The current flap over Alan Simpson’s idiotic emails is above all about what kind of guy he is and whether he should be co-leading a high-profile commission for Obama, but behind it is a basic philosophical debate over the concept of social insurance.
The neoliberal caucus, which includes the Pete Petersons, Alan Simpsons and Paul Ryans of this world, believe in incentives. Each one of us, at every moment, should have an unmistakable incentive to work as much as possible, save as much as possible, and do everything else to promote economic growth. Marginal tax rates should be rock-bottom, and no government program should shield us from the consequences of our failure to accumulate wealth. It is pure social darwinism.
Their sworn enemy is social insurance, the idea that the members of a society would want to pool their risks and achieve a bedrock of security. This means opposition to any form of national health insurance, which pools our medical expense risk, Social Security, which pools retirement risk, and unemployment insurance, which pools labor market risk. We should be prepared, they say, to sink or swim on our own and not look to the “nanny state” to take care of us.
I think it’s time for the other side, a.k.a. the forces of civilization and progress, to defend social insurance. It is an enormous advance for a society provide economic security to all its citizens. It gives us peace of mind, and it expresses a humane concern for the well-being of all members of the community, something we should not be ashamed to embrace as a moral principle.
Sure, insurance always comes bundled with moral hazard issues. Some people will react by doing things that increase the risks we insure against. But this is not a reason to abandon insurance, just to design programs carefully so that moral hazard doesn’t get out of hand. If you think Social Security has generated disincentives that need to be fixed, indicate what they are and help come up with solutions. Don’t reject insurance itself; it’s one of the highest achievements of the last thousand years of human development.