We need to build new safety nets
Commentator Robert Reich says "The Great Moderation" of the last two decades led Americans to think we didn't need much by way of social insurance. But now, he says, a radical economic swing is back and we should react to it.
Robert Reich (Robert Reich)
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TEXT OF COMMENTARY
KAI RYSSDAL: That monthly inflation report we started with today -- up 1.1 percent -- has gotten most of the attention. The really scary number, though, is the year-over-year comparison. Prices in June '08 were 5 percent higher than June a year ago. The biggest jump in 17 years. Granted, we're still a long way from the hyperinflation of the 1970s. But commentator Robert Reich says what happened *after that should give us pause now.
ROBERT REICH: What economists have called "The Great Moderation" -- a period when the business cycle evened out, and neither inflation nor recession posed much of a threat -- began in the mid-1980s, and now appears to be over. It was good when it lasted. But it led the nation to think we didn't need much by way of social insurance.
No one knows for sure what caused the Great Moderation. Some had credited the increased sophistication of financial markets, and the wisdom of the Federal Reserve Board. Hindsight suggests it was more luck than anything else.
Well, folks, it turns out the Great Moderation was something of a fluke, and now tens of millions of Americans are in trouble with no safety net to help them.
That's because the apparent end of the boom and bust cycles led us to assume the economy would no longer impose such huge, unexpected, and arbitrary losses on large numbers of Americans. So, we basically got rid of the safety nets. We abolished welfare, let unemployment insurance wither, and paid scant attention when corporations eliminated defined-benefit pensions and cut health-insurance benefits. We even stopped worrying about the safety of small investors.
But now we have to rethink safety nets. Right now, nets are being spread for the wrong people. The giants of Wall Street along with Fannie and Freddie get bailed out, but there's still no relief in sight for most homeowners who can't pay their mortgages. Corporations that don't deliver on their pension obligations are helped out, but there's nothing for retirees and small investors whose savings are drying up because of Wall Street's decline.
Yet, I have to believe the end of the Great Moderation will eventually result in a broader safety net. Maybe not the old forms of social insurance but new ones like universal health insurance, earnings insurance, and savings accounts in which the dollars you put away are supplemented by government dollars.
The very rich and the biggest corporations don't need social insurance. Now that the booms and busts are back, the rest of us do.
RYSSDAL: Robert Reich is a professor of public policy at the University of California Berkeley.
Comments
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08/04/2008
Curious, isn't it, how the defenders of the free market empire rush to condemn any idea of saving Joe Average from going under. Yet bailing out over-extended hedge funds and Wall Street tycoons is just par for the course.
Right on, Robert Reich, keep kicking them where it hurts.
TonyR.
From UT, 07/17/2008
Robert Reich's dominant, consistent and nauseating theme is always socialism. Safety is nothing that can be guaranteed to anyone in this world.
Life, business and money are risky. Get over it and stop pretending that the little people need Robert the Enlightened to engineer policies to keep them cozy and safe.
With 44 trillion in unfunded liabilities (as per GAO, Feb. 2008) on the horizon, what magic does Mr. Reich propose to pay for his lovely nanny state?
Instead, let's allow the unholy, government-meddled corporations to fall. It's time to return to the complete separation of business and state.
From Chicago, IL, 07/17/2008
I think your analysis is on point and accurate. Maybe we should adopt the ultimate safety net "Communism or Socialism". LOL
From OH, 07/17/2008
Robert Reich as a political economist is what the breed is, but his comments yesterday had my jaw drop. Has he looked at the Federal budget. Social programs (safety nets) are the vast majority of our budget. And we just entered into a $8 trillion (with a T) senior drug program that is unfunded. NAFTA and related trade policies from his administration have put U.S. companies and people up against the wall. Then he wants universal health care. A health care system run by people from Washington (the Freddie Mae types?). I smell government default, crap care, and blame someone else for what you did.
07/16/2008
Does Prof. Reich think the small investors only invest in penny stocks and gold bullion? If not, then how is government "bailing out" the giants of Wall Street while not bailing out the
owners and debt-holders of those
giants, such as small investors?
And when the PBGC takes over a failing pension, how is this not a help to the retirees?
What's next? Will Prof. Reich claim
that the FDIC pays off the banks rather
than the depositors?
From Belmont, CA, 07/16/2008
The commentator is right to suggest that big cooperations do not need safety nets and that the govt is putting tax dollars in saving financial banks. However, I disagree that the safety net is required for small or individual investors. Every investor is taking a bet when investing his/her money in the market and should be responsible to manage his/her portfolio.
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