Build wealth, not entitlements - POLITICO.com Print View

Build wealth, not entitlements
By: Anne Kim and Jonathan Cowan
May 6, 2010 04:47 AM EDT

For much of the 20th century, progressives put their political capital into building a safety net to protect Americans against market excesses. They aimed for economic security from cradle to retirement.

Today, many on the left say that health care reform is just one more step in this effort.

But it would be a mistake for Democrats to make expanding the entitlement state the defining goal in the 21st century as well.

Rather, they should focus on a new signature cause: policies that build national and individual wealth.
For Democrats, who may be more familiar with how to cut up the pie than increase its size, this marks a significant shift.

Progressives have been reluctant to champion a pro-growth, pro-business, pro-wealth agenda — particularly in the financial meltdown of the past 18 months.

But if Democrats are going to remain politically relevant and govern effectively, there are three reasons to organize around expanding the economic pie.

First, the United States is now about as close to being Denmark as can comfortably fit our values, vision and economic model. Because of the progressives’ relentless efforts, we’ve eradicated many extreme privations of hunger, poverty and old age that marred the American experience in the past 75 years.

Health care reform now weaves the last major thread into our social safety net — a robust system that includes not only guaranteed health coverage access but also Social Security, Medicare and Medicaid, disability and unemployment insurance, welfare, disability, food stamps and housing vouchers. Let’s declare victory and move on.

Second, a new growth agenda could help preserve the long-term viability of the existing safety net, which now looks to be on an unsustainable trajectory. Our publicly held debt is projected to triple to $18 trillion in 2020 from almost $6 trillion in 2008, according to the Congressional Budget Office.
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The Treasury Department pegs the shortfall between what the government is slated to pay in benefits, like Medicare, Social Security and Medicaid, and the amount it receives through taxes, at $62.3 trillion over the next several generations.

Given these staggering projections, raising taxes and cutting spending are unavoidable. But the severity of these measures can be mitigated only if we generate the kind of supercharged economic growth we had in the 1950s and mid-’60s.

Otherwise, the cuts in entitlement benefits and increases in taxes could be draconian. They are sure to lead to highly polarizing fights — across generations, regions, incomes and race — over shrinking slices of the pie.
Third, a more generous safety net is not what our nation needs to win in the 21st century.
steal our intellectual property and lock out our products.

Our immigration laws leave millions in legal limbo and discourage to foreign talent from becoming U.S. entrepreneurs. Our education system shortchanges our children, and our social policies are seriously outdated.

Solving these problems will require policies that help small businesses get bigger, promote exports, protect U.S. intellectual property, spur clean energy innovation, ensure a fair economic shot for all and make a college education more affordable.

For example, Democrats should restructure the corporate tax code to significantly encourage domestic research and development and ensure that the tax burden on U.S. companies is competitive with that of foreign rivals.

Democrats should aggressively pursue new bilateral and global trade agreements, giving Americans full access to new markets.

They also should propose mobility and opportunity policies that aim to erase disparities based on class, rather than on race or gender.

And they must not shy away from innovation in public education — a real economic driver. Experiments to eliminate teacher tenure, institute year-round schooling and encourage excellence rather than standardization must all be on the table.

Though ideas like these may challenge the prevailing Democratic orthodoxy, they can create the foundation of a robust agenda geared at promoting growth.

By embracing growth, Democrats may have the best shot at staying true to their animating values.

It is a cause that can both preserve the progressives’ safety net of the past century and ensure U.S. success in this one.

Anne Kim is economic program director at Third Way, a progressive policy organization. Jonathan Cowan, a former chief of staff at the Department of Housing and Urban Development, is president of Third Way.

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