Not all the Democrats are celebrating the January unemployment numbers as morning in Obama’s America. Robert Reich, Clinton’s labor secretary and one of Via Meadia’s favorite liberals, notes dourly that most of the hiring is happening in lower-wage sectors.With more Americans impoverished than at any other point over the past fifty years, Reich finds candidate Romney’s proposals to, as Reich would have it, eviscerate safety nets and benefits for the poor especially wrongheaded. Romney believes the rise in benefits is a sign of mounting dependency; Reich believes it is a sign of growing poverty:
Romney and other Republicans point to government data showing that direct payments to individuals have shot up by almost $600 billion since 2009, a 32 percent increase. And 49 percent of Americans now live in homes where at least one person is collecting a federal benefit such as food stamps or unemployment insurance, up from 44 percent in 2008. But Romney and other Republicans have cause and effect backward. The reason for the rise in benefits is that Americans got clobbered in 2008, and many are still sinking. They and their families need whatever help they can get.
Like Reich, we don’t think that shredding safety nets while preserving carried interest loopholes for hedge fund fatcats is a magic path to recovery, but Reich’s approach, however humanitarian, seems likely to flop as well. America’s deep economic problems won’t be cured by Dr. New Deal remedies any more than by opening orphanages and workhouses for the poor.Reich and Romney both get the reality that it is the declining fortunes of the middle class that should worry us. And the relationship between the middle class and government benefits and subsidies is complex. Programs like Medicare—the time bomb that will wreck America if we can’t figure it out—lavish much more money on middle class beneficiaries than on the poor. Recent studies from the Center on Budget and Policy Priorities show that government benefits flow primarily to the middle class, not to the poor.Government benefits to the middle class in this case aren’t rising primarily because the middle class is becoming poor; they are rising because the explosive cost increases in health care combined with the country’s demographic profile (lots of boomers) and increased longevity drive up the cost per client while increasing the number of clients.If the costs of Medicare and a handful of other programs (like Medicaid, the health care program for the poor) could be controlled, the long term federal budget picture would actually look much better. This is, or should be, a health policy debate, not a social safety net debate. Changing the nature of our health care system so that it produces the services we want at a price we can afford is the single most important thing we can do to put the government’s finances back on track. Obamacare is, in our view, going to make things worse in the end, but the President was right to put health care at the heart of the national agenda.This is another way of saying that the budget crisis is an aspect of the social crisis brought on by our dysfunctional social model. Our current ways of organizing and managing our affairs do not work. The American middle class isn’t making enough money to do all the things we think of as middle class essentials: it cannot afford to educate its kids without saddling them with enormous debts, and it cannot afford the health care it wants without bankrupting the country. It can’t fulfill its dream of owner-occupied housing without setting off bubbles that threaten the whole global economy, it can’t pay for the level of government services it wants without incurring mounting debts, it can’t save enough for the kind of long, secure retirement that it craves.With the middle class unable to afford what we think a middle class ought to have, and economic changes driving many people out of the middle class mostly in a downward direction, questions about the poor get caught up in the broader political gridlock and confusion. If we get the relationship of government to the middle class right — and if we figure out a sustainable path for middle class life in this country — the problems of the poor can be addressed reasonably well. And if we fail to deal with middle class issues, the poor will be squeezed harder as their numbers increase.There is no single cause for this growing complex of problems. In some cases it’s globalization and the effects of automation and outsourcing on a growing number of jobs. In others it’s the result of learned guilds driving up costs in universities and health care by building and defending poorly designed and low productivity organizations that are meant primarily to serve the interests of key stakeholders. In some cases it’s a combination of excessively costly, overreaching and slow government structures and wave after wave of often well intentioned but also often overlapping, poorly configured and poorly administered regulations that block economic development and growth. In some cases it’s a result of cultural forces—shrinking families, demographic change, mass participation of women at all levels of the labor force—that affect the way society works in complex and sometimes unpredictable ways.For many liberals, there is plenty of money in America to fix all this and more; the problem is that the wrong people have it. If we tax the rich more, we can afford all the Medicare, all the college educations, all the long retirements we want—not to mention all the food stamps and all the low-income housing loans. And if the price of college and health care rises some more, we just go back to the old piggy bank and shake a few more billions out of the rich.My concern is that the costs of living the way we want to live are rising faster than our ability to pay for them. That was true even before the current bout of bad economic times and it will be true even when it is over. It’s an unsustainable edifice; the termites are eating the foundations of our house and the answer isn’t to add another story to this rickety building.Governor Romney and the rest of the Republican field don’t, I think, have the answers, but neither do the Democrats. That’s America’s problem in 2012—just as it was in 2008, 2004 and 2000. America wants to go forward, but we keep spinning our wheels and over time we are getting a little bad tempered.