster the political will to actually raise taxes. This has little to do with Obama, or the stimulus, and much more to do with the shoddy habits of discourse on display here.

    Repeating silly scripts that confuse rather than clarify the matter just perpetuates the problem. We need to raise revenues and lower expenditures in the long term – the 20 to 30 year timeframe. Our short-term countercyclical spending is very secondary, and very likely improves the long–term outlook. Mr. Mead knows this, but that synapse seems to be having a brownout. Funny.

    I totally agree, though, that we need to bring down medical spending. The utter failure of Obamacare to bring down spending is a huge failure, even though making our healthcare system civilized is a great success. Politically, I understand doing it in two parts, one moral the other fiscal, and we now must move on to the second.

    I don’t see how this is a poor approach. Maybe Mr. Mead, like Ralph Nader, believes we should allow the badness of the system to build on itself until it has a catastrophic failure, so we can start anew. There is a logic to this that makes the current horrors of America acceptable, so I understand how people can believe it. It may even be right, the best way to make major changes is to let the system crash. But I’ll still take a victory where I can get it, and Obamacare is a victory, despite its ashy aftertaste.

    If Mr. Mead really wants the radical changes he suggests, he should take care to discuss these important issues more clearly. Confusion just lets the forces of oldness (not to mention reaction) use their advantage to stymie change. Clarity is key.

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  • Peter

    The blue social model is (and has been) a cancer in America. It has turned millions, especially blacks, into wards of the state.

    And now Obama is trying to similarly enslave the middle class with chains of government dependency.

    About all that’s needed to finish off the Republic is to grant amnesty & citizenship to the 20 – 25 million illegal aliens that are now here.

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  • Mike M.

    In an appropriate tangent to this blog entry, Portugal, a European canary in our coal mine, just had their credit rating downgraded to AA- by Fitch today.

    The owls aren’t merely sitting there quietly watching, they’re hooting out loud to anyone nearby who is bothering to listen.

  • Norm

    In the course of the health-care debate I think the American public should be able to see that Candidate Obama campaigned as a center-left moderate but President Obama is governing as a fairly conventional leftist social democrat who would make the USA a giant version of Denmark with a blue social model paradigm. The price of that is unsustainable debt because the rich don’t make enough to pay for it all even if the government expropriated their wealth. Ultimately that leads to dollar collapse or creation of new taxes (probably a VAT) that are essentially regressive since it will be necessary to tap all those non-rich subjects of the government who make less than $250,000 a year to chip in so they can pay for Obama’s transformative vision.

    Part of the blue social model is the implicit assumption that income is what the government decides to let you keep. Obamacare extends this to the states by including a provision that suspends Medicaid funding if the state reduces its medical aid to the poor for any reason. Coming at a time when most states are slashing programs to balance budget, this is an unwelcome intrusion into local politics.

    There are moves in nearly 40 states to challenge portions of Obamacare in the courts. This number of states is important since it at the threshold where the states might choose to call a constitutional convention to redress the balance of power between the federal government and the states. Such a move, as dramatic as that would be, is very unlikely for now.

    However, the public threw out the GOP bums and got the current bunch into power. They seem comparably corrupt and bent on pursuing unpopular courses of action. The contest may turn a struggle between the people and a government bent on shaping the environment for its view of our own good. If it comes to that, then that government is really changing the constitutional bargain where the people are sovereign.

    The empirical test of this hypothesis would be if the 2010 elections returns a congress that is so composed that this administration would be frustrated in reaching its goals through legislation and would then resort to imposing the blue social model administratively, in the teeth of Congressional opposition.

  • Russ Wood

    Prof. Mead,

    Good post, but I assume you’re playing hide the ball out of politeness. Surely, you’d agree that there’s a lot of thinking and talking of alternative approaches. The problem is the political class lacks the will or the courage, or both, to tell the public that they can’t have a free lunch.

    We already have a federal budget deficit (as do some states — I live in CA) that we have no near-term prospect of solving.

    We already have three looming deficits that there is simply no way we’ll pay: Social Security, Medicare/Medical, and public pensions. Taxes will go up, benefits will be cut, mostly debt will rise.

    Now, the statists have added a vast expansion of federal commitments in health care. They dishonestly understated the predictable costs and overstated the revenues and “savings” that they’ll generate: another long-run deficit.

    Unfortunately, I think that all this will necessarily involve American withdrawal from world affairs, as we (like the Europeans before us) reduce defense spending to help fund the burgeoning costs of the social welfare state.

    Unless this can be turned around, this week, we took a big step toward becoming the United States of Greece.

    Don’t give up hope. But you may want to develop a taste for retsina.

  • Fred Z

    Very many assume that giving health insurance to 30 some odd million Americans is a good thing. I do not understand why this is a good thing.

    Can someone please explain?

    Can someone please explain why we should not likewise give other and more direct necessities of life to those that do not have them, such as food, clothing and shelter? I thought we were in agreement that pure welfare was a bad thing, to be discouraged, limited, avoided.

    Perhaps I am wrong, perhaps free insurance is not in fact welfare. But I doubt it.

  • John Barker

    To give you an idea of the disruptive potential of technology in education, at our small charter high school we are looking at online programs that would allow one teacher to “manage” 250 students instead of the usual 125 or so. I say “manage” because the lessons and assignments are delivered via the online software.We may need to blend online instruction with live classes but with diminished resources from the state, we may be going this way by necessity not choice.On the positive side, by using online lessons we can offer as many courses as the largest and most advanced high schools.

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  • http://norwegianshooter.blogspot.com/ Norwegian Shooter

    “Replacing expensive skilled human labor with information technology is the key to national economic prosperity and human progress in the decades ahead.”

    Wow, you know how to toss in a “human progress” like it was green chives in a salad, you hardly notice it’s there. But as for the idea, on one hand, it’s meaningless. The key to improving or ruining? On the other, it’s ridiculous. The simple replacement of human input costs with technology input costs provides large benefits to small constituencies (tech firms and businesses in industries that can make the replacement), small benefits to society as a whole (lower prices), tremendous costs for those that are replaced (obviously), and small costs to society as a whole (reduced demand for goods, higher social needs). It’s the same old globalization trends, just different industries. Amazingly, the rich win, the middle stagnates and the poor lose. And we call this the free market.

  • http://norwegianshooter.blogspot.com/ Norwegian Shooter

    “How can we harness our society’s unprecedented technological resources to address critical social problems and needs at a radically reduced cost?”

    In the short run, we can’t. It will take massive up-front investments. Sounds like a good idea for a stimulus plan, though.

    Just what country is thinking outside the blue and succeeding right now?

  • Kennedy Smith

    Sadly, I don’t think we have any choice about having a weak American President. Barack Obama simply is one, and all the king’s horses and men can’t disguise it, no matter how many times he demands people to “save my presidency”. I hardly think passage of the healthcare bill has strengthened his position.

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