Next Social Contract

Medicaid has always been plagued by inequities and inefficiencies due to its dual federal-state character, which diffuses accountability, and because some state governments simply don’t care much about the poor.

State budgets are being squeezed by unprecedented amounts for the third year in a row as legislators are forced to close gaps of up to 50 percent of state spending.

As cuts to badly needed services and welfare programs continue, the slice of budgets going to public pensions looms larger. States' widespread underfunding during prosperous periods undermined public pensions even before today's massive budget shortfalls, and now the Great Recession's impact on tax revenues has made pension liabilities appear colossal.

Over 30 percent of American workers are engaged in ad-hoc, contract-based employment, known as contingent or precarious labor. In comparison to employees on payroll, these contingent workers take on more risk in terms of both their income and retirement security, and are not covered by basic federal labor protections, such as minimum wage, overtime, and health and safety standards. They are also unlikely to have access to traditional employer-based benefits meant to provide a safety net to American workers.

On July 13, 2008, New York City’s poverty rate was 18 percent. Twenty-four hours later it had ballooned to 23 percent. How did more than 400,000 New Yorkers become impoverished overnight? The answer is that Mayor Michael Bloomberg adopted a new and more complex—and, he argued, more accurate—measure of poverty than the one the federal government uses. His action reignited a debate in Washington, D.C., and beyond about how America determines who is poor—a debate that many hope will be settled by the U.S. Congress this year.

For more and more Americans, the dream of a secure retirement has become increasingly threatened. The Great Recession has taken its toll on a retirement system which has been in place in the United States since WWII. Retirement was conceived as a "three-legged stool," with the three legs being Social Security, pensions and personal savings centered around homeownership.

American retirement security, even prior to the Great Recession, was in bad shape. The downturn has only exacerbated previously-existing structural problems, such as an over-reliance on home values and the troubled transition from defined-benefit to defined-contribution retirement plans, as we mentioned in a previous Talking Points article. 

Among the many theories exposed as fallacies by the Great Recession is the idea of the mass upper middle class. During the years of the American bubble economy, progressives and conservatives alike lauded the graduation of most citizens from the working class to a new elite that included the majority of Americans.

Have the American people outlived their usefulness to the rich minority in the United States? A number of trends suggest that the answer may be yes.

In every industrial democracy since the end of World War II, there has been a social contract between the few and the many. In return for receiving a disproportionate amount of the gains from economic growth in a capitalist economy, the rich paid a disproportionate percentage of the taxes needed for public goods and a safety net for the majority.

The financial crisis has shaken the foundations of retirement security in both the private and public sectors, and nowhere more than in California. Generous public pension promises are straining the finances of cities and counties while private sector workers have little prospect of secure retirement.  The contrast between the guaranteed and increasingly expensive pensions and retiree health benefits enjoyed by most public workers in California and the less secure (and often missing) retirement plans of private-sector workers has touched off pension envy.

The United States faces two immense challenges: prolonged unemployment and an aging population. To meet the needs of the elderly while creating jobs for low-skilled workers, Michael Lind and Lauren Damme propose the Dignity Voucher program, an innovative system of service care vouchers for the elderly.