The GOP’s Obamacare cliff is closer than they want you to believe

During the budget wars of the Obama administration, congressional Republicans regularly courted national disaster by forcing fiscal cliffs, debt cliffs, and austerity cliffs on the country.  Now in control of Washington, Republicans look poised to set up an Obamacare cliff.  This might be the most reckless act of GOP gamesmanship yet.

When it comes to Obamacare, the GOP is the dog that caught the car.  Republicans have railed against the law for years, voting to repeal it 60 times and shutting down the government in protest.  But now that they are in power, Republicans are finding themselves utterly ill equipped to take action against the law.  That’s because they still haven’t yet readied a nuts-and-bolts health reform plan over the last six years.  Even though “repeal and replace” has long been their rallying cry, conservatives have spent precious little time forging a unified strategy for the latter part.

Aside from policy considerations, “repeal” also has a simpler legislative path than does “replace.”  The GOP can repeal most of the law through a reconciliation bill on a bare-majority vote, meaning without Democratic cooperation.  To affirmatively pass a replacement law, however, Republicans will need Democratic votes, unless they kill the filibuster (which some key Republican senators are reluctant to do).

This combination of policy uncertainty and political expediency is pushing the GOP toward a strategy of quickly repealing the law on a time delay.  Without a readily available replacement, Republicans will try to repeal the law while postponing its actual demise until perhaps January 2019, after the 2018 midterm elections.  This would ostensibly give Congress two years to devise a replacement for the law, extending Obamacare a two-year fuse until it explodes.

GOP health policy expert James Capretta objects to this strategy on the grounds that Congress will wind up perpetually extending Obamacare’s two-year lifeline.  “If . . . the GOP sticks with a repeal-only bill,” Capretta argues, “there is a high probability that they will never get around to agreeing on a workable replacement plan. At which point the odds would then favor retention of the ACA, or something close to it, as the only viable way forward.”

Capretta points out that legislative momentum will only wane after 2017 and into 2018.  The likelihood of an Obamacare replacement doesn’t increase over time, but dwindles by the day.

Keeping Obamacare on the books may be the conservative nightmare scenario.  But the other consequences of the GOP’s reckless repeal-and-delay course are far more dire.  For one thing, the mere contemplation of repeal, let alone actually passing a repeal bill, may be enough to create an insurer stampede out of the law’s marketplaces.  Insurers must decide whether to offer plans for 2018 in the marketplaces before May 2017, just three months into the new Congress.  Many will be unlikely to participate in a program that is in the midst of being slowly killed off.  This is particularly true given the already fragile state of the exchanges, which are in need of constructive reform, including previous wounds inflicted by the GOP to strip the law’s protections for participating insurers.  If insurers flee a perceived sinking ship, the law will cease to function whether it’s officially repealed or not.

If the GOP forges ahead with repeal-and-delay and triggers an insurer exodus in the process, there very well may not be any can to kick down the road again come January 2019.  The law could become zombie health reform with impotent, ghost-town marketplaces.  There would be nothing left for Congress to extend.

So the GOP likely cannot reap the political benefits of repeal while putting off the tangible costs for two years.  And those costs would be very real.  The private insurance markets in all fifty states could seize up, making it functionally impossible for the millions of people who currently rely on Obamacare’s exchanges today to obtain coverage.  The historic gains we’ve made in expanding insurance would quickly reverse.  Repeal-and-delay would take a massive human toll.

So if the exchanges are mostly bled dry by Republicans before January 2019, what then?  Once the GOP lights this fuse, the rapid deterioration on insurance markets would probably place immense pressure on Democrats to cooperate with right-leaning reform efforts.  And if the 2018 midterm elections become a backlash against Trump and restore Democrats to power in Congress, then Democrats would be left to clean up the healthcare mess that the GOP is about to create.

The GOP’s repeal-and-delay strategy is ostensibly meant to buy Republicans time to devise a substitute to center-left health reform.  But it’s hard to see what Republicans will be able to dream up in two years that they couldn’t in six.

Setting up an Obamacare cliff once again triggers a high-stakes game of chicken.  But unlike previous congressional chicken matches, blinking at the last hour might not spare the harm this time.  Rather, because Obamacare relies on private health insurers to expand coverage (i.e., because Obamacare is a centrist attempt at universal healthcare), the harm of repeal may be realized well before Congress even has a chance to flirt with plunging over any self-concocted cliff.

So Republicans pushing repeal and Democrats opposing it need to understand that “repeal and delay” is functionally no different than straight-up repeal .  Delay does not postpone the fight for another day.  When that day comes, it will already be too late — the law’s foundations will already be drastically weakened, perhaps entirely moribund.

Republicans are trying to set up yet another cliff to force congressional action.  But the cliff is much, much closer than it might appear.  The question is who truly realizes it.

The missing Democratic narrative

In the fall of 2015, the economists Anne Case and Angus Deaton discovered something disturbing: the mortality rate for middle-aged white Americans—and only them—had sharply increased over the previous 15 years.  Most of this increase was from an alarming explosion in the number of suicides and “poisonings” from drug overdoses among this population.

Meanwhile, Donald Trump was on his warpath toward the Republican nomination.  And he was winning heavily in the distressed communities that Case and Deaton studied, cleaning up in the counties with the highest middle-aged white mortality rates.  These places were littered with the skeletons of abandoned factories, but were ghost towns when it came to jobs and degrees.  The misery and desperation was ripe for Trumpism.

Case and Deaton had landed upon the most troubling and violent indication of what is a larger existential unease within much of the country.  Deaton speculated that these Americans had “lost the narrative of their lives — meaning something like a loss of hope, a loss of expectations of progress.”

Donald Trump became president-elect last week in part because he filled in that narrative with what had gone wrong.  For “the forgotten men and women of our country,” as he called them, who feel that they have been forcibly displaced from the American economy and society, Trump provided a story grounded in resentment and named culprits.  They’d been shafted by Washington elites cutting bad trade deals that ship jobs overseas, he told them.  They’d been cast aside for immigrants pouring over the border with drugs and crime, he warned.

This narrative aligned with what many people want to believe and what they see around them.  They see shuttered manufacturing sites that once employed thousands.  They see superstores where nothing is made in America or by Americans.  They see neighbors and family members consumed by opioids.  They see the lives of minorities and immigrants who “cut in line” ascending, while theirs languish.

Liberals can and should object to the honesty and intolerance embedded in Trump’s tale.  Yes, we’ve done too little to cushion workers from the dislocations of trade.  But neither Trump nor any other politician is bringing wide-scale manufacturing employment.  And while immigrants are an easy scapegoat, they have little impact on the wages or employment of native-born Americans.

Trump’s story is a manipulative con.  But it’s the only one that Americans were offered in this election.  Hillary Clinton did little to offer a competing narrative that spoke to the continuing anxieties and inequalities of millions of Americans.  For all the progressive policy ideas Clinton developed, she never synthesized them beyond the contentless message “Stronger Together.”  The reach of her campaign left her unable to develop a message with any specificity.  Hoping to rout Trump by a historic margin, she crafted a tent so big that it collapsed in on itself.

This has revealed a fundamental problem for Democrats.  For six years, the party has gotten walloped in virtually every national and state election  where Barack Obama’s name has not been on the ballot.  As he exits the national stage, the Democrats can no longer depend on his coattails.  They need to win by standing for something that connects with voters.

There is one clear narrative percolating within the Democratic Party.  And it’s coming from the party’s left flank.  Elizabeth Warren and Bernie Sanders are interpreting the election results as reflecting widespread frustration with an economy rigged by and for the wealthy and powerful.  In their version, there has been a thirty-five year project of deliberate government policy and tax cuts that redistributed money to the most well-off.  This hollowed out the programs, investments, and institutions that once upon a time created a thriving and secure American middle class.  The wealthy reached the highest rung of the social ladder and then pulled the ladder up behind them.

This too makes for a compelling story.  And there’s a good deal of truth to it.  The growth in inequality in the United States closely corresponds with the onset of the Reagan revolution and the shift toward supply-side economics.  At the same time Reagan was slashing taxes on the rich, deregulating industry, and implementing free market reforms in the early 1980s, inequality began rising.  Economists on the left argue that these kinds of unbalanced tax cuts and reductions in public programs increase inequality.  As inequality boomed, incomes for the middle stagnated.  And for those becoming displaced and rendered obsolete by the economy, the bottom fell out.

This would be an exceptionally opportune time for liberals to start loudly making this case to the public.  With unified conservative control of Washington, Republican leaders are gearing up to pass a round of massive tax cuts tilted heavily toward the wealthy.  Both Trump and Paul Ryan have proposed trillions of dollars in tax cuts.  They’ll just need to sort out whether half of all the benefits will go to the top 1 percent (Trump’s plan) or if 99.6 percent will (Ryan’s).

These tax cuts will inevitably rob from important social spending on education, healthcare, food assistance, and poverty programs.  They will suck more money out of the very communities that need it the most.  This will exacerbate inequality, not reverse it.

By offering up this kind of narrative, Democrats can accomplish two things in one fell swoop.  First, they can counter the fraudulent story that Trump has successfully sold so far.  Second, they can show that Trump never had the back of working people—that he’s looking out for his interests and those of his class by passing yet another typical Republican supply-side tax cut.

To build a party that isn’t dependent on one man, the Democrats need to contextualize and offer solutions for the discontent afflicting many Americans.  Trump did that, even if his pitch was a working-class sham.  To mount an effective opposition and win back power, Democrats need to offer voters a narrative of their own.

The awe-inspiring and dispiriting United States of America

It’s a whole new world, and like most everyone else, I didn’t see it coming.  Coming to grips with what Trump’s America looks like and means will take a long, long time.  But my immediate, still-distraught reaction is up at Medium.  The concluding thoughts:

The last eight years have seen a remarkable amount of social progress. Marriage equality became a reality. The century-long quest for health reform came to pass, protecting millions from devastation by illness. We fought off economic catastrophe and have made steady gains ever since. We created millions of jobs and built a thriving renewable energy industry for the twenty-first century from the ground up. We made serious inroads to curtail environmental harm and combat climate change. We took steps to corral a financial sector that helped land the entire economy in peril.

Trump’s election jeopardizes many of these gains. But it does not erase the fact that we are a society capable of producing the achievements of the Obama years.

We have seen figures like Trump before in our politics — people like George Wallace, Strom Thurmond, Jesse Helms, and other poisonous demagogues. Never before have we allowed one to come close to our highest office, let alone win it. That is unprecedented in our history.

But so was electing a black president. This may seem confounding — after all, how could the country that twice elected Barack Obama elect Donald Trump?! But the United States is a baffling and frustrating place — at once both awe-inspiring and deeply dispiriting. Admirable progress over the ills of our history often gives way to reactionary backlash and retrenchment.

We have a long and storied history of taking one giant leap forward, only to follow it up with a gut-wrenching step back. Lincoln’s freeing of the slaves in 1863 and a decade of Southern Reconstruction gave way to nearly a century of Jim Crow, lynching, segregation, and violent white supremacy. The outlawing of segregated schools in 1954 triggered massive resistance to black and white children learning together. The Civil Rights revolution of the 1960s fed Richard Nixon’s silent majority and the ensuing limitations on civil and equal rights. That Barack Obama will now turn the White House over to the birther Donald Trump is tragically in keeping with the rhythms of American history.

Yet we can change these rhythms. Obama likes to quote Martin Luther King’s statement that the arc of the moral universe is long, but it bends toward justice. Tuesday’s jarring electoral result is a reminder that the moral universe bends only from the dogged persistence and faithful agitation of those refusing to give up the fight. Progress is not guaranteed, and advancement is not simply the natural course. Left alone, the moral universe quickly reverts back toward a darker past. When we ease up, it eases down.

But by fighting on, we hasten the day when our country’s government once again stands for hope, progress, and decency. So don’t look to Canada. Don’t give up on America, and don’t drop out of politics. Despair today. Then rejoin the fight.

The reconciliation option

Jacob Hacker dangles an intriguing legislative prospect in his New York Times op-ed promoting a public option as a cure to Obamacare’s woes.  Specifically, he suggests that Democrats could enact a public option with a bare-majority vote in Congress through the budgetary procedure of reconciliation:

This year, Senate Republicans, providing another lesson, passed legislation that repealed the Affordable Care Act through the budget process, which isn’t subject to a filibuster. (President Obama vetoed it.) If that’s possible under the budget rules, creating a public option should be, too — especially since it could reduce the deficit by tens of billions of dollars a year.

Reconciliation is a tool that allows for expedited consideration of budgetary legislation.  Importantly, it allows legislation to overcome the Senate filibuster and pass with simple majorities in each chamber of Congress.  The filibuster, of course, is the veto power invoked by 41 minority party senators to obstruct the legislative will of the majority.  It’s not part of the Constitution, and as wielded by Senate Republicans, the filibuster has created an unnecessary de facto super-majority requirement for virtually all congressional action.  Reconciliation is a safety valve to let lawmaking go forward in the face of obstructionist filibustering.

What can and cannot be achieved through the reconciliation process depends heavily on precedent and the whims of the Senate parliamentarian.  Most famously, Obamacare was originally heaved over the finish line through reconciliation after the Democrats abruptly and unexpectedly lost their Senate super-majority in 2010.  The main requirement for reconciliation is that it must be budgetary neutral, and may not add to the federal deficit.

During the past year, Paul Ryan and House Republicans have been steadily expanding the bounds of reconciliation.  Congressional Republicans have passed bills repealing Obamacare, including its insurance subsidies, Medicaid expansion, and individual and employer mandates.  They even used reconciliation to de-fund Planned Parenthood.

None of these bills made it past President Obama’s veto.  But they did pass muster as appropriate uses of reconciliation with the Senate parliamentarian.  This helped Ryan create precedent for 2017, when he hoped to have a Republican president to sign off on his bills instead of vetoing them.  Indeed, in early October, Ryan was openly talking about his plans to pass much of his agenda through budget reconciliation next year.

But the last month has turned the tables on Ryan’s reconciliation plan.  After a catastrophic month for Donald Trump, the presidency is Hillary Clinton’s to lose, Democrats have a good chance to retake the Senate, and may even have the House within reach if the agony of Trump sufficiently depresses Republican turnout in November.  Ryan’s hopes to push his “Better Way” agenda through reconciliation have been dashed, and now it’s the Democrats who are looking for creative ways to enact their legislative priorities.

So could a public option really be passed through reconciliation?  There’s good reason to think so.  According to the Center on Budget and Policy Priorities, a good deal of major legislation has relied on reconciliation, including welfare reform in 1996, and the 2001 and 2003 Bush tax cuts (which actually increased the deficit and debt).

Most relevant, Congress has used reconciliation to create major health insurance programs before.  In 1985, it used reconciliation to extend health coverage to workers who have lost their jobs (so-called “COBRA” insurance).  In 1997, it used reconciliation to create the Children’s Health Insurance Program, extending coverage to millions of low income children.  And also in 1997, it used reconciliation to create Medicare Advantage.

Not to mention that Obamacare itself (and repeated efforts to repeal it) relied on reconciliation.  If the original law fit the standards of reconciliation, then so too should  most efforts to tweak and improve it.  If balanced with new revenue sources, then Democrats could conceivably enhance insurance subsidies, lower the Medicare eligibility age, expand Medicaid, and enact a whole host of other health reforms all through reconciliation without regard for the hurdles posed by congressional Republicans.

If Democrats eke out only the slimmest majorities in Congress, it doesn’t have to be a recipe for gridlock and legislation stymied by Republicans relegated to minority status.  Much of the Democrats’ health reform 2.0 agenda could be passed through reconciliation.  For that, no small degree of thanks is owed to the precedent created by Paul Ryan and his fellow repealniks in the GOP congressional caucus.

The problem with Obamacare is (still) politics

This week’s announcement of large premium hikes across the health insurance marketplaces has brought another round of Obamacare hand wringing. The average premium on silver plans on exchanges across the country is set to rise by 25 percent this year. Worse, competition is dwindling on the exchanges, as one in five shoppers will have to choose from plans offered by only a single insurance company.

This has left many once again wondering what the problem is with Obamacare, and whether the law is failing. And once again, the core problem with Obamacare comes down to politics.

Obamacare has achieved remarkable successes. It has driven the uninsurance rate to historic lows. Between the law’s Medicaid expansion, marketplace enrollment, and adult children remaining on their parents’ insurance plans, 20 million people have gained coverage from Obamacare, with another million expected to sign up during the coming enrollment period. The law guarantees a right to purchase insurance for those with preexisting conditions, and outlaws insurer-imposed caps on annual coverage. It has also corresponded with a dramatic slowdown in U.S. healthcare spending.

But there is persistent unease (to put it mildly) on the law’s health exchanges. Big insurers have found it hard to create financially viable exchange products, and the exchanges are quickly turning into marketplaces for Medicaid-type plans and customers. The recent premium spikes just add to the exchanges’ struggles.

Now it should be noted that most Obamacare customers will not pay the full sticker price of these increases. The increases reported are before federal subsidies kick in. These subsidies will insulate most shoppers from major premium shock.  Moreover, enrollees in previous years have proven remarkably willing to change plans in response to price changes, and could do so again this year.

Still, the pre-subsidy premium increases do reveal an ongoing turmoil in the marketplaces. There are four principal reasons for rising premiums:

1) Insurers systematically underpriced premiums during the first years of enrollment. Premiums rose by just 2 percent in 2015 and 7 percent this year. By jacking up premiums this year, insurers are bringing prices in line with earlier expectations. In fact, average premiums for 2017 are now in line with Congressional Budget Office forecasts before the law was enacted.

2) Important insurer protections in the law were allowed to lapse, exposing participating insurers to higher costs and risks. The law’s risk adjustment mechanisms insulated insurers from higher-than-anticipated costs from a sicker population enrolling in their plans. This encouraged insurer participation and kept premiums low. However, Republicans latched on to risk adjustment as an insurer bailout. Senator Marco Rubio, looking to bolster his anti-Obamacare cred, maneuvered a repeal of risk insurance through Congress this year. The lack of risk adjustment is now reverberating into insurers exiting the marketplaces and customers facing higher premiums.  (Good job, Marco!)

3) The mix of customers on the exchanges is older and sicker than expected. The administration originally hoped that young adults would account for 38 percent of all enrollees. Their actual share of enrollment has only would up being just 28 percent. Enrollment in general has been lower than the administration predicted. But a relatively older and less healthy population of enrollees incurs higher costs for insurers, causing premiums to increase.

4) There is less competition on the exchanges than anticipated. Some insurers are finding it hard to turn a profit and exiting the exchanges altogether. More and more parts of the country are being left with fewer and fewer choices. Without competitive pressure, insurers can raise prices without losing enrollment, essentially controlling the market.

There are relatively straightforward solutions to these problems. We should restore risk insurance mechanisms. And to encourage enrollment (particularly among the young and healthy), we could stiffen the individual mandate penalty, while simultaneously sweetening the law’s subsidies and cost-sharing benefits. And to generate competition, we should create a public option, at least in those states with too few private insurance offerings.

Paul Waldman relays several more good ideas for improving the law from Paul Starr of the American Prospect, including:

  • “Require all insurers who want to sell in the individual insurance market to offer their plans through the exchange, so they couldn’t cherry-pick individuals outside the exchange . . .
  • “Reduce the waiting period for those on disability insurance to get Medicare coverage from two years to six months to move some of the very high-cost enrollees out of the individual-market pool.
  • “Require any insurer that wants to offer a Medicare Advantage plan in an area also to offer a plan in the marketplace for under-65 enrollees.
  • “Have the federal exchange adopt the procedures used by California in actively bargaining with plans instead of acting as a passive clearinghouse[ ].
  • “Create a public option for those aged 55-64 clearly identified as an early buy-in to Medicare.
  • “Create a second federally run public option for enrollees from 18 to 54.
  • “Restore the risk corridor and reinsurance provisions that have expired that were intended to protect exchange plans against adverse selection.”

These are all positive solutions to Obamacare’s woes. Expanding Medicare eligibility for near retirees and the newly disabled would help remove some high-cost patients from the exchanges, thereby taming premiums for everyone else. California actively negotiates better prices for consumers as a condition for insurers to list on its exchange. Because of that, premiums in California are rising by just 5 percent this year. Letting the federal exchange negotiate too would put downward pressure on premiums for more customers in more states.

But while these ideas are great in theory, most have little plausible path to becoming law. Hillary Clinton hopes to build on Obamacare by increasing subsidies and creating public options.  Yet Republicans in Congress have little interest in doing anything to shore up the law.  Six years after passage, the conservative anti-health reform fever has yet to break, and massive resistance remains firmly in place.

The conceptual foundations of Obamacare are not broken; only its politics are. We know what we need to do to improve the law, but the logjam of health politics in Washington has locked the rushed, imperfect bill passed in 2010 into a stasis that hasn’t been imposed on any other piece of major social legislation in American history. Big laws need tweaking and fixing along the way, but Congress just won’t do that for Obamacare.

Jonathan Chait is right when he argues that Obamacare has been a policy success but a political failure. But it’s more complicated than the law being a substantive triumph with a public relations problem. Obamacare’s PR problem is now actively hindering its substantive real-world success. If the law had broader political support, reasonable reforms could get passed, and its exchanges would be made more functional.

So for all the actuarial and wonkish analysis of what ails Obamacare, its core problem remains political. Republicans have no interest in rectifying the law, and many probably actively hope it crumbles from wont of legislative care and maintenance. Obamacare does not require a fundamental overhaul or a desperate rejiggering. What it needs is a legislative majority interested in its success.

A Nordic cure for American anxiety

Any time liberals try to expand the American social welfare state, conservatives can be counted on to howl in resistance in the name of freedom.  Government helping parents pay for childcare?  An invasive infringement on the freedom of families to make their own childrearing arrangements, according to the conservative National Review.  Guaranteeing paid family leave for all workers?  A job-killing big government burden on free enterprise, according to conservatives like Sen. Marco Rubio.  Providing universal healthcare through the private insurance market?  Government coercion on the freedom to take your chances without health insurance, according to virtually all Republicans.

We’ve become accustomed to this serve-and-volley routine in American politics.  Liberals pitch their policy ideas in terms of fairness, justice, and equity.  Conservatives furiously respond as the guardians of freedom from government overreach.

But this one-sided conception of what American freedom means warps the debate and obscures a richer, fuller understanding of what it means to enjoy the fruits of liberty in the twenty-first century.  Sometimes it takes a voice from outside of the bubble to show us what we’re missing.

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In The Nordic Theory of Everything, Finnish journalist Anu Partanen provides that voice.  Partanen was born in Finland but moved to the United States as an adult.  Upon landing in America, Partanen quickly noticed that for a country that prides itself as the land of opportunity, American life was remarkably laden with anxiety, dependence, and constriction.  With little in the way of public support, Partanen encountered the reality that Americans are largely on their own to obtain basic modern necessities and navigate complex systems that are publicly provided in other countries.  Americans had little sense of just how unfree their lives were.

Partanen’s home country of Finland provides a robust and modern welfare state.  Back home, Partanen had enjoyed a whole host of public benefits: simple and comprehensive universal healthcare, a year’s worth of paid disability leave, nearly a year of paid parental leave (with the option of lesser-paid leave for an additional two years), affordable public daycare, universally high-performing K-12 education, free college, and free graduate school.

In the United States, however, Partanen was struck by the degree to which Americans are on their own to manage the complexities of modern life, and how this fosters strangely backward relationships.  “[T]he Americans I encountered and read about were being forced to depend more and more on one another,” Partanen writes, “in a throwback to the traditional relationships of old.  And in the process, individuals were becoming beholden to their spouses, parents, children, colleagues, and bosses in ways that constrained their own liberty.”

For instance, Partanen grew disturbed by the grotesquerie of financial tax incentives to marry, and using marriage as a solution to poverty to compensate for lack of government support.  “[I]n Finland,” Partanen explains, “a policy like America’s would be considered government meddling in matters of private morality.”  To Partanen, promoting marriage—“one of the most precious of human experiences”—as a poverty fix “sounds like something from the distant past.”

Partanen explains that the Nordic welfare states arise from what she calls the “Nordic theory of love.”  This is the idea that love and fulsome relationships arise between individuals who are equal and autonomous.  Dependency is anathema to love.  This theory, Partanen explains, “has inspired the broad variety of policy choices in the Nordic nations that together ensure a single, predominant goal: independence, freedom, and opportunity for every member of society.”

These are quintessential American values.  But American fear of the welfare state has endangered them as increasingly hollow aspirations.  There is an odd contradiction in American life, Partanen writes: “Today the United States is at once a hypermodern society in its embrace of the contemporary free-market system, but an antiquarian society in leaving it to families and other community institutions to address the problem the system creates.”

Leaving it to families and others to fill in the gaping holes in our safety net can dampen relationships that ought to be sacred.  The dependency of the elderly on their children to act as caretakers, for instance, breeds resentment and exhaustion.  That’s why Nordic countries provide public eldercare centers.  Nordics, Partanen writes, “want their love for the elderly to remain untainted by the sort of resentments that can arise when aging parents are stuck in relationships of dependency with their own children—relationships that destroy the autonomy, independence, and freedom of everyone involved.”

This is true at the opposite end of life, too.  New parents must solve logistical puzzles to take time off from work to be home with their new child, and to coordinate childcare while staying in the labor force.  Those who are lucky have paid leave as a fringe benefit from their employers, but far from all have this luxury.  The Nordic theory, however, is that “parents should be able to focus on welcoming new life into the world and loving their newborn, rather than being overwhelmed by the logistical challenges involved,” Partanen writes.  That’s why Nordic countries each provide at least nine months of paid leave for new parents to stay home with their children.  And Nordic countries provide public daycare for working parents, sparing them the exhausted mental bandwidth that American parents expend figuring out how to juggle work and childcare.

The Nordic brand of freedom means the absence of burden.  Children don’t bear the burden of their parents’ income status—kids of all classes can access high-quality education and are entitled to a basic child allowance.  Workers aren’t stuck at a job for fear of losing health insurance—and employers aren’t burdened with running complicated social insurance schemes, either.  Entrepreneurs can put business ideas in practice, knowing that there’s a safety net to catch them if they fail, and that their startup won’t be tasked with paying for costly employee benefits.

Skeptics might argue that this freedom is merely replacing one dependency with another—making citizens dependent on government instead of on family, neighbors, civil society, and themselves.  Indeed, the prospect of government dependency has long been the bogeyman in American politics.  Why should Nordic dependency on the state be preferable to American informal dependency elsewhere?

Henrik Herggren, a Swedish public intellectual, has one answer.  In The Myth of the Nearly Perfect People, author Michael Booth deals with similar themes of Nordic freedom and personal independence, and poses the question of government dependency to Herggren.  According to Herggren:

“[Swedes] are not arguing that people are totally independent, because they are dependent on the state. [. . .] [But] [y]ou can get an awful lot of autonomy by accepting a democratic state is actually furnishing you with the means to be autonomous in this way, and reach a certain self-realization.  [. . .]  [T]he point here is not that the state is saying this is how you should live your life, but it is providing you with the support structure.  Society is unequal and people don’t have the same opportunities, but we are trying to lift everybody to the same level so they can achieve the same kind of freedom and self-realization, which only a small group could do previously.”

In Herggren’s view, the state can provide a support structure and a set of guideposts to create equal opportunity in a way that no other actor or institution can.  Any other arrangement of dependency—on families, on employers, on charities—will create varying and unpredictable levels of support.  Only the state can guarantee a basic level of opportunity to all, setting everyone on a path of self-exploration and meaningful freedom.

So what is to be done for the stressed-out and stretched-thin United States?  Partanen has a clear vision for what the country needs.  “What Americans need,” she writes, “so that they can stop struggling so hard to be superachievers, is simple: affordable high-quality health care, day care, education, living wages, and paid vacations.”  In short, real freedom requires government to step in to provide the goods needed to loosen the squeeze on everyday Americans.

Of course, Nordic citizens pay handsomely for these types of generous public services.  But as Partanen explains, when you tally up all of the United States’s public and private expenditures on items like health care, pensions, unemployment benefits, and childcare, it winds up spending as much as Sweden does as a share of its GDP.  Given the bounty that her tax bill bought, Partanen says, “it was a bargain.”

The United States is stuck in an outmoded, negative view of freedom.  This brand of freedom is negative in that it focuses solely on freedom from government infringement on personal liberty.  But modern society calls for a more positive understanding of freedom—a freedom from knowing that certain basic goods and services are accessible to fall back on in order to meaningfully actualize personal liberty.

“Today nations that have progressed into the twenty-first century see freedom as something much richer,” Partanen writes.  “They see freedom as the assurance that all individuals get real opportunity, so they’re free to pursue the good life for themselves, and real protection from the lottery of bad luck, so they’re free from unnecessary fear and anxiety.”

Let’s hope we join these nations soon.  Our incomplete idea of freedom is obscuring all of the ways that we are already unfree and dependent, constrained and burdened.  A modern and comprehensive welfare state is necessary to replace mounting American anxiety with real American freedom.

Remembering Congress’s 46-year-old hearings on basic income and child allowance

In the spring of 1970, Congress had dueling basic income proposals to consider: a basic income for needy families from President Richard Nixon, and a basic income for children from Senator George McGovern.  The congressional debate over these plans provides an intriguing historical evaluation as we once again explore ways to provide income security to more Americans in the twenty-first century.

During March of 1970, the Senate Select Committee on Nutrition and Human Needs held hearings ostensibly on “Hunger and the Income Gap.”  Instead, the hearings quickly veered into the merits of the basic income proposals on the policy table.  The committee, which was chaired by McGovern and included Republican senators Bob Dole and Jacob Javits, elicited testimony from prominent witnesses like Rev. Jesse Jackson and New York mayor John Lindsay.

As McGovern eyed a run against Nixon two years later, he was eager to elicit testimony contrasting his child allowance plan from Nixon’s basic income proposal.  Several participants found Nixon’s $1,600 basic income for needy families to be unduly stingy.  Others took issue with the failure of Nixon’s plan, which included a work requirement, to specify exactly what kind of work beneficiaries would be required to perform.

But much of the testimony centered on how to fund McGovern’s child allowance plan.  There was near-unanimous agreement that the policy could be paid for by repealing the dependent tax exemption.  During his testimony, Jackson asked, “Don’t the rich people have a $600 allowance tax write-off for their children?”  McGovern answered, “[T]here is, as a matter of fact, a children’s allowance in the United States today written into our income tax laws, as $600 exemption. [. . .]  [I]t is really a children’s allowance for the rich.”

A child allowance was seen as an equitable way of expanding the tax system’s child subsidy to all.  In Lindsay’s record testimony, he said, “Of course, an essential step in creating a children’s allowance system would be to eliminate the $600 per dependent exemption . . . .  Only those who earn enough to pay taxes now benefit from this form of a children’s allowance.  Those who are poor receive no benefits at all.”

McGovern himself fleshed out the distributional impact of his child allowance, which he thought should be taxable for higher earners.  “[I]f you repealed the existing income tax exemption and made the children’s allowance taxable, 79-80 percent of the benefits . . . would go to families of $10,000 income or less,” he explained.  “Under the present system, the income tax exemption is just the reverse.  Most of the benefits of the income tax allowance go to families above $10,000.”

(McGovern’s explanation was a response to Senator Javits, the Republican senator from New York.  Javits proclaimed himself “very favorable to children’s allowances.  In my last campaign I advocated it.”  Lindsay was also still a Republican until switching parties in 1971 and challenging McGovern for the Democratic presidential nomination.  The child allowance was thus a bipartisan idea at the time.)

The senators and witnesses were right.  We do have a child allowance in the United States—it’s just baked into the tax system.  But tax exemptions inherently favor the wealthy.  These reductions exempt a certain amount of income from taxation.  Because the wealthy are in a higher tax bracket, they receive disproportionate benefits from the exemption.

Today, the dependent tax exemption remains a regressive tax-based child allowance.  Families can exclude up to $4,000 per child in taxable income.  This tax benefit costs the government more than $38 billion annually, but only 1.5 percent of the benefits accrue to the poorest 20 percent of households, while 57.1 percent accrues to the top 40 percent.

Since 1997, the United States has also had a Child Tax Credit, another $1,000 per child tax credit child allowance.  The CTC lifts millions out of poverty, and is structured to be a somewhat fairer and less regressive child subsidy because a portion of it is refundable for low-income families who owe no federal income taxes.

Still, because it is not fully refundable, the CTC too tends to favor better-off families.  The CTC costs the government some $60 billion per year, with the largest subsidies flowing to middle- and upper-middle class families rather than to the poor.

Each of these child tax subsidies are tilted toward the middle- and upper-ends of the income spectrum.  Not only is this inequitable, but it means that public benefits aren’t being efficiently directed toward those who need them the most.

One solution is to convert all tax reductions into refundable tax credits.  This would equalize the value of the subsidy across all classes of taxpayers.

But a better option is to disgorge child subsidies from the tax code entirely and use the funds spent on the CTC, the dependent exemption, and other smaller child tax credit subsidies to create a true child allowance, deposited into families’ bank accounts every month.

Researchers at The Century Foundation have calculated that the direct spending of a child allowance is a more cost effective way of slashing poverty than the CTC’s submerged tax spending.  For instance, a $2,500 child allowance would cost an additional $109 billion per year and would cut child poverty by 5.1 percent. On the other hand, a $4,000 Child Tax Credit would cost an additional $101 billion per year while cutting child poverty by only 1.2 percent. This is because a child allowance would reach all families, including those with little or no income, and would thus rescue more children from deep poverty.

So the insights of McGovern, Lindsay, and Jackson remain true today.  The most direct and equitable way to subsidize children is to scrap our tax reductions and create a simple child allowance.

What’s perhaps most foreign about the Senate hearings is how cavalier and casual the participants were about trashing the dependent tax exemption.  Today, such a suggestion would be a virtual death knell—a nonstarter quickly blasted as a tax hike, even if the net effect of a child allowance would expand relief to many more families.  In 1970, though, the right hadn’t yet succumbed to taxphobia, and no anti-tax pledge had yet gained hegemony over Republicans in Congress.  There was more political space to imagine different and more efficient ways of doing things.

Instead, in looking back at these hearings forty-six years later, it’s striking to see senators and witnesses alike honestly searching for the best solution.  We might face different resistances today, but we’d be wise to relearn what we knew then.  A child allowance is needed just as urgently today as it was in 1970.

When basic income was almost an American reality

Note: This post has been cross-posted at Medium.

Lately I’ve been writing about the relative virtues of basic income and child allowance proposals  to counteract poverty and inequality.  These seem like novel ideas on the American scene today.  But in fact, there was a time when both of these ideas were seriously proposed on Capitol Hill.  After forty-five years of lost faith in government, we are simply rediscovering the ambitions we once held.

In August 1969, President Richard Nixon unveiled a basic income scheme for needy families with children called the “Family Assistance Plan.” (FAP)  Under Nixon’s FAP, a family of four would receive $1,600 annually from the federal government, or about $10,500 in 2016 dollars.  For families deriving income from work, the FAP would gradually phase out above a certain level.  Indeed, FAP included a work requirement for most “employable” individuals.

Nixon’s FAP drew on proposals for a negative income tax from economists like Milton Friedman.  It also drew on work done by the Office of Economic Opportunity in President Lyndon Johnson’s administration.  A Johnson administration commission produced a report recommending a basic income, but Johnson rejected it out of hand in favor of an anti-poverty approach focused on skills training and education.

Nixon announced the FAP in a nationally televised address.  He saw FAP as an opportunity to upend the web of New Deal-era welfare state programs and to leave a conservative mark on  anti-poverty policy.

The FAP passed the House, but was attacked from both the right and left.  Conservatives fretted that the FAP would expand public dependency and expanded the size of government.  Liberals, on the other hand, thought that the basic income was too stingy and the work requirement to be punitive.

As an alternative, Senator (and future Democratic presidential challenger) George McGovern proposed a child allowance, which he called a “Human Security Plan” (HSP), on January 20, 1970 in a speech in New York City.  McGovern’s HSP would have provided at least $50 per month ($310 in 2016) for every child in the nation.  This entitlement would be paid for by eliminating the dependent tax exemptions, which today are worth up to $4,000 per child in reduced taxable income.  McGovern’s plan also included guaranteed employment, including government-provided public service employment of last resort if no private sector jobs were available.

McGovern hoped that a child allowance would “very nearly wipe out poverty among most families with children [and] would also provide a critical boost in the income of middle American families.”

McGovern evidently anticipated that the HSP would be criticized for incentivizing people to have more children at a time when many worried about overpopulation.  Indeed, the child allowance came into prominence in Europe for that precise reason: to serve pro-natalist population restorative purposes.  As Tony Judt explains in his European history Postwar, “[f]amily allowances were a key element in plans to increase the birth rate,” particularly in countries that suffered heavy death tolls in World War I.  Belgium introduced a child allowance in 1930, and was quickly followed by France, Hungary, the Netherlands, and others.

America in the 1960s had the exact opposite concern, fearing that out-of-control population would soon cause mass starvation and suffering.  McGovern tried to allay these fears by pointing out that the United States was then (and now) one of the only advanced countries without a child allowance, and that in most countries, the policy had in fact been implemented without causing birth rates to explode.

McGovern’s HSP went nowhere in Congress, but served as a prelude to his presidential run.  In January 1972, McGovern rolled out his own basic income proposal, which he called a “demogrant.”  More generous than Nixon’s proposal, the demogrant would have provided $1,000 per person as a minimum annual income, or $4,000 for a family of four.  This would replace the personal income tax exemption.

Liberals and conservatives revolted against McGovern’s demogrant plan.  In the Democratic primary, Hubert Humphrey warned that McGovern’s plan would have caused substantial tax increases on the middle class and ballooned government spending.  Others worried that the reach of the proposal would cover a large fraction of the country with new benefits.  In the general election, the Nixon campaign ran an ad blasting McGovern’s demogrant for leaving “47 percent of Americans” dependent on “welfare.”

Under pressure, McGovern ultimately scaled back his plan.  In the summer of 1972, McGovern dismantled his universal basic income proposal by “proposing a new categorical plan and by emphasizing the importance of work,” according to Brian Steensland’s The Failed Welfare Revolution.  McGovern’s new plan was a “system of national income insurance” built upon work and public service jobs.  “The best incentive is a job opening,” McGovern said.  “The best answer to welfare is work.”

McGovern’s scaled back approach had three still fairly ambitious components: more generous Social Security, an employment guarantee for those capable of work, and income assistance for those who could not work, including mothers with children, at $4,000 for a family of four.

It’s not clear why McGovern did not revive his HSP child allowance plan when he retrenched from his universal basic income proposal.  But his compromised version reflected the tendency for liberal welfare state expansions to hew toward categorical means-tested approaches instead of universal citizenship-based entitlements.

McGovern lost in a landslide to Nixon in November, shortly after Nixon’s FAP was unceremoniously killed in the Senate in September 1972.  Nixon ultimately dropped the idea entirely by his 1974 State of the Union address as he battled mounting calls for impeachment.  Congress eventually enacted a narrower version of the negative income tax concept underlying FAP, providing an Earned Income Tax Credit to top off the wages of the working poor.

The late 1960s and early 1970s arguably mark the zenith for American liberal policy imagination.  During the course of the Nixon administration, the United States came tantalizingly close to enacting a universal basic income scheme, a universal government-run childcare system, and universal healthcare.  It came less close to enacting a child allowance, but the idea was at least on the table.

Government was bold and full of ambition on the heels of the civil rights revolution and the War on Poverty.  The public trusted government to act in good faith and competently solve big national problems.  But the foundations were already cracking, and the aftermath of Vietnam and Watergate crippled public trust in government for generations, even still today.

We’re fitfully trying to pick up the pieces and restore a government to meet the needs of the twenty-first century, drawing inspiration from the audacious plans floated forty-five years ago.  But for now, the close of the 1960s seems to be the high-water mark for lofty public policy, too—one more place where, as Hunter S. Thompson once put it, “the wave finally broke and rolled back.”

Why we need a basic income for kids

Note: A version of this post has been cross-posted at Quartz.

A universal basic income is all the rage in policy circles across the globe.  And increasingly, UBI advocates are realizing that the best place to start is by providing a basic income for kids.

It’s a simple idea: to help families mitigate the costs of raising children, the government should send each household with minor kids a monthly check.  Unlike a full UBI, which is just now being piloted in a handful of cities, a basic income for children (often called a “child allowance” or “child benefit”) has already been successfully implemented in many other developed nations.  Countries like Canada, the Netherlands, and the Nordics all have one.  Britain used cash grants to families to help cut its child poverty rate by half in just fifteen years.

There are a lot of good reasons for the United States to import this tried and true policy.  On a basic moral level, a child’s wellbeing should not be dependent on her parents’ ability to earn market income.  But that’s exactly what we have allowed in the United States, and some 20 percent of all children suffer in poverty because of it.  Poor children are poor through no fault of their own, having simply had the misfortune of being born into low-income households.  We shouldn’t accept this fate.

Indeed, rampant child poverty makes equality of opportunity a fiction for poor children.  Poverty is a massive handicap for kids, impairing their ability to learn in school and literally scrambling their brain compositions from the permanent effects of stress.  The weight of poverty tragically holds kids back.

Conversely, children that get income boosts do better in school and grow up to earn more money.  Making sure that children are raised on at least a basic income gives them a fair shot to seize opportunity and achieve in school and their future careers.

A children’s basic income is also fair for parents.  Having a child is a huge financial burden, costing parents over a quarter million dollars on average.  Yet parents typically have children relatively early in their working careers, when their incomes are at their lowest.  This makes having and raising children a significant risk of poverty.  With more mouths to feed, family income just doesn’t stretch as far.

Our public policy typically tries to support and encourage childrearing, not implicitly penalize parents with the prospect of financial ruin.  Yet many millennials are finding themselves unable to afford to have children, a trend with bad long-term impacts for the size of the workforce, the prospects for the economy, and the stability of programs like Social Security.  A children’s basic income would provide the support parents need to securely raise children.

In fact, a children’s basic income would finally treat raising children like real valued work.  In 2012, when a Democratic surrogate bone-headedly bashed Ann Romney for foregoing private employment to stay home with her children, the Romney campaign rightly fought back by insisting that raising children is real work.  Most of us would undoubtedly agree, and paying parents to raise children would put our money where our mouths are.

Such a program would also be great for the economy.  Because parents have more expenses, they are more likely to spend new money they receive.  More spending generates more growth, boosting the economy as a whole.  That’s why, when the economy began to sputter in 2008, President Bush and Democrats in Congress responded with an initial stimulus plan that in part gave an extra $300 per child to parents as a sort of one-off child allowance.  Parents could be counted on to spend the money.  And when money is earmarked for children, parents do indeed tend to spend it on their children rather than on vices like alcohol or tobacco.

A children’s basic income is also a wise long-term investment in the future of the economy.  By one estimate, child poverty costs the economy a whopping  $672 billion each year.  By ensuring that all children can capitalize on their potential, we’ll have more productive workers in the future and ensure that talent does not go squandered by the bad luck of being born poor.

On the campaign trail, Donald Trump has proposed a new child care tax deduction that would, predictably, only help rich parents.  Hillary Clinton’s plan is better, but would only help parents who put their kids in commercial childcare, and not those who raise children at home.  In Congress, Rep. Rosa DeLauro has proposed a new refundable young child tax credit that would go far to help the youngest children who are most ill affected by poverty.

It’s a good sign these issues are finally being debated, but ultimately, something bolder is needed.  A basic income for children would alleviate child poverty and give parents the support and flexibility they need.  So aspirants for a universal basic income should start where it’s needed most: America’s children.