|October 7th, 2009||#1|
[This thread will prove that government is a scam designed to enrich criminal gangsters and their support staff at the expense of everybody else.]
Here's the clownverment protecting the environment:
Needed: A 'clean line' to determine lawfulness
* Comments (50)
By Brian W. Walsh
"You don't need to know. You can't know." That's what Kathy Norris, a 60-year-old grandmother of eight, was told when she tried to ask court officials why, the day before, federal agents had subjected her home to a furious search.
The agents who spent half a day ransacking Mrs. Norris' longtime home in Spring, Texas, answered no questions while they emptied file cabinets, pulled books off shelves, rifled through drawers and closets, and threw the contents on the floor.
The six agents, wearing SWAT gear and carrying weapons, were with - get this- the U.S. Fish and Wildlife Service.
Kathy and George Norris lived under the specter of a covert government investigation for almost six months before the government unsealed a secret indictment and revealed why the Fish and Wildlife Service had treated their family home as if it were a training base for suspected terrorists. Orchids.
That's right. Orchids.
By March 2004, federal prosecutors were well on their way to turning 66-year-old retiree George Norris into an inmate in a federal penitentiary - based on his home-based business of cultivating, importing and selling orchids. [Who actually gives a shit about, knows about, cares about orchids? George Norris? Or the F&W SWAT goons?]
Mrs. Norris testified before the House Judiciary subcommittee on crime this summer. The hearing's topic: the rapid and dangerous expansion of federal criminal law, an expansion that is often unprincipled and highly partisan.
Chairman Robert C. Scott, Virginia Democrat, and ranking member Louie Gohmert, Texas Republican, conducted a truly bipartisan hearing (a D.C. rarity this year).
These two leaders have begun giving voice to the increasing number of experts who worry about "overcriminalization." Astronomical numbers of federal criminal laws lack specifics, can apply to almost anyone and fail to protect innocents by requiring substantial proof that an accused person acted with actual criminal intent.
Mr. Norris ended up spending almost two years in prison because he didn't have the proper paperwork for some of the many orchids he imported. The orchids were all legal - but Mr. Norris and the overseas shippers who had packaged the flowers had failed to properly navigate the many, often irrational, paperwork requirements the U.S. imposed when it implemented an arcane international treaty's new restrictions on trade in flowers and other flora.
The judge who sentenced Mr. Norris had some advice for him and his wife: "Life sometimes presents us with lemons." Their job was, yes, to "turn lemons into lemonade."
The judge apparently failed to appreciate how difficult it is to run a successful lemonade stand when you're an elderly diabetic with coronary complications, arthritis and Parkinson's disease serving time in a federal penitentiary. If only Mr. Norris had been a Libyan terrorist, maybe some European official at least would have weighed in on his behalf to secure a health-based mercy release.
Krister Evertson, another victim of overcriminalization, told Congress, "What I have experienced in these past years is something that should scare you and all Americans." He's right. Evertson, a small-time entrepreneur and inventor, faced two separate federal prosecutions stemming from his work trying to develop clean-energy fuel cells. [Government creates or exacerbates problems - always and only.]
The feds prosecuted Mr. Evertson the first time for failing to put a federally mandated sticker on an otherwise lawful UPS package in which he shipped some of his supplies. A jury acquitted him, so the feds brought new charges. This time they claimed he technically had "abandoned" his fuel-cell materials - something he had no intention of doing - while defending himself against the first charges. Mr. Evertson, too, spent almost two years in federal prison.
As George Washington University law professor Stephen Saltzburg testified at the House hearing, cases like these "illustrate about as well as you can illustrate the overreach of federal criminal law." The Cato Institute's Timothy Lynch, an expert on overcriminalization, called for "a clean line between lawful conduct and unlawful conduct." A person should not be deemed a criminal unless that person "crossed over that line knowing what he or she was doing." Seems like common sense, but apparently it isn't to some federal officials.
Former U.S. Attorney General Richard Thornburgh's testimony captured the essence of the problems that worry so many criminal-law experts. "Those of us concerned about this subject," he testified, "share a common goal - to have criminal statutes that punish actual criminal acts and [that] do not seek to criminalize conduct that is better dealt with by the seeking of regulatory and civil remedies." Only when the conduct is sufficiently wrongful and severe, Mr. Thornburgh said, does it warrant the "stigma, public condemnation and potential deprivation of liberty that go along with [the criminal] sanction."
The Norrises' nightmare began with the search in October 2003. It didn't end until Mr. Norris was released from federal supervision in December 2008. His wife testified, however, that even after he came home, the man she had married was still gone. He was by then 71 years old. Unsurprisingly, serving two years as a federal convict - in addition to the years it took to defend unsuccessfully against the charges - had taken a severe toll on him mentally, emotionally and physically.
These are repressive consequences for an elderly man who made mistakes in a small business. The feds should be ashamed, and Mr. Evertson is right that everyone else should be scared. Far too many federal laws are far too broad.
Mr. Scott and Mr. Gohmert have set the stage for more hearings on why this places far too many Americans at risk of unjust punishment. Members of both parties in Congress should follow their lead.
Brian W. Walsh is senior legal research fellow in the Center for Legal and Judicial Studies at the Heritage Foundation.
|October 7th, 2009||#2|
[If they can't beat up normals, why, cops must content themselves with thumping retards.]
Cop Caught On Camera Beating Special Education Student Marshawn Pitts (WATCH)
A south suburban Chicago police officer was caught on a security camera beating up a high school special education student, CBS2 reports.
Marshawn Pitts, 15, was walking down his school hallway when he says a Dolton, Ill. police officer went from berating him for his untucked shirt to slamming him to the ground and beating him.
"The officer was in his face because he didn't have his shirt tucked in," Pitts' attorney told CBS 2's Davis Savini. "That's the officer put in that school to protect these kids, and instead of doing that, this officer is literally assaulting this kid."
Neither school nor Dolton officials responded to CBS 2 about the story.
|October 7th, 2009||#3|
[Cops are cowards - not just moral cowards, which is obvious, but physical cowards too, as was evident most notably in the Rodney King riots and at Columbine, but also in the recent gang-fight beating death, where cops stood back waiting reinforcements. Government service isn't public service it's self-service. Their proclaimed motto might be "to protect and to serve," but their actions show their real one is: "to hang back, and to scritch illiterate notes after the fact...unless the subject is an unarmed teenage retard, in which we become ferocious beasts, of confrontation and forearms all compact."]
Fenger High School melee: Police presence to be stepped up on first open day since fatal beating
By Kristen Mack Tribune reporter
September 28, 2009
Chicago police geared up to provide extra security at Fenger High School on Monday as they reviewed a graphic amateur video showing a student beaten to death with wooden two-by-fours.
The nearly three-minute video, shot by a girl who attends Fenger, captured the gruesome melee as it unfolded. Derrion Albert, 16, is seen being struck then stumbling to the ground; teenagers then continued to viciously punch, kick and strike him with the wooden boards. The additional evidence is aiding the investigation, Chicago police said.
Derrion's family was squeamish about watching the footage and not all of them were able to make it through. But they said they don't have a problem with people viewing it as long as it helps identify who beat Derrion to death.
"It hurt to watch," said LaTonia Williams, Derrion's aunt. "It's one thing to hear about it and come up with your own theory of what happened. To see it is another thing. It gave us a real clear picture of what happened. That video was crucial."
Some parents and students have expressed reservations about returning to Fenger on Monday. It is the first time Fenger will be open since Thursday, when brewing gang rivalries that started at school spilled onto the streets of the Roseland neighborhood on Chicago's Far South Side.
"Word is there will be more violence at the school on Monday. Don't think this is going to end," said the Rev. Victor Grandberry, community representative for the local school council, who said some parents will withdraw their students from Fenger on Monday.
Police said they are increasing their presence at and around Fenger to ease fears students and their parents may have about safety, Morgan Park District Cmdr. Mike Kuemmeth said. The beefed-up security will remain until the public perception that the school is dangerous decreases, he said.
In an effort to curtail the violence, several community groups plan to hold a vigil at the school Monday afternoon.
On Friday, a teen girl, who asked the family not to identify her because she fears retaliation, showed the video to Derrion's family before handing it over to police and WFLD-Channel 32, the local Fox station, said Eunice Cross, the grandmother of Derrion's half-sister. The vivid images were captured from the middle of the brawl. The footage the girl shot provided an additional vantage point to video from a surveillance camera atop the Agape Community Center, 342 W. 111th St., next to a vacant lot where dozens of boys converged Thursday afternoon.
Detectives reviewed the tape Friday evening and said they appreciate the new evidence.
"We are pursuing interviews with a number of people of interest," Police Officer Gabrielle Lesniak, said.
Three people older than 17 and a juvenile are being questioned in connection with the attack, a law enforcement source said Sunday.
Police have identified several people from the video, police spokesman Roderick Drew said.
Fox Chicago was approached Friday by the female student's brother with a copy of the video, said Carol Fowler, the station's news director. It held off on airing the tape for 24 hours at the request of police, who wanted more time to find suspects. Fox paid its typical freelance fee of about $300 to obtain the tape exclusively, Fowler said. "The principal reason we decided to air the video was because it communicated in a powerful way the danger these kids face getting to and from school every day," Fowler said.
Joseph Walker, Derrion's grandfather, said he could not bear to watch the recording. "The graphics are too strong for me," he said. "God bless whoever took that video. It did and said it all."
Witnesses and police said Derrion, an honor roll student, was swept into the altercation. The first officers who arrived on the scene waited until backup arrived before they broke up the sprawling fight, witnesses said.
Tribune reporter Kristen Schorsch contributed to this report. [email protected]
Last edited by Alex Linder; October 7th, 2009 at 04:45 PM.
|October 7th, 2009||#4|
[Typical example of government thuggery in the name of 'the children,' 'fighting terrorism,' any excuse that comes to mind...]
French police grab 4 kids on German orders
Homeschool family's children accused of 'being alone'
Posted: October 06, 2009
By Bob Unruh
© 2009 WorldNetDaily
Four children of a family that fled Germany to avoid further fines for homeschooling have been snatched from their home in France by police and accused of "being alone," according to a report today on the ongoing war against home education across the continent.
The word comes from the Home School Legal Defense Association, which has been involved in a long list of cases of persecution of homeschooling families across Europe, especially in Germany.
The report said two French social workers and two police officers appeared without notice at the home of Dominique Chanal in St. Leonard, France, where Dirk and Angela Wunderlich and their children have lived since July.
"The four officials told a stunned Mrs. Wunderlich that they had come at the request of German authorities and that they had to take the family's four young children because they were 'in grave danger,'" the HSLDA report confirmed.
"A copy of the report justifying immediate seizure of the children was obtained by HSLDA. The reasons given for the seizure were that the children were 'socially isolated, not in school and that there was a 'flight risk,' – none of which appear to be true," the report said.
The family fled Germany because of a series of fines imposed for homeschooling and the concern that German authorities inside Germany would take custody of the children.
After the children were seized by French authorities, the Wunderlichs contacted their lawyers in Germany, and they now are being represented by a local attorney in France.
Armin Eckermann, chief of a German group involved in defending homeschoolers, told the HSLDA that when he contacted Germany authorities, they denied asking French police to get involved.
The children were taken into custody Sept. 28, and it was three days before the parents were allowed to see them again.
"The social workers told us that the reason they took our children was because they 'have no contact with other children, that school education is guaranteed and that you are a risk of escape.' But this is nonsense, as anyone who knows our family can tell," the parents said in a statement.
Michael Donnelly, a staff attorney with the HSDLA who is familiar with a number of egregious persecution cases coming out of Germany, said the development is alarming.
"We are concerned about the increase in negative treatment of homeschoolers in Europe. This apparent trend is counter to all the evidence that shows that homeschooling is effective both academically and socially. Because homeschoolers in Europe are relatively few, it is important that homeschoolers in America encourage and support them," he said.
The HSLDA noted that another family, Uwe and Hannalore Romeike, now has a political asylum request pending in the U.S. because of the potential for persecution should they be forced to return to Germany.
Immigration Judge Lawrence O. Burman has scheduled a hearing on the case Dec. 16 in Memphis, Tenn.
The landlady for the Wunderlich family said she was shocked.
"This is a wonderful family," Chanal told HSLDA. "There are always children coming to the home to play with the children and my daughter. It is like a school in our house.
"These are very good parents who protect their children from dangers. They are better parents than most parents in France, because they do not let the children wander the streets or get involved in other bad behavior," she said.
"I believe that this was an illegal act by the German Youth Welfare Office. We are no longer residents of Germany," Dirk Wunderlich said. "As citizens of the European Union we have the right to free mobility, and we are complying [with] French education laws. The Germans should leave us alone."
Donnelly reported another family, still in Germany, has been assigned a new trial date of Nov. 16. Juergen and Rosemarie Dudek of Archfeldt, Germany, previously were sentenced to 90 days in prison for homeschooling their own children.
The penalty earlier was overturned on technical grounds, and they have been ordered to a new trial.
The HSLDA warned that the behavior of German authorities is a foreshadowing of what American parents should expect if the U.N. Convention on the Rights of the Child ever is ratified in the U.S. Its concerns are detailed at Parental Rights.
WND reported recently on a similar situation in Sweden in whichi authorities snatched a 7-year-old child from an airplane on which he and his parents were moving to India.
The HSLDA has dispatched a formal letter to a local Swedish social services unit involved in the case in which Dominic Johansson, of Gottland, was forcibly taken into custody minutes before he and his parents, Christer and Annie Johansson, were due to take off to start a new life in India, Annie's home country.
"This kind of gross disregard for family integrity and simple human decency is becoming the hallmark of countries like Germany, and now apparently Sweden," Donnelly said at the time, "where the state is more interested in coerced uniformity than in protecting fundamental human rights and fostering pluralism."
WND has reported on multiple cases of persecution of homeschooling families in Germany, including situations in which jail terms were ordered for parents of homeschooled children, a family sought political asylum because of the persecution, and a teen was taken into German state custody and ordered into a psychiatric ward for the crime of being homeschooled.
|October 7th, 2009||#5|
[Government wastes money under cover of science]
NASA morons spend $79 million (read: 800 million) to blow up moon ISO water
Last edited by Alex Linder; October 7th, 2009 at 05:47 PM.
|October 7th, 2009||#6|
[Government puts a queer - which is a synonym for pederast - in charge of school safety. Again, this is not government at its worst or most extreme, this is government at its typical, its usual, its normal. The solution is not to improve public schools, which belief exhibits a complete misunderstanding of their mission, the solution is to abolish public schools.]
American Family joins calls for Jennings ouster
'This man is not a good role model for the nation's children'
Posted: October 06, 2009
© 2009 WorldNetDaily
The American Family Association today joined in the call for the removal of "gay" activist Kevin Jennings from his job as overseer in the U.S. Department of Education's Office of Safe Schools.
Perversion 101: Kids taught 'gay' sex, rape, bestiality
High school teacher keeps job after handing out pornographic 'banned book'
Posted: October 05, 2009
By Chelsea Schilling
© 2009 WorldNetDaily
"The Perks of Being a Wallflower," by Stephen Chbosky
A father of a high-school student is infuriated after he said a teacher provided "banned books" to her 11th-grade students, including at least one with explicit descriptions of homosexual sex acts, rape, masturbation, profane language and even bestiality.
John Davis, father of an 11th-grade student at William Byrd High School in Vinton, Va., told WND that English teacher Kathleen Renard provided her personal copy of a book called "Perks of Being a Wallflower" by Stephen Chbosky to one of her English students, and it was passed to his son. The book is published by MTV Books.
Davis found the book in his son's possession, along with a bookmark that said, "Read banned books. They're your ticket to freedom."
"My son was reading the book and stated it was a school assignment," Davis told WND. "He was embarrassed that I began to peruse through the book and discovered its contents. He advised that the book belongs to his English teacher, Mrs. Kathleen Renard."
Upon reading the book, Davis discovered the following:
* sex acts between teenagers
* male and female masturbation
* oral sex
* extensive use of profanity, especially the "F"-word
* multiple cases of homosexual acts between teenage boys, including kissing, seduction and anal sex
* illegal drug and alcohol use, including smoking marijuana and LSD usage
* anonymous homosexual acts between men and boys
* rape of a teenage girl while she cried
* molestation of a young boy by a woman
* molestation of a young girl by an older man
* how hitting a girl can turn her on and make her love a boy
* attempted sex between a boy and a dog
Davis confiscated the book and arranged to meet with Renard and William Byrd High School Principal Richard Turner.
Amazon.com excerpt from 'Perks of Being a Wallflower'
The father said the English teacher was not present at the Oct. 2 meeting. He asked the principal if he could speak with the teacher, but he said Turner refused to call her in, saying, "I'm not going to fire her over this."
Get "The Marketing of Evil: How Radicals, Elitists, and Pseudo-Experts Sell Us Corruption Disguised as Freedom"
"I was supposed to be meeting with him and the teacher together so I could get some answers," Davis said. "He wouldn't let the teacher come in because he was trying to protect her."
Davis said the principal explained that Renard had made "a whole row" of banned books available to her students in celebration of the American Library Association's "Banned Book Week." She included her personal copy of "Perks of Being a Wallflower," complete with her own name on the inside jacket, among other selections.
The book is listed among ALA's top 10 "most frequently challenged books of 2008." The ALA "banned" books also include many other stories that reference sex, occult themes, violence, offensive language, drug abuse, homosexuality and suicide.
The principal told Davis he believed the book was inappropriate, but he said the father handled his complaint improperly.
Parents were not informed that these banned books would be made available to the students. Davis said that when he expressed this concern to the principal, he replied, "You're right about that."
According to Davis, the principal said he believed the teacher should not have provided the books. Principal Turner claimed he had met with the instructor and disciplined her, but Davis said he would not say what actions had been taken. Instead, he told the father, "That's between me and her."
Davis said, "As far as I know, he may have just given her a paid day off. He wouldn't tell me."
Renard's personal copy of 'The Perks of Being a Wallflower' included a 'banned books' bookmark inside
Principal Turner acknowledged that the school also carried two copies of the book in the library and said he had asked to have them removed from the shelves.
Messages left with Principal Turner and Roanoke County School Board members had not been returned at the time of this report.
Davis mentioned WND's big list of teachers who have sexual relationships with minor students and said he is concerned that a teacher who provides sexually explicit reading material to her students could have ulterior motives.
Instructor's name appears inside 'banned book'
Davis is still in possession of the book and has chosen not to give it back to the instructor because he said he doesn't want it back in the hands of students.
"This is one of the better schools around," he told WND. "People need to wake up and start questioning some of the things that are going on in the schools. They wonder why we're having so many problems with teens. A lot of it has to do with what goes on in the schools."
Concerned individuals may contact William Byrd High School or the Roanoke County School Board.
|October 7th, 2009||#7|
[Government promotes disease-spreading perversion.]
President Obama will be the keynote speaker at the Human Rights Campaign’s annual dinner on Saturday in Washington, D.C.
“We are honored to share this night with President Obama, who has called upon our nation to embrace LGBT people as brothers and sisters,” The Human Rights Campaign President, Joel Solmonese, said in an announcement today.
|October 7th, 2009||#8|
Join Date: Dec 2003
Location: Under the Panopticon.
"LGBT (or GLBT) is an
You have to remember I live in Denver and some things are perfectly legal here that aren't where you live.
|October 7th, 2009||#9|
[Good example of government-provided "security." Government promises anything and everything, but it only delivers two things: higher taxes, fewer freedoms.]
14-Year-Old Boy Boards Flight Using Mom's Name
TSA Allows 6'2", 200lb Boy Apparently Named 'Virginia' Board Flight
CANBY, Ore. October 6, 2009 (AP)
A 14-year-old Canby boy was able to slip through security at Portland International Airport and board a flight to Chicago using his mother's name and credit card.
Transportation Security Administration spokesman Dwayne Baird said that the boy - who is 6-foot-2 and weighs about 200 pounds - was asked by a TSA screener if his name was "Virginia," the first name of the passenger listed on the ticket. The boy said yes, was allowed through security and made the flight.
|October 7th, 2009||#10|
|October 7th, 2009||#11|
[Government moves to protect foreign illegal criminals from deportation, endangering the people who pay its salaries and whom it claims to protect.]
San Francisco officials on Monday moved closer to amending the city's controversial sanctuary ordinance and restricting when local authorities can report juveniles for possible deportation.
|October 7th, 2009||#12|
Geez, I've just listed a half-dozen examples of government at its most typical - wasting money, endangering citizens, kidnapping children - all taken from one day's reports. Government = lies + terrorism. Government = you paying your captors for the privilege of living as a slave.
|October 7th, 2009||#13|
[Government provides security - by shooting the innocent party. The government worker, of course, was absolved of any crime.]
Family Suing After Phoenix Cop Shoots Homeowner Instead of Intruder
Tony Arambula Was Shot Six Times After Calling 911 For Help
By SARAH NETTER
Oct. 6, 2009
When Tony Arambula managed to corner an armed intruder in his son's bedroom he expected police to come to his aid.
Instead, a Phoenix police officer confused Arambula for the intruder and shot him six times before realizing his mistake, a moment captured on the 911 call with a simple "F**k."
Even after realizing their mistake, Arambula said he was treated roughly, being dragged out of the house and transported briefly on the hood of a police car.
Now Arambula, 35, who survived but faces a lifetime of pain, is suing the city of Phoenix and the officers who responded to his house that night.
The lawsuit, filed in Maricopa County Court, alleges that Phoenix Police Officer Brian Lilly and his on-scene supervisor, Sgt. Sean Coutts, quickly conspired to cover up the mistake, not realizing that 911 was still recording Arambula's call for help.
CLICK HERE to listen to Tony Arambula's 911 call to Phoenix police.
Lillly has been cleared of any wrong doing by the Phoenix Use of Force Board, but the Arambulas are suing the officer, Coutts, the city of Phoenix, the Phoenix police department and a number of unidentified emergency workers for at least $5.75 million.
|October 7th, 2009||#14|
[Government stooge hypes bogus danger - greenhouse gas - after failing to get his way with earlier bogus danger - new ice age. Manufacturing crises in order to steal money and freedoms is what government does. Is all it does.]
As Henny Youngman might say: "Take John Holdren, the climate czar, please."
Today he tells us the planet is heating up to the boiling point because of catastrophic levels of man-made carbon dioxide.
But 40 years ago, he was proclaiming the dawn of a new ice age – with many of the same government prescriptions in mind.
|October 7th, 2009||#15|
[Government, here global, is obsessed with turning children into diseased perverts.]
In 2004 in Paris, UNESCO signed a 26-page "Cooperation Agreement" with Microsoft Corp. to develop a "master curriculum (syllabus)" for teacher training in information technologies based on standards, guidelines, benchmarks and assessment techniques. This agreement states that the syllabus will "form the basis for deriving training content to be delivered to teachers," and "UNESCO will explore how to facilitate content development."
UNESCO's director general boasted that one of the goals is to foster "worldwide curricula reflecting UNESCO values." This fall, UNESCO has been busy writing guidelines for the teaching of sex education, supposedly in order to slow the spread of HIV-AIDS and other sexually transmitted diseases.
In these guidelines, UNESCO tells teachers in all countries to present abstinence until marriage as "only one of a range of choices available to young people" to prevent pregnancy
and sexually transmitted diseases. Other choices would surely be more fun.
The working draft of the guidelines calls for children ages 5 to 8 to be taught in school about masturbation (age 5 means starting in kindergarten). Children 5 to 8 years old would also be taught about same-sex couples and tolerance of different sexual orientations.
Schoolchildren ages 9 to 15 are to be given more detailed discussions about masturbation. New topics on the list for 9-year-olds include orgasm and abortion.
|October 7th, 2009||#16|
Join Date: Apr 2004
Location: Land of Cotton
Article dated October 6, 2009
(More examples of the government's ability to spend your money)
...duplication and inefficiency, mismanagement, and fraud--are comparatively easy to identify and oppose. Thus, they are heavily represented in the examples of government waste below:
"To speak his thoughts is every freeman's right, in peace and war, in council and in fight."
"The very aim and end of our institutions is just this: that we may think what we like and say what we think."
-Justice Oliver Wendell Holmes, Jr.
Last edited by COTW; October 7th, 2009 at 07:46 PM.
|October 8th, 2009||#17|
Join Date: Apr 2004
Location: Land of Cotton
House Cuts Workweek to 2 1/2 Days
They don't give a shit about how you'll vote.
"To speak his thoughts is every freeman's right, in peace and war, in council and in fight."
"The very aim and end of our institutions is just this: that we may think what we like and say what we think."
-Justice Oliver Wendell Holmes, Jr.
|October 8th, 2009||#18|
Join Date: Jun 2009
According to Keynes there is no waste in spending, as the economy runs on spending. That's why we have it so good- the more spending, the higher the standard of living.
As the former head of NASA (Goldin) put it: "The money is not being spent in space. It'z being spent on earth!"
Our problem to-day is simply not enough spending.
|October 8th, 2009||#19|
Join Date: Apr 2004
Location: Land of Cotton
Once upon a time the banks said, "There's no such thing as a bad loan" and the Fed said, "There's no such thing as too much money, somebody will take it."
The ending has yet to pass but it doesn't look favorable does it?
"To speak his thoughts is every freeman's right, in peace and war, in council and in fight."
"The very aim and end of our institutions is just this: that we may think what we like and say what we think."
-Justice Oliver Wendell Holmes, Jr.
|October 8th, 2009||#20|
[Government = fail.]
The New Middle Class Contract
JAMES C. CAPRETTA
America's post-war prosperity has been a wonder of the modern world. Flexible and adaptable labor and capital markets, a culture that values entrepreneurial initiative and risk-taking, and an openness to the increasingly global economy have all helped create the wealthiest society in history. Above all, though, America owes its bounty to its vast and robust middle class: a skilled, efficient, and ever-expanding work force upon which American companies have built immense success.
The severe economic contraction of the past year has left many Americans wondering if we are witnessing the end of this age of affluence. Far more than other recent recessions, the present crisis appears to have exposed underlying weaknesses in our economic foundations, and has involved failures of institutions long taken for granted. These failures were not simply the result of the burst housing bubble and credit meltdown; the financial crisis was the straw that broke the backs of *long-teetering giants. Americans have now been left to ask if our entire economic system might be similarly vulnerable. If General Motors can collapse into a heap, what other pillars of our post-war order may yet fall?
That question is hardly trivial. In fact, the downfall of GM in particular — which has been very long in coming — offers a disturbingly apt metaphor for America's post-war economic order. At the height of its success, GM understood that the company's booming growth depended on its large and able work force. And this realization — together with effective lobbying by the unions representing those workers — led to an extensive array of worker entitlements, ranging from generous health-insurance coverage to comprehensive retirement pensions to *job-security guarantees.
Premised on the growing labor and consumer markets of the boom years, these arrangements over time began to weigh down the company. But once offered, the benefits proved almost impossible to roll back — and rather than make the difficult choices involved in revising longstanding contracts and face unhappy workers and unions, the company pretended its books could somehow fall into balance by magic. The old joke that GM was a health-insurance company that made cars on the side increasingly became the company's grim reality. As its commitments grew while its profits shrank, GM became unsustainable.
Over the same period, the United States government came to a similar arrangement with the country's growing and industrious middle class. To offer some security to the workers powering America's prosperity, a series of entitlement programs took shape, aimed especially at providing for retirement income and health-care expenses. These programs' finances were built on demographic and economic trends that could not have been expected to go on forever; yet even as their underlying logic has grown obsolete, these arrangements have proven extremely difficult to change. Today, America's political leaders are essentially in the position that GM's management was a decade or two ago: They have made a contract with the middle class that now threatens to bankrupt all involved, but seem unable to do anything about it.
The dire consequences of failing to change this arrangement are clear. According to the Congressional Budget Office, the trajectory of spending laid out in President Barack Obama's first budget would push the nation's debt to 82% of gross domestic product at the end of 2019 — up from 41% at the end of 2008. (And that's before the retirement of the Baby Boom generation hits with full force.) Politicians of both parties routinely decry this mounting debt and urge a thorough scrubbing of the budget. But while there is certainly much fat to trim around the edges, the great bulk of America's debt burden will come from three key entitlement programs: Medicare, Medicaid, and Social Security — the core of the middle-class contract.
For perspective, consider that in 1970 — just a few years after Medicare's enactment — the defense budget stood at 8.1% of the nation's economic output, as measured by GDP. Combined spending on Social Security, Medicare, and Medicaid, meanwhile, stood at 3.9% of GDP. But in 2019, almost a half-century later, defense is expected to fall to about 5% of GDP, while the big three entitlement programs will approach 12%. By 2050, they will exceed 18% of GDP — which is about the historical average of total revenue collection each year. The U.S. government, like GM today, will then be mainly in the business of providing health and pension benefits, and will struggle to perform its other basic functions — maintaining a standing army, for example — on the side.
The paradox of our entitlement system is that although it is designed to mitigate risk at the individual level, it is now creating a massive *economy-wide risk. For years, economists across the political spectrum have been warning that unconstrained federal borrowing will ultimately leave the country unable to issue debt at favorable and affordable rates of interest. When that point is reached, there will be little choice but to embark on a long period of painful fiscal contraction and austerity, with deep and immediate cuts in benefits and steep rises in taxes.
Like any large political undertaking in our democracy, our entitlement system depends on the loyalty and support of the broad middle class. It is, after all, fundamentally an arrangement with middle-class voters. Its benefits accrue largely to them (with the exception of Medicaid, which nonetheless exists only because of their backing). And the consequences of the system's fiscal decline — especially the tax burden required to contend with it — will affect the middle class above all, and through them the larger economic engine they make possible.
To sustain American prosperity and pass along a healthy economy to the next generation, the middle-class contract of the post-war years must be revised. Our entitlement programs need not be abolished — but they do need to be reformed so that they are economically viable, and bolster a thriving free-market economy instead of undermining it. For such an overhaul to happen, middle-class voters will need to be persuaded that change is necessary, and that it can be undertaken rationally, responsibly, and fairly. This may be the foremost political challenge of our time.
DEMOGRAPHY IS DESTINY
Social Security, the oldest of our major entitlement programs, aims to provide retirees with a modest income — partly as insurance against poverty in old age, but also to see to it that retired workers receive a base pension bearing some relation to what they earned in their working years. The program is funded by a dedicated payroll tax of just over 12% (half of which is paid by the employer, and half by the employee). This tax has risen significantly over the years — today's rate is roughly twice what it was in 1960 — as have Social Security benefits. Although the program is designed to resemble a pension savings plan — in which workers put aside money through taxes and then receive it when they retire — Social Security is in fact a "pay-as-you-go" system: Tax payments from current workers finance benefits for current retirees.
There is a mathematical limit to what any pay-as-you-go pension system can churn out in benefits, as the implied real rate of return for the average worker over the long run cannot exceed the sum of population growth and real productivity improvement in the economy. Put simply, what comes in must keep pace with what goes out. In practice, this means that what will be affordable in the future will depend entirely on the size of the future work force relative to the size of the retiree population, and on the capacity of that work force to produce marketable goods and services.
The world's richest economies still have the ability to grow through improved productivity, but the sizes of the working and retired populations are another matter entirely. Since the 1960s, the developed world — and now even newly emerging economies — have seen unprecedented declines in fertility just as life expectancies have risen. We are living much longer than ever before, and having far fewer children.
In 1940, men who reached age 65 — the first year of eligibility for Social Security retirement benefits — could expect to live to about age 77. Today, a man turning 65 will live, on average, to age 82. At the same time, birth rates have plummeted. In 1955, at the height of the Baby Boom, the average American woman had 3.5 children (the so-called total fertility rate, or TFR). Today, the U.S. TFR has fallen to 2.1 — just barely enough to prevent population decline.
To be sure, the problem is far worse in other countries. Germany, Italy, and Spain all have TFRs below 1.5. Japan's has fallen to an astonishing 1.27. Between 2010 and 2050, Japan's working-age population is expected to decline by nearly 33 million people, or almost 40%.
But even in comparatively fertile America, rapid increases in our retiree population combined with dwindling growth in the number of workers will put tremendous pressure on government finances and overall economic performance. Between 2010 and 2050, the number of Americans aged 65 and older is expected to more than double, growing from 40.5 million to 81.6 million. Meanwhile, the working-age population — those persons between the ages of 20 and 64 — will increase by only 37 million. The result is a large decrease in the all-important *measure of pay-as-you-go pension viability: the ratio of workers to retirees. Between 2010 and 2050, it will decrease from about five workers for every retiree to about three.
This demographic shift makes the mathematics of Social Security simply unsustainable. And the first serious problems are very near at hand. The program's trustees now project that the Social Security trust fund will run cash deficits (that is, will take less in through taxes than must be put out in benefits) every year after 2016. The outlook only gets worse over time: Social Security's projected unfunded liability is a whopping $5.3 trillion over the next 75 years.
Faced with massive imbalances in their state-run pay-as-you-go pension schemes, some other countries are trying to close the gap with *payroll-tax increases on the current generation of workers, in the hope that more revenue will lessen the pressure for unpopular benefit reductions for current retirees. The Japanese government, for example, has begun a nearly five-percentage-point increase in that country's payroll-tax rate, phased in between 2004 and 2017.
But these kinds of tax-heavy solutions are counterproductive because they will exacerbate the trends causing the pension imbalances in the first place. The primary problem in these pension systems is that birth rates have fallen, so that the work force is simply too small to carry the full weight of an unreformed pension entitlement. And overly large pay-as-you-go pension programs are themselves one of the reasons for suppressed fertility. A large body of economic research confirms that the countries with the most expensive state-run pensions have seen the sharpest drops in birth rates. A 2005 study by economists Michele Boldrin, Mariacristina De Nardi, and Larry Jones found that a government-run pension system equal to 10% of a country's economy correlates with a reduction in the TFR of between 0.7 and 1.6 children, after controlling for other variables. Why? A plausible explanation is that, in earlier times, couples "invested" in children to help care for them in old age. The advent of expensive social-insurance arrangements reduced the after-tax resources a family had to raise children, while also lessening the economic need for them.
Raising payroll-tax rates to close a Social Security financing gap is therefore the last thing our country should do. The only long-term *solution to an aging population is higher birth rates — and to the extent that government can play a role in encouraging these, it is by helping younger families with the costs of raising children, not raising taxes on their earnings. The Social Security crisis is a function of a larger demographic challenge now faced by every developed nation. A reformed old-age entitlement will need to take account of this reality and, where possible, try to address it.
THE HEALTH-CARE COST PUZZLE
Medicare — the health-care entitlement program whose enrollees largely overlap with those receiving Social Security benefits — is naturally burdened by the same demographic shifts that are pushing the old-age pension program toward insolvency. But Medicare also suffers from another vexing problem: rapid growth in health-care costs. While Social Security provides a cash benefit, Medicare pays for a service — and the price of that service has been skyrocketing for decades.
CBO has estimated that, between 1975 and 2005, annual Medicare per capita costs rose, on average, 2.4 percentage points more rapidly than per capita GDP growth. Medicaid's costs, meanwhile, have grown 2.2% faster than GDP, and privately funded health-care costs have grown 2.1% faster than GDP.
Combining escalating health-care cost inflation with the retirement of the Baby Boom generation makes for a budgetary nightmare. Between 2010 and 2040, CBO expects the combined costs of Medicare and Medicaid to increase from 4.9% of GDP to 10.6%.
President Obama and his aides have increasingly argued that the only way to "bend the cost curve" of Medicare is to enact comprehensive health-care reform with cost-cutting measures that can be applied across the system. That argument has some appeal; after all, Medicare buys services for its enrollees from more or less the same hospitals and physicians who take care of everyone else. And with roughly 15% of the population lacking stable health coverage, cost-cutting in the absence of a universal insurance arrangement would risk being unfairly imposed on those with the most tenuous access to care.
But upon closer scrutiny, this approach actually seems to have things backward. Yes, there is an aspect of cost escalation that is traceable to variables outside the government's control. Rising wealth and medical discovery are fueling the demand for more and better treatments (and that should not be resisted in any event). But there is widespread *agreement that costs are also high and rising in significant part because of gross inefficiencies in how we pay for health care.
Here, the chief culprit is the federal government itself. The vast majority of Americans get their insurance through one of three sources: Medicare for retirees, Medicaid for the poor, and job-based insurance for workers and their families. In each instance, federal policy is driving up costs unnecessarily.
In the case of Medicare, most beneficiaries are enrolled in the program's traditional "fee-for-service" insurance arrangement. Medicare FFS allows enrollees to see any licensed service provider, with no questions asked. Medicare does require substantial cost-sharing — including a 20% co-pay to see a physician, and a deductible of more than $1,000 per hospital admission. But this is ineffective, because about 90% of the enrollees also have some form of supplemental coverage, which pays for what Medicare does not. Thus, in most instances, more care does not cost Medicare beneficiaries any more money.
It's not surprising, then, that the Achilles' heel of Medicare is volume. According to CBO, the real price Medicare paid for physician fees dropped between 1997 and 2005 by nearly 5%, but total spending rose 35% because of rising use and more intensive treatment.
Employers have been trying for years to move away from Medicare-style FFS in favor of steering patients to higher-quality, lower-cost *networks of service suppliers. The private sector is also well ahead of the federal government when it comes to disease management and wellness efforts. But employers can only do so much when Medicare, the dominant payer in most health-care markets, pushes in exactly the opposite direction. Because Medicare will finance unlimited use, many individual practitioners and institutions see no reason to give up their autonomy and join an organized delivery model. All manner of ancillary service providers — labs, home health agencies, hospices, and others — also survive as stand-alone operations because of Medicare's open network and provider-centric payment systems.
The cost of this escalating use of services in Medicare is felt mainly by current taxpayers, not the program's enrollees. Current retirees qualified for the hospital coverage the program provides long ago. They do not have to pay any additional premium for that coverage in retirement, even though actual costs are well above what was projected when they were working. Current beneficiaries do pay a premium for physician and outpatient coverage, but it covers only 25% of the total cost. The other 75% is automatically drawn from the U.S. Treasury.
The Medicaid program, meanwhile, fuels growth in health-care costs because it is financed with a flawed system of federal-state matching payments, with no limit on the amount that can be drawn from the Treasury each year. For every dollar of Medicaid cost, the federal government pays, on average, 57 cents; the states pick up the rest. But it's the states, not the federal government, that call the shots in the program's management: They determine who is eligible for what, and how much to pay hospitals and doctors for services. Under this arrangement, if governors or state agencies want to reduce Medicaid's cost to their budgets, they have to cut the program by $2.30 to save $1.00 — because the other $1.30 belongs to the federal government. Paying the full political price for benefit cuts while getting less than half the economic benefit obviously does not appeal to most state politicians. So instead, they spend most of their energy devising ways to maximize what they can get from the federal government while minimizing the state contribution.
The private insurance market, in which most Americans get their health coverage through an employer, is also far from immune to price distortions caused by government policy. The federal tax treatment of private employer-sponsored coverage fuels serious cost escalation *system-wide. Today, employer-paid health-insurance premiums do not count as taxable income for workers. No matter how expensive the *health-insurance premium, if the employer is paying, it is tax-free to the worker. Employees thus have a strong incentive to take more and more of their compensation in the form of health coverage instead of cash wages. For every dollar spent by his employer on health insurance, a worker gets a full dollar of health coverage; but when the same worker gets paid in cash, a large portion is sent to the government in taxes.
The favorable tax treatment of job-based insurance was instrumental in spreading private coverage to working-age Americans in the post-war period. It has been a crucial part of the middle-class contract. But because the tax subsidy has no limit, it has also encouraged overly expansive insurance, with lower deductibles and looser networks than would otherwise have developed. Economizing in health care is hard enough under the best of circumstances; if a company and its workers are only going to keep 50 to 60% of what they save, they are going to be much less vigorous in their search for savings.
When you put it all together — Medicare's fee-for-service program and insulation of beneficiaries from rising costs, unlimited federal funding for state-run Medicaid plans, and an open-ended tax subsidy for employer-paid insurance premiums — it is not surprising that health-care costs are rising rapidly in the United States. The vast majority of Americans are in health-insurance arrangements that are heavily subsidized by the federal government. When premiums rise, much of the added cost is shifted to the Treasury. And when someone else is paying even part of the tab, demand for services always rises.
The combination of the demographic variables buffeting Social Security and the distortion of health-care costs caused largely by Medicare, Medicaid, and the tax treatment of employer-based health insurance makes for a very grim prognosis. The case for mitigating the risks middle-class families face has not grown weaker, but the system we have built for doing so must be transformed.
One obvious component of an entitlement-reform strategy is an emphasis on later retirement and longer working careers. Americans are living much longer than they did when Social Security and Medicare were enacted, and longevity is expected to increase for the foreseeable future. Current projections therefore assume that Americans will spend an ever greater portion of their lives out of the work force and in retirement, placing ever-growing pressure on public finances.
Ironically, some of the largest impediments to continued work by those in their sixties and seventies are embedded directly in the rules governing our entitlement programs. They are implicit in the middle-class contract.
For example, Social Security benefits are based largely on the first 35 years of work, and any earnings beyond the 35-year mark get counted only if they are higher than an amount credited in a previous year. But most people hit 35 years of earnings in their fifties, and if they are winding down their careers, their wages during their last years of work may fall well below what they earned in younger days.
What's more, older workers pay the full Social Security and Medicare payroll taxes — a combined 15.3% on wages, split evenly by employer and employee — even after they have signed up for benefits. In most instances, they get nothing in return for paying these added taxes. This is especially true in the case of Medicare, as the entitlement is unrelated to payroll-tax contributions and is conferred after just ten years of work.
Medicare also discourages continued work by older Americans with its "secondary payer" rules. A 1982 law requires employer-sponsored insurance to cover medical bills first, before Medicare pays for any costs incurred by someone enrolled in both the employer's plan and Medicare. This provision greatly increases health-care costs for employers with seniors on their payroll, and they have responded quite predictably by cutting the wages they are willing to pay such workers. This requirement of primary coverage by job-based insurance imposes an implicit tax on wages ranging from 15% (for men at age 65) to 60% (for women at age 80).
Given these strong disincentives to work, it is hardly surprising that most seniors choose not to. Today, just under 30% of men aged 65 to 69 remain employed, down from 46% in 1960, when men died at much younger ages.
The point of changing these features of our entitlement programs is not to create a situation in which seniors have to work, but to end the powerful disincentive to do so. Making it easier for older Americans to work longer if they wish would significantly improve the financial prospects of our entitlement system.
WORK, FAMILY, AND CONSUMER CHOICE
Creating a genuinely sustainable middle-class contract, however, will require more significant reforms that get to the core logic of our entitlement system, and reward greater self-reliance through work, family formation, and cost-conscious consumption of health care.
In this regard, a good place to start is President George W. Bush's 2005 effort to introduce voluntary personal accounts into Social Security. Fully funded personal accounts would avert fiscal disaster because they would explicitly limit what gets paid out to the amount that gets paid in. Instead of an opaque benefits formula determined by government, personal accounts pay pension annuities based on the actual accrued balances in workers' accounts at retirement. Such accounts would also improve work incentives, as every dollar contributed would add to an annuity in retirement.
Clearly, moving from a mature pay-as-you-go system to funded accounts raises difficult transition problems. Directing payroll-tax *contributions to non-governmental, individually owned accounts would mean reduced receipts for the Social Security trust funds, and, very likely, more federal borrowing. It is entirely plausible that such a reform would actually raise overall national savings, as the amounts in the personal accounts would offset federal borrowing. But the great uncertainty of requiring trillions of dollars in new federal borrowing at a time of existing fiscal stress proved to be an insurmountable obstacle to the Bush effort. In any case, the prospects for personal accounts during a period of Democratic dominance in Washington are dim. And justifiably or not, recent market turmoil has also reduced the public's appetite for such a move.
There is, however, another way to introduce greater personalization, budgetary control, and incentives for continued work into Social Security without transition costs. Several other countries — most of which have faced more severe imbalances than those currently projected for our Social Security system — have adopted a form of personal accounts within a pay-as-you-go structure. The idea, called "notional defined contribution" accounts, is to track worker "contributions," assign "investment earnings," and report "account balances" — but without actual money attached to the accounts. Pensions for current retirees are still financed on a pay-as-you-go basis, with payroll taxes collected today used to cover benefits today. But payments are calculated based on the worker's own individually assigned account, which is converted into a monthly benefit much as the balance in a 401(k) can be used to purchase an annuity. The retirement benefit is set at the amount that would, when drawn monthly, deplete the worker's "account" over his expected remaining lifespan.
Even without full funding, personalization of this kind would still vastly improve work incentives. The only way workers could boost their future pension entitlements is with higher wages and more "contributions" to their notional accounts. For older workers, automatic reductions in monthly benefits for an early work-force exit would encourage more people to stay active and delay retirement.
Notional personal accounts also lend themselves to permanent solvency and budgetary control. The key variable is the notional rate of return, which is used to inflate the "investments" in the personal accounts. Because it remains a pay-as-you-go system, that return must be limited to what population growth and productivity allow. In fact, the Swedish version of this approach explicitly ties the rate of return credited to notional accounts to observed trends in demographics and real economic growth. If, for instance, the size of the work force were to fall below expectations, the annuity calculation would be adjusted automatically to cut monthly payouts — thus ensuring that notional account balances are not overdrawn.
Yet even if a notional account system were imported into our Social Security program, the problem of relatively low fertility and a rising ratio of retirees to workers would not go away. There is not much that entitlement reform alone can do to address this larger social trend, of course. But some modest steps could at least send the right message, and perhaps also influence behavior. Under our current entitlement system, for instance, two families with identical earnings records — one with children and the other without — would get the same Social Security benefit; it doesn't matter that one carried the burden of raising members of the next generation of workers, while the other did not. Pay-as-you-go pension systems cannot long survive without a steady stream of new entrants, so it only makes sense for such schemes to explicitly and transparently reward parents for doing what is essential for the viability of the system (and, for that matter, of society in general). In the context of a reform that introduces notional personal accounts as the basis for calculating benefit payments, this could be done by providing rebates against contributions, or additions to account balances, commensurate with the costs of raising children.
The primary argument against this kind of vision for Social Security reform is that it would necessarily limit the redistributive aspect of the current program. Low-wage workers today get a higher rate of return on their contributions than their higher-wage counterparts. This advantage would be lost if benefits were tied completely to personal accounts funded entirely by worker contributions. But a switch to notional personal accounts could be supplemented with any number of additional explicit subsidies for low-wage workers to replicate the outcomes associated with today's defined-benefit formula. For instance, workers with lifetime earnings below a certain average could get supplemental contributions to their accounts financed out of general revenue. This would have the advantage of transparency and budgetary control, and, structured properly, less of a distorting effect on retirement decisions than today's opaque benefit formula.
Medicare, too, would benefit from adjustments that take account of demographic realities, like a modest increase in the age of eligibility from 65 to 67. But even more important is a concerted effort to slow the pace of rising costs per enrollee, and of health-care costs more generally. In that regard, there really are only two choices: artificial cost constraints imposed by the government (like those employed in many other industrialized nations today), or cost-conscious consumer choice in a decentralized marketplace.
President Obama and the congressional leadership have clearly signaled their preference. They have pledged repeatedly to constrain the growth of government health-care spending. But, to date, they have not admitted that what they ultimately have in mind are limits on spending enforced with price-setting or fixed budgets, which would result in painful and arbitrary rationing of care. Instead, they argue that the government can slow the pace of rising costs system-wide with smarter interventions: more federally financed health information technology, additional research funded by the government into what treatments work best, and some changes in the way Medicare pays for services.
There are two glaring problems with the idea that the government has the capacity to engineer a more efficient health system this way. First, independent analysts, including those at CBO, have already said that these kinds of reforms are unlikely to produce deep and lasting savings absent more fundamental changes in the financial incentives that drive patient and provider behavior. Second, the government has been running Medicare and Medicaid for nearly half a century, and that experience demonstrates that government micro-management of health insurance is highly inefficient. Instead of building a network of high-quality preferred providers, political control of Medicare has resulted in an open network that pays all licensed providers exactly the same fee, regardless of the quality of the care provided. And the only cost-cutting remedy Congress can ever seem to pass is a fee reduction. If applied more systematically across all of health care, such price-setting would, in time, lead to a reduction in willing suppliers of services, to waiting lists, and to government-driven rationing of care.
The alternative is a functioning marketplace in which consumers choose their insurance and the services they use, and so become far more conscious of the costs of their choices. An essential feature of such a marketplace would be fixed, rather than open-ended, subsidization of insurance by the government. That would mean the conversion of today's Medicare entitlement — as well as of the tax break for employer-sponsored insurance, and even of Medicaid — into limited defined contributions toward the purchase of insurance. With fixed contributions, a consumer who wanted to buy more expensive coverage would have to pay more. Conversely, anyone willing to economize and choose a plan with more controls and a tighter network would keep the money he saved. (Such a switch in Medicare could be phased in with new retirees to prevent disruption for those already in the program.)
Opponents argue that this kind of reform would be dangerous for the middle class, and especially for Medicare recipients, because health-care costs would rise faster than the premium subsidies. But with a functioning marketplace, there would be much greater pressure on doctors and hospitals to reorganize themselves into more convenient, *cost-effective, and patient-focused systems of care. It is far more likely that the inefficiency in health care the president so often mentions would be reduced through the power of consumer choice than through bureaucratic regulation.
Reforms of this sort could help bring our entitlement system into line with economic and demographic realities, so that these programs — and the larger economy so heavily influenced by them — could continue to function. America does not face a choice between our march toward fiscal disaster and leaving the elderly and the poor to fend for themselves. Rather, we face the challenge of revitalizing our entitlement system to make it what Americans once hoped it might be: an affordable safety net for those times when the people who have engaged in the work of American prosperity can no longer meet their current needs with their current income.
A NEW MIDDLE-CLASS CONTRACT
The politics of middle-class entitlements has made it extremely difficult to change America's fiscal course, even as it has become increasingly clear that this course leads to ruin. No politician wants to be the first to suggest serious reforms, and be left vulnerable to caricature as an enemy of the middle class. Those who have gotten over their fears and given it a try have failed to solve the problem, and almost without exception have been badly burned in the attempt. Their failures have only reinforced the notion that pushing serious reforms requiring *genuine change or sacrifice is political suicide. Washington is littered with the lengthy reports and analyses of previous reform efforts, all of which were launched with great fanfare but came to nothing: the *Kerrey-Danforth Commission of 1994, the Breaux-Thomas Commission in 1999, President Bush's Social Security Commission (and the ensuing reform push in 2005), just to name a few.
All have run into the same wall of resistance, consisting of the lobbies built up around our entitlement system and the disinclination of the political class to make changes in popular programs. Above all, reform has been stymied by the lack of interest among middle-class voters in altering a system they have come to rely upon — and only a change on this front could make a meaningful difference. The groups that represent the beneficiaries of the current system are not about to step aside, and our politicians are not about to turn courageous. They will act only if their voters want them to.
This might make the case seem hopeless. After all, why would voters willingly sacrifice benefits they have come to expect, and believe they have earned? Nothing in our recent political history suggests that any such willingness is likely to emerge. But we are living in strange times, and proponents of entitlement reform should not miss the opportunity created by the unprecedented economic challenges and political responses of the past few months. In the crisis that began in late 2008, the American public got a taste of economic calamity like nothing we have witnessed since the Great Depression — when the first inklings of today's middle-class contract appeared. Policies that would have seemed unthinkable just a few months earlier — from massive government expenditures to save our banking system, to federal ownership of large corporations — were implemented in swift succession.
Some liberal politicians, including the president, have sought to use this moment of instability — when all past certainties seem suddenly in question — to advance their longstanding agenda and expand the role of the state in health care, energy, education, and other sectors, taking on new spending commitments and in effect exacerbating the dangers of the old middle-class contract. As Obama's chief of staff, Rahm Emanuel, said in November 2008: "You never want a serious crisis to go to waste."
But the shock of the economic crisis may also make Americans more open to serious entitlement reforms that Emanuel, President Obama, and many other Democrats have long resisted. The logic of the case for reform is much like that of the case for the recent emergency interventions: the need for a bold response to an enormous problem, aimed at regaining some equilibrium and allowing again for sustainable economic growth and prosperity. This is the time to explain to the public just how grave the prospects for our entitlement system — and therefore for our larger economy — really are, and to argue for a serious and sensible change of course.
The impulse to insulate the middle class from the cost consequences of their choices — an impulse that has defined our longstanding *middle-class contract — has done great harm and stands to do far more. The remedy must be to redesign our entitlements so that the choices the middle class makes in terms of work, family, and health care will promote more productivity, efficiency, and wealth, rather than the shrinking of the labor force and the growth of government.
Done right, a new arrangement would both strengthen our fiscal outlook and improve the economic standing of American families. The path to such a new arrangement will not be without its costs, but it will surely yield great benefits. The new middle-class contract would still work to mitigate risks and would still care for the old and the needy, but it would do so in ways that encourage personal responsibility, respect individual choice, and foster the work ethic that has made America's middle class the backbone of an unrivaled age of prosperity and strength.
James C. Capretta is a fellow at the Ethics and Public Policy Center.