NO ONE CREDITS THE GOP WITH PASSING NAFTA AND GATT:

Bush's Ownership Society: Why No One's Buying (Paul Glastris, December 2005, Washington Monthly)

Conservatives have a knack for taking good ideas—say, patriotism or faith—to the sort of ideologized extreme that brands the ideas as theirs and leads liberals to abandon them. We're seeing that now with the issue of choice and individual empowerment. Those very concepts used to be associated with liberal causes like abortion and voting rights. But over the last couple of decades, conservative intellectuals have roped them to a larger agenda to revolutionize government.

And they're perfectly open about it. Talk to scholars at the Cato Institute or the Heritage Foundation or to movement organizers like Grover Norquist, and they'll walk you through the strategy. Big government and individual freedom, they'll explain, are opposed to each other; more of one means less of the other. The three big areas of non-defense-related government spending are retirement (mainly Social Security), health care (mainly Medicare and Medicaid), and education (mainly K-12 public schools). For political reasons, it is practically impossible to cut spending in these areas. But it is possible to dismantle the government bureaucracies that administer them in a way that enhances personal freedom and makes possible big cuts down the road: privatize the benefits.

The father of this line of thinking is Milton Friedman. In the 1950s and 1960s, the conservative economist dreamed up the notions of education vouchers and private accounts for Social Security. Republican operatives and think tankers seized on Friedman's ideas in the 1970s, expanded them into areas like health care, and fleshed out their philosophic and political logic. Vesting individuals with more choice, control, and ownership of their government benefits, they argued, would not only enhance virtues like personal responsibility, but over time, it would also result in the shift of hundreds of billions of tax dollars from the custodial care of government to the corporations that would help manage people's private accounts. Best of all, from the conservative point of view, it would transform the electorate's political identity. Instead of government-dependent supporters of the Democratic Party, voters would become self-reliant followers of the GOP.

These ideas are the intellectual fuel of the conservative movement that has swept across the country in recent decades. They were well understood in the Reagan administration, and the Gipper's speeches are suffused with them. But it has only been in the last few years, with both Congress and the White House in conservative Republican hands, that the ideas have truly debuted. [...]

It would be easy and natural for liberals to react to the failure of Bush's Ownership Society with a “Phew, that was close. Now, we don't have to think about choice anymore.” That would be a mistake, for two reasons.

First, it's not like the right is suddenly going to stop pushing these ideas just because Bush himself failed to sell them. The voucherizing of government is part of the guiding vision of modern conservatism. Entire organizations are funded primarily to achieving it. The problem with Social-Security private accounts, Grover Norquist recently told me, is “nothing that can't be solved with 60 Republican votes in the Senate.”

Second, as reform-minded progressives from author and speechwriter Andrei Cherny to British Prime Minister Tony Blair have been at pains to argue, the public's aspirations are changing. People want and receive more choice and individual control in the marketplace, and for all its frustrations, they rather like it, and will naturally expect more individual choice and control from government, too. Conservatives have tapped into a real yearning. What they've failed to do, for ideological reasons, is apply these concepts in ways that actually solve problems. Liberals are in a much better ideological position to actually deliver on the demand for more individual control and choice. The only obstacle is realizing that liberal policy goals can be advanced by smart proposals that let citizens make their own decisions.

An instructive example is public housing. Back in the early 1990s, Jack Kemp, George H.W. Bush's charismatic Housing and Urban Development secretary, was pushing the idea of selling off public housing to tenants and letting those tenants manage their own buildings. It was a classic early example of “ownership-society” thinking—Kemp called it “empowerment”—and it was, when you think about it, highly dubious. Is it really a favor to saddle the responsibility for maintaining decrepit high-rise buildings in terrible neighborhoods on the tenants who are stuck there, many of whom have trouble managing their own personal lives? Kemp wanted to fix the places up first, but the cost would have run $100,000 per unit in 1990 dollars—enough, noted OMB Director and Kemp nemesis Richard Darman, to buy each tenant a condo.

Kemp's ideas, well-meaning as they were, went nowhere. It took his successor in the Bill Clinton administration, Henry Cisneros, to figure out an “empowerment” strategy that actually worked.

Cisneros and his advisers—including Chief of Staff Bruce Katz and Assistant Secretary (and later secretary) Andrew Cuomo—figured out two important truths. First, they understood what urban experts had been saying for years: that the heart of the problem of public housing was the way it concentrated poverty in one place. Second, they grasped that to address this problem would require using certain choice-enhancing, market-based tools long favored by Republicans and disparaged by Democrats—namely, housing vouchers and tax credits for developers.

And so, with the backing of the president and GOP moderates in Congress, Cisneros and his team implemented a sweeping plan to break up that concentrated poverty. The department forced local housing authorities to tear down broken-down, crime-ridden public-housing complexes. It encouraged the building of low-rise replacement public housing or gave departing residents Section 8 housing vouchers to help find private apartments in better neighborhoods. It also provided private and non-profit developers tax credits to build or rehab apartment buildings with rules requiring that they rent to a mix of both poor and working-class tenants.

These largely unsung efforts helped drive the renewal of many urban centers that took place in the 1990s. Not enough time has passed to know how effective they were in improving the lives of HUD's poor. But surveys by the Urban Institute show that those who left public housing did wind up in somewhat better neighborhoods, and that former residents “generally perceive themselves as being better off,” with better housing conditions and fewer mental-health problems.

Notice how Cisneros's reforms were structured. They utilized policies that empowered individuals (housing vouchers, tax credits). But they relied on strict government regulation to guide the process towards a goal (breaking up concentrated poverty) that public officials determined was in the best interests of tenants and the nation. And they understood that most people, most of the time, will choose not to choose, and so they forced the issue. Individuals could move to other public housing or to temporary housing until the new low-rise developments were finished, or take a Section 8 voucher, but staying in condemned public housing wasn't an option.

Libertarian paternalism

Choice, then, can be a powerful tool to advance public ends as long as one ironic truth is recognized: People like having choice but often don't like to choose.

This concept is at the center of a brewing movement within public-policy circles, one that Cass Sunstein and Richard H. Thaler of the University of Chicago have affectionately, if cheekily, dubbed “libertarian paternalism.” The idea is for government to shape the choices people have so that the natural human tendency to avoid making a decision works to the individuals' and society's advantage.

For instance, many private-sector employees don't participate in company-sponsored 401(k) programs, even though participation is hugely in their financial interest (employees can invest pre-tax dollars and watch their money grow tax-free until the money is withdrawn). Lower-paid employees are the least likely to participate because they reap fewer tax benefits, seldom receive a company match, and are often living paycheck to paycheck. But the biggest reason lower-income employees don't participate is the hassle factor. The forms are a bother to fill out. They don't know much about investing. They can't decide where to put their money. They choose not choose.

Understanding this, some clever officials in the Clinton administration changed the rules governing 401(k)s to allow for “automatic enrollment.” Henceforth, firms could choose to automatically put aside a percentage of all employees' wages in 401(k) accounts. Employees would have the ability to “opt out” of the program, thus retaining the right to choose, but would have to take the initiative themselves in order to exercise that right. In practice, few do. A study of companies that instituted automatic 401(k) enrollment, by economists Bridgette Madrian and Dennis Shea, found that participation rates for employees making under $20,000 annually rose from 13 percent to 80 percent.

Imagine if every company in America automatically enrolled its employees in 401(k)s, IRAs, or similar retirement accounts? That one simple step might do more to strengthen America's retirement system than any number of changes to Social Security (at no cost to the federal treasury).

Scholars think this “opt-out” concept could be applied to a wide range of policies that are vitally important, broadly supported politically, but plagued by low participation rates.

It would be all to the good if the Democratic Party were to adopt the Third Way of Bill Clinton, but recall that they opposed Welfare Reform, free trade and the like when he was in office, just as they oppose the Third Way reforms of the Ownership Society. And if any significant number of congressional Democrats were to endorse the items above the President would gladly adopt them himself, since they differ so little from what he's doing and would advance the ball. It would be great for the country but not much use to the Democratic Party.

Posted by Orrin Judd at November 9, 2005 6:22 PM