December 03, 2007
Dean Baker
Truthout, December 3, 2007
See article on original website
It is always best to be cautious about declaring premature victories in politics. Declaring the battle won while it is still being fought is a sure recipe for defeat. Also, the gods have a way of punishing presumption. Still, it is important the successes be recognized both so that people can see the benefits of political action and also so the strategies can be analyzed for future battles.
So with appropriate cautions about the battles not yet being over, it is worth noting two tentative victories for progressives in major longstanding battles. The first victory is the success in preventing large-scale cuts and/or the privatization of Social Security. The second victory is protecting the European welfare state against efforts to remodel it along U.S. minimalist lines. Both are huge victories that will make important differences in the lives of hundreds of millions of people.
Starting with Social Security, the right has waged a quarter century long battle to cut and/or privatize Social Security for both ideological and economic reasons. On the ideological front, Social Security is the granddaddy of all social welfare programs. For those who want to eliminate the social welfare state, Social Security is the biggest game out there.
On the economic side, the repayment of bonds owned by the SS trust fund, will transfer trillions of dollars from the wealthy to middle and lower income retirees. If the SS program can be restructured in a way that does not require repayment of the money borrowed from the trust fund, the nation’s richest people will reduce their prospective tax burden enormously.
The central thrust of SS enemies was the claim that the program was on the edge of bankruptcy due to the country’s shifting demographics and could not survive on its current course. They also promised workers a much better deal by putting their money in the stock market through private accounts. SS faced its gravest danger on this front in the 90s when the nonsense about the baby boomer time bomb was in its heyday and irrational exuberance led tens of millions of otherwise sane people to think of the stock market as a cash machine.
The 2000-2002 crash helped to clear people’s thoughts about the stock market. With progressives have rallied to defeat President Bush’s privatization plan in 2005, we are now on the cusp of the baby boomers’ retirement. The rolls of people dependent on Social Security will rise rapidly in the years ahead, making the prospect of serious cuts in the program far more difficult. We have also benefited from the massive public education campaign that took place in 2005. Far fewer people today accept the nonsense about SS facing a demographic disaster.
Time has also proved to be on the side of the defenders of the European welfare state. In the mid-nineties there was a concerted effort to weaken European unions and rollback worker protections like generous unemployment benefits, restrictions on layoffs, and mandated vacations and paid leave. Exhibit A in arguing this case was the boom that the U.S. economy experienced in the late 90s, contrasted with the relatively stagnant and high unemployment economies of Western Europe.
With the 90s boom long over the facts on the ground have changed. European unemployment is no longer much higher than in the United States and some of the countries with the most generous welfare states, such as Denmark and Austria, actually enjoy lower unemployment rates than the United States. The Organization for Economic and Cooperation and Development (OECD), one of the key actors in the 90s drive for rolling back European welfare states, has recently acknowledged that there is no necessarily link between a generous welfare state and poor economic performance. In its 2006 Jobs Strategy report, the OECD explicitly noted the success of the Nordic model in which strong welfare state protections for workers have facilitated solid economic growth and low rates of unemployment.
Now that the U.S. housing market is unraveling and the country’s major export appears to be bad mortgage debt, few people in Europe are looking to the U.S. model. If the housing crash leads to full-fledged recession, then efforts to restructure Europe’s welfare state along U.S. lines will be put on hold for the foreseeable future.
While the news on both SS and the future of the European welfare state is very good, we must be cautious in our celebrations. The troops are still on the battlefield. In the case of the European welfare state, every European country has a powerful lobby that is still looking to make important cuts in the rights and benefits guaranteed to its citizens. Many cuts were made over the last 15 years, some of which had real consequences. In other words, the battle is not over yet, and the victory was far from complete.
In the case of Social Security, the program’s well-funded opponents have not yet passed into retirement. And there are still tens of millions of people who accept the demographic scare stories. This means that there is still much fertile ground for attacking SS should the opportunity arise. Still the odds have clearly shifted in favor of those supporting the program, and this fact, along with the survival of the European welfare states, is worth celebrating.
Dean Baker is the co-director of the Center for Economic and Policy Research (CEPR). He is the author of The Conservative Nanny State: How the Wealthy Use the Government to Stay Rich and Get Richer (www.conservativenannystate.org). He also has a blog, “Beat the Press,” where he discusses the media’s coverage of economic issues. You can find it at the American Prospect’s web site.
