Editore"s Note
Tilting at Windmills

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August 11, 2004
By: Kevin Drum

FEELING SECURE....Mark Schmitt writes that the real revolution in the economy over the past few decades isn't increasing income inequality per se. Rather,

the big thing that has changed, is not the number of jobs, the rate of growth, or income inequality. It's the shift in risk from the government and corporations onto individuals.

Mark is responding to an article by Jacob Hacker in The New Republic in which he describes research he's done not on income inequality, but on income instability:

When I started out, I expected to see a rise in the instability of family income. But nothing prepared me for the sheer magnitude of the increase. At its peak in the mid-'90s, income instability was almost five times as great as it was in the early '70s, and, although it dropped somewhat during the late '90s (my data end in 1999), it has never fallen below twice its starting level. By comparison, permanent income differences across families have risen by a more modest, if still troubling, 50 percent over the same period.

It's true that the rise in income inequality over the past 30 years has mostly been due to huge gains at the top end, not to declines at the bottom. The average worker may not be much better off than he was in 1973, but he's not (generally speaking) worse off either.

So why does the economy feel so much worse to so many people? Hacker believes that one of the big reasons is that life has become so much more risky. People are a lot closer to the edge, closer to a single catastrophe that can wipe them out, than they were three decades ago.

This has a chilling effect even if nothing ever happens to you. Almost everyone who's not already well off these days knows someone who's been ruined by a personal catastrophe, and this personal knowledge rubs off. You're worried that you could get laid off at any time and not be able to find a job for months or years. You're worred that a sudden healthcare crisis could devastate you. You're worried that your pension fund or your 401(k) might not be there when you retire because you made bad investment choices.

FDR dedicated the New Deal to "freedom from fear." He believed that government's role was not to provide handouts to the poor, but to provide a certain minimum level of security against the everyday catastrophes that ruin people's lives.

It is this minimum level of economic security that George Bush and modern movement conservatives want to abolish. In fact, it's the point of Bush's "ownership society": if everyone owns their own Social Security account, their own healthcare account, and their own college account, then the government no longer provides security against disaster. If you make a mistake, or if the market makes a mistake, you're screwed.

This is likely to be the eventual downfall of modern conservatism. Human beings have a deep desire for a certain minimum level of stability and security in their lives, and eventually they'll rebel against a party that refuses to acknowledge this. Life today is so much better than it was in the 30s that people have forgotten the basic New Deal ethos that made it that way. But if conservatives have their way, it won't be much longer before they start remembering.

Kevin Drum 2:22 PM Permalink | Trackbacks

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