A social contract for the global age?

Will Marshall

Fate – or, more precisely, his White House predecessor – has dealt President Barack Obama a stupendously lousy hand. On the economic front, he faces not one huge problem but three: the worst banking crisis since the Depression, what seems likely to be the longest recession since World War II, and an exploding public debt that threatens America’s fiscal stability. This triple whammy will hit the poor and children (tomorrow’s taxpayers) especially hard. For this reason, however, the crisis could accelerate Washington’s lagging efforts to write a new social contract for the global age. For example, President Obama’s $787 billion economic stimulus plan includes billions to expand food stamps, extend unemployment benefits, aid troubled urban schools, and help the states pay health bills for poor families. It remains to be seen whether this spending spurt will be temporary or lead to a permanent strengthening of the social safety net. What else could the Obama administration do to lessen inequality and spur social mobility? Here are five ideas:

End childhood hunger in America by 2015
Nearly 700,000 poor US children go hungry and more than 12 million suffer from what the government calls “food insecurity,” meaning their families struggle to meet their daily nutritional needs. For a remarkably modest investment, roughly $5 billion a year, Washington could end this disgrace by expanding food stamps, providing all children with a free school breakfast, and streamlining the welter of federal food programmes and bureaucracies.

Making work pay for men, too
One of America’s most successful anti-poverty programmes is a tax credit for low-wage workers, which President Clinton persuaded Congress to expand dramatically as part of his campaign to reduce welfare dependence. That credit aimed at making work more attractive than the dole for single mothers. Now it’s time to extend this “work bonus” to low-income men, whose work rates have lagged well behind those of women.

Investing in early education
A glaring source of inequality in America is the education achievement gap: poor and minority students score significantly lower on reading and math tests than their middle class counterparts. Recognising that such kids come to school with big cognitive deficits, progressives are calling for national investment in early education for three- and four-year-olds. Their case is buttressed by a growing body of research showing that dollars spent to develop young children’s mental and social capacities have a much larger economic payoff than later remedial programmes.

Closing the graduation gap
In America’s inner city school districts, as many as 60 to 70 per cent of kids – mostly Latino and black – fail to graduate from high school. The problem isn’t money, its motivation, which takes more intensive concentration on at-risk students than our old, factory-style public schools can provide. One remedy is school autonomy – letting school leaders call the shots rather than rule-bound central bureaucrats. Another is to challenge outdated rules, like lifetime tenure for teachers, which prevent self-governed schools from hiring the best teachers available.

Dismantling the fiscal doomsday machine
The baby boom retirement has begun to hit America with the force of a demographic tsunami. With about 4 million boomers reaching retirement age each year, the cost of America’s social insurance programs, especially Medicare and social security, are spiralling. As formula-driven entitlements, they are growing automatically and, especially in the case of health care, at unsustainable rates. They already consume nearly half the federal budget, and if not revamped will inexorably squeeze out fiscal space for investments in education, health care, safety, the environment, clean energy, transportation and other public goods – everything, in short, that progressives ought to care about.

Many, however, have been loath to face an inconvenient truth: we must renegotiate the intergenerational contract embedded in America’s big social insurance systems. Fortunately, President Obama has declared himself “ready to spend political capital” on entitlement reform. He recognises that it is the only way to balance the twin economic imperatives of stimulating the economy in the short run, and assuring US fiscal stability in the long-term, which requires reducing public debt as the economy recovers.

This fiscal balancing act, in fact, could very well turn out to be the central drama of Obama’s presidency.

Will Marshall is president of the Progressive Policy Institute