THE PARTY OF MENDING IT:

Beyond the Welfare State (YUVAL LEVIN, Spring 2011, National Affairs)

Changing course will not be easy, to be sure. It will require extraordinary sacrifices from today's young Americans, who will need to continue paying the taxes necessary to support the retirements of their parents and grandparents while denying themselves the same level of benefits so their children and grandchildren can thrive. To persuade them to make such sacrifices, our political leaders will need to offer them a plausible program of reform, and an appealing vision of American life beyond the dream of social democracy.

That vision cannot be a purist fantasy. It must be a serious answer — an answer better suited to a proper understanding of human nature and American life — to the same question that motivated the social-democratic ideal: How do we balance our aspirations to prosperity and virtue and build a thriving society that makes its wealth and promise accessible to all?

In their struggle with the left these past 60 years, conservatives have too often responded to the social-democratic vision by arguing with it in the abstract. Constitutionalism, natural rights, libertarianism, traditionalism — all offered powerful objections to the welfare state, but few viable alternatives. Conservatives have thus lacked specificity on policy, and so have been left struggling to explain themselves to the public. There have, of course, been exceptions (most notably the economic reforms of the 1980s and the welfare reforms of the 1990s). On the whole, however, conservatives have focused on the size and scope of government, but not on its proper purposes — on yelling stop, but not on where to go instead.

Now, as the social-democratic dream grows truly bankrupt and untenable, America finds itself governed by a reactionary party and a conservative party. The reactionary party, the Democratic Party, its head in the sand and its mind adrift in false nostalgia, insists that nothing is wrong, and that the welfare state requires little more than tinkering at the edges, and indeed further expansions. It lives always with the model of the Great Society in mind, and fails to grasp the ruin it threatens to bring upon the rising generation. It cannot imagine a different approach.

The conservative party, the Republican Party, still struggles for a vocabulary of resistance, and so has not taken up in earnest the vocabulary of alternatives. It calls on the spirit of the founders, but not on their genius for designing institutions; it shadowboxes Progressives who no longer exist (and whose successors, running on fumes and inertia, have nowhere near the intellectual depth to take up their case); it insists that our problem is just too much government.

But if the Republican Party is to be a truly conservative party, it will need to think its way to an agenda of conservative reform. Conservatism is reformist at its core, combining, as Edmund Burke put it, "a disposition to preserve and an ability to improve," and so responding to the changing world by means that seek to strengthen what is most essential. A conservative vision would be driven not by a desire to "fundamentally transform America" (as Barack Obama promised to do in 2008), but rather by an idea of what we want to be that is the best form of what we are. It would look to make our institutions suit us better, and so to make them serve us better and more effectively help us improve ourselves.

Our welfare state is very poorly suited to the kind of society we are — an aging society in which older people are, on the whole, wealthier than younger people. And it is very poorly suited to the kind of society we want to be — enterprising and vibrant, with a free economy, devoted to social mobility and eager to offer a hand up to the poor. A successful reform agenda would have to take account of both.

It would begin not from the assumption that capitalism is dehumanizing, but rather from the sense that too many people do not have access to capitalism's benefits. It would start not from the presumption that traditional practices and institutions must be overcome by rational administration, but rather from the firm conviction that family, church, and civil society are the means by which human beings find fulfillment and are essential counterweights to the market. It would reject the notion that universal dependence can build solidarity, and insist instead that only self-reliance, responsibility, and discipline can build mutual respect and character in a free society. It would seek to help the poor not with an empty promise of material equality but with a fervent commitment to upward mobility. It would reject the top-down bureaucratic state in favor of consumer choice and competition. It would insist on the distinction between a welfare program and a welfare state — between directed efforts to help the poor avail themselves of meaningful opportunities and a broad project to remake society along social-democratic lines.

The appeal of such a re-orientation is not that it is radical but that it is moderate — that it suits us. And for now, there is even still time to pursue it by moderate means — to allow today's retirees and near-retirees to receive all the benefits they have been promised as we transform our institutions going forward.

It would be folly, of course, to propose a detailed policy platform that would meet these criteria. Just as the left for a century had not a precise agenda but a general vision of what its ideal outcome would look like — a vision that could guide incremental steps and provide criteria for judging compromises — so the conservative vision, the ideal of democratic capitalism, can exist only in outline. But over the past half-decade, in the work of conservative scholars, intellectuals, and politicians, just such an outline has been emerging.

It would begin with a simple and predictable tax system, with a broad base and low rates, free of most of today's deductions and exclusions. The only three worth keeping in the individual tax code are the tax exemption for retirement savings (which are far preferable to universal cash benefits to retirees), a unified child tax credit (to encourage parenthood and to offset the mistreatment of parents in the tax code), and the charitable-giving deduction (since a reduction in government's role in social welfare must be met with an increase in the role of civil society, which should be encouraged). These three exemptions are directed precisely to the needs of a modern society, and to addressing the three broad failings of the social-democratic welfare state. The corporate tax code should similarly be dramatically broadened and flattened to encourage growth, which must be the foremost goal of economic policy.

Second, essentially all government benefits — including benefits for the elderly — should be means-tested so that those in greater need receive more help and those who are not needy do not become dependent on public support. Most retirees would still receive some public benefits (and the poorest could well get more than they do now), but the design of our welfare programs would avoid creating the misimpression that they are savings programs. People who are already retired or nearly so today should be exempted from such means-testing, as they have planned for decades around the existing system; Americans below 55 or so, however, should expect public help only if they are in need once they retire. Means-testing should, to the extent possible, be designed to avoid discouraging saving and work. And private retirement savings should be strongly encouraged and incentivized, so that people who have the means would build private nest eggs with less reliance on government.

Third, we should advance a consumer-based health-care system — backed with fixed, means-tested premium supports — in which individuals purchase their own insurance in a free market regulated largely by the states. Such a system would, over time, replace today's tax exclusion for employer-based coverage (which would be converted into a flat universal tax credit for the purchase of insurance) as well as Medicare and Medicaid (which would become add-ons to that credit based on wealth, age, and health — again leaving today's retirees or near-retirees with today's benefits). This would create a single continuous system in which the poor and the old would still have heavily subsidized coverage and much of the middle class would still have moderately subsidized coverage, but everyone would make real purchasing decisions and keep the same insurance as his circumstances changed. This approach would seek to let people be active consumers, rather than passive recipients of benefits — which would be good both for the federal budget (since consumer pressure in a free market keeps costs down far better than price controls) and for the character of our nation.

Fourth, we should gradually but significantly reduce domestic discretionary spending, ending most of the discretionary Great Society programs and folding others into block grants to the states. The federal government's role in the provision of social services should be minimal, and largely limited to helping the states and the institutions of civil society better carry out their missions. It would still have some role as an investor (in infrastructure and education, above all), but this too should be strictly targeted to essential public needs that the private sector would not meet, and block-granted to the states whenever possible. Government at all levels should also look to contract its remaining functions out to the private sector where it can, both to improve efficiency and to avoid harmful conflicts between the government's obligations to the people it serves and its obligations to the people it employs — conflicts that have been rampant in our time.

Fifth, we should reduce the reach of the administrative state, paring back all but essential regulations and protections and adopting over time an ethic of keeping the playing field level rather than micromanaging market forces, and of preferring set rules (in regulation, in monetary policy, and elsewhere) to administrative discretion.

Obviously, these are only general principles and aims. And at least as important as what they contain is what they do not — what is left to the sphere of the family, religion, and civil society. Government must see itself as an ally and supporter of these crucial mediating institutions, not as a substitute for them. Its role is to sustain the preconditions for social, cultural, and economic vitality.

But these general aims offer a stark contrast to the general aims of the social-democratic vision of society — a very different understanding of what it is about capitalism that needs to be tempered and balanced, of what the sources of social solidarity really are, of the significance of responsibility and choice, and of the deepest meaning of the American experiment. They outline a government that is smaller but more effective, and gesture toward a vision of American public life that is economically sustainable and morally rich and responsible.

After the Welfare State: The moral price of dependence on government is even higher than the financial cost. (William McGurn, 4/05/11, WSJ)

Mr. Ryan proposes a simple but dramatic shift: helping people afford private coverage. Under this reformed system, seniors would have their private premiums subsidized, and the poorest would get the largest subsidies. The hope is that over time it would have the opposite effect of the present system. Instead of increasing the dependence of the middle class, it would help make all seniors consumers.

Alas, bringing the middle classes into government programs has been a key aim of the social democratic state. We all know that has helped raise the financial costs to levels we can no longer afford. The moral and social price of expanding government, however, has been even more costly.

In a remarkable blog post at the American Interest, Walter Russell Mead notes that today African-Americans are fleeing the "urban paradises of liberal legislation and high public union membership" for the suburbs and job-creating red states. Another way of putting it is that the progressive policies and programs that were supposed to advance equality and opportunity have instead left blighted communities and blighted lives in their wake. This he calls "the most devastating possible indictment of the 20th century liberal enterprise in the United States."

It didn't have to turn out this way. Somewhere along the line, liberals came to accept that the only path to their goals was through government. Huge bureaucracies and powerful constituencies grew up around that idea, turning the private sector into something that existed only to be squeezed for the necessary funding.

Ironically, in their obsession with government, American liberals continue to overlook their greatest strength: their ability to set goals for our society. Whether it be increasing access to good housing, a dignified retirement, or a decent education for every child, liberals have won most of the arguments. In fact, even if our unpopular health-care law is repealed, it's a good bet that Republicans will still have to find a way to meet another goal set by liberals, that of ensuring that Americans with pre-existing medical conditions can get coverage.

What conservatives like Mr. Ryan and Mr. Levin offer here is a better "how"—a road map that lets us balance our care for fellow citizens without wrecking the economy, ruining families, or giving birth to more soulless bureaucracies. Think of it this way. Even Milton Friedman's proposal for school vouchers, which would still see the state providing an education for all children, is essentially a "how" argument.

The what is Security. The how is Liberty.

Posted by oj at April 6, 2011 6:21 AM
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