Why Isn’t the Circle of Prosperity Widening?

The American middle class is under siege and yet we can barely utter the word “class” without referring to it as some distant, European condition.  As Harold Meyerson points out in “Rise of the Have-Nots” (Washington Post, 9/27/2007), the Baby Boomers spent so much of the last century advancing civil rights  that issues of prosperity protection have gotten short shrift:

“…the idea that the economy could revert to its pre-New Deal configuration (in which the rich claimed all the wealth the nation created while everyone else just got by), the notion that the middle class might shrink even as the economy grew: Who, among all our generations and political persuasions, expected that?”

The Pew Research Center reported that 48% of Americans now believe we live in a nation of haves and have-nots.  Indeed, the rich are getting richer, but this is not simply a matter of tax subsidies and welfare programs.  While median family incomes have stagnated in the past quarter century, the costs of education and health care have sky-rocketed.  While more families are sustained by two incomes, the availability of decent, middle-income manufacturing jobs are being replaced by low-skill, service sector positions.
While our government has no obligation to ensure there are more CEOs than roadside waitresses, our nation is predicated on middle class security.  With nearly 70% of our GDP dependent on consumer spending, shouldn’t we support initiatives that drive the American economy?  After all, who will foot the bill if the average American can no longer own a home, send the kids to a good school, or save for retirement?

Lonny Stern | Communications Director

“Math Scores Rise, But Reading is Mixed”

An article in today’s New York Times by Sam Dillon discusses the results of this year’s reading and math tests, known as National Assessment of Educational Progress, and their implications for the renewal of No Child Left Behind.

Revisiting the Debate on Social Security

After a year of discussion with politicians from both sides of the aisle, Treasury Secretary Henry Paulson claims that there is overwhelming bi-partisan support to reform Social Security.  Apparently, policymakers are recognizing the seriousness of the problem and agree that necessary action should take place.  Paulson believes that Social Security has been an issue of partisan politics, with Democrats and Republicans debating the details rather than the problem, inevitably delaying any compromise that could lead to reform.

It is estimated that by the year 2017 Social Security will be paying out more in benefits than it is collecting in payroll taxes.  The longer Congress waits to address the issue, the more it is expected that taxes will increase, and the promised benefits through the system will decrease.

Paulson’s mission has been to revitalize the Social Security debate by focusing on areas of bi-partisan agreement.  Drawing from his findings, the Treasury Department plans to release issue papers discussing the problems and potential solutions over the next three months to further ignite discussion of reforms.  For more information, please read “Treasury Rekindles Social Security Debate,” by Michael Fletcher, Washington Post.

Courtney Haynes | Hope Street Group Fellow

Simplifying Savings

Despite their essential role in the economy, personal savings have been declining over the past two decades, reaching a negative rate at the end of 2005, the lowest since the Great Depression.  Moreover, it does not seem that our public policies on savings are succeeding in offsetting those trends.  As the future of Social Security remains uncertain and a growing proportion of baby boomers continue to retire, Americans need to be even more diligent when it comes to their savings plans.  Unfortunately, in the current environment this is easier said than done.

Given the complexity of a great number of savings plans on the market today and a generally low level of financial literacy, benefiting from these plans often requires expert consultation that is unaffordable to a majority of the population.  As pointed out by the Washington Post,  a 1 percent difference in associated administrative fees and expenses could reduce a savings plan account balance at retirement by 28 percent.  Even though the Federal Employee Benefits Security Administration is putting forth great effort to provide the public with more transparent information about various 401(k) fees, it is essential that policymakers bring this topic to the forefront of debates, especially in light of the nation’s current savings crisis.

Arian Hassani | Program Associate

Encouraging Older Students to Finish High School

The New York Times recently reported on an innovative program to encourage older students to receive their diplomas.

Now more than ever, a high school degree is essential in ensuring opportunity. The earnings of those without high school diplomas has declined by almost one third since the 1970’s, and it is expected to continue declining as a developing “knowledge economy” places more value on education and educational attainment. New York City’s move to provide “transfer schools,” designed to cater to students past the traditional high school graduation age, is in effect giving 70,000 students a second chance to pursue lifetime of opportunities. Offering these older students the appropriate environment to pursue their diplomas without embarrassment and stigma from younger students is not only encouraging potential drop-outs to stay in the system, but it is also creating a supportive and empowering social structure that goes well beyond high school education. Now, the City not only knows who its failing students are, but more importantly, it is equipped to help them achieve a milestone that is doubtlessly crucial for their future success.
Arian Hassani | Program Associate

Beyond Employer-Based Health Insurance

In his recent column, “The New Social Contract,” David Brooks argues that”…[T]he old employer-based social contract is eroding and the central domestic policy debate of our time is over how to replace it.” Employers cannot afford the high cost of health care; neither can employees or the government; and certainly neither can the non-traditionally employed American.

Cognizant of this breakdown of the once thriving backbone of health care security for millions of Americans, Brooks echoes the potential efficacy of Butler’s 4 principles of health reform: security, reciprocity, responsibility, and reasonable self-sufficiency.

However, perhaps his strongest principle is the support of alternatives to employer-based insurance. The urgent need for health reform is not just about the absolute cost of the care, but also it is about portability, continuity, and universal, equitable access. It is precisely the civil society-based model of health insurance that has great potential to bridge the gaps in coverage from which many Americans currently suffer. Civil society-based coverage would not force those who like their coverage to make any changes. It would provide portability and effective access to care for those who are not employed full-time by a big business.

Some might argue that this type of reform would diminish the incentive for employers to offer health insurance. So what? What if big businesses altogether stopped providing health insurance? If this civil-society-based system is effective at negotiating reasonable prices, just as large employers have done, then in fact we may be shifting our population slowly toward a more effective way of accessing health coverage.

Alternatively, it might remain true that offering high-quality, comprehensive health care attracts better employees. In that case, employers might surprise even the skeptics and maintain their benefits packages for the same reasons as they did when the “modern American health and pension system” was accidentally born.

Serious Health Care Reform Requires Compromise

Health care has become the centerpiece of many pre-election discussions among politicians. Karl Rove’s recent opinion piece in the Wall Street Journal highlights some of the strengths of the Republicans’ key proposals for health care reform, but no single political team has the complete solution.

Health care reform must bridge what Rove describes as the “deep differences between liberals and conservatives.” It is precisely this type of compromise that has led to a deluge of state-level plans. We should, on a national level, learn from these early-adopters; we cannot afford to continue the no-win game of “liberals” versus “conservatives.”

Despite that disconnect, Rove makes several key points. The tax playing field must be leveled, and health care must be portable. Regardless of one’s employment, every American should benefit from the same tax breaks and from assured continuity in coverage. At the same time, we must assure that there is another mechanism for making the cost of care affordable for those Americans whose income is too low for the tax breaks to be effective. If it becomes easier for Americans to keep a plan for a decade instead of a year, those plans are also more likely to increase their investment in and emphasis upon preventive care. Similarly, if small businesses can pool together to improve their risk stratification, the price of coverage should drop even further.

With the highly variable cost and quality throughout the U.S., it is essential to arm both patients and health care providers – doctors, social workers, physician’s assistants, and others – with accurate, meaningful data on cost and quality. Providers need to make informed decisions that take cost into measured account, without sacrificing quality or sound medical judgment. Patients need this information to make value-based decisions about where and when to access care. As a team, patients and providers can make informed purchasing decisions and improve the overall value of health care in the U.S.

The revolution that we need in health care in this country will not be defined by a single political ideology, nor need it disproportionately favor one stakeholder over another. The key to health reform will be to pool the best ideas from across the spectrum, including market-based, medically sound, politically viable, and patient-friendly reforms. As we build a higher-value, universal system, we have the opportunity to take suggestions from all key stakeholders, and the best policies will come from complex, and painful, compromise.

Marie-Adele Sorel | Health Care Program Associate

Corporate tax reform should lower the corporate tax rate, not address all USA’s fiscal woes

Corporate loopholes not only cost taxpayers millions, but they also hurt our overall economy, which has led citizens and politicians alike to agree that cutting corporate favoritism is a necessary reform.  In fact, cutting corporate favoritism has been backed with bi-partisan support from Democrats including Nancy Pelosi and Edward Kennedy to Republicans including Patrick Toomey and John McCain.  Thus, it is largely corporate lobbyists and certain vested interest politicians that favor sustaining corporate favoritism.   While Robert S. McIntyre’s “Opposing view: Close loopholes, fix problems” (USA Today, 9/17/07) makes some good points, the money saved from cutting corporate favoritism shouldn’t be filtered into other areas such as healthcare, retirement, and road construction.  It’s not that these social services should be neglected or receive less funding, but these savings should accumulate toward lowering the overall effective corporate tax rate for three primary reasons: 1.  Small to medium-sized businesses are being shut out of business opportunities.  In particular, businesses that do not generate $1M in revenue but pay the 34-39% corporate tax rate cannot compete with larger corporation that benefit from a lower tax burden.  Why should small to medium-sized businesses be forced to pay a larger tax bill and essentially leak profit?  Many mid-sized businesses fail each year because of the undue tax burdens they face.     2.  Lowering the overall corporate tax rate would finally eliminate the incestuous relationships between certain politicians and corporate lobbyists in Washington, D.C.  Large corporations would then be free to focus more of their energy on profit-generating, rather than on politics.   3.      Cutting corporate favoritism enjoys bi-partisan support.  Political expediency will demand that savings derived from cutting corporate favoritism should be shared with all companies by reducing the corporate tax rate.  If we try to steer the savings toward other areas of reform, the issue—and consequently, the money—will get lost in the shuffle. 

                                                                                                                   — Courtney Haynes | Hope Street Group Fellow

                                                                                                 

With Teachers, You Get What You Pay For

There are few professions that carry more economic and social importance for this nation than teaching.  No Child Left Behind has ignited vital debates surrounding our current educational system, but if it wants to impact some of this nation’s most fundamental challenges, revisions to this law must address teacher’s pay and incentive structures. As Superintendent of Prince George’s County Public Schools, John Deasy, points out in Michael Alison Chandler’s “Support Grows for Teacher Bonuses,” (Washington Times, 9/18/07) “we need to pay our best and brightest more, particularly in places where it’s most difficult to work.”  Naturally, identifying and retaining the best and the brightest teachers remains at the heart of this debate.  Some school districts are using test scores as benchmarks, while others are adopting other performance pay plans based on teacher evaluations, national board certification, or portfolio submissions demonstrating leadership and parent outreach.   

Despite attempts in some states to set higher standards for teacher certification, new teachers nationwide continue to come primarily from among the bottom of the graduating college classes.  Moreover, there remains a major gap in the number of teachers needed to fill vacancies.  Given these trends, national marketing campaigns and outreaches coupled with effective financial incentives can prove to be key factors in attracting a pipeline of qualified teachers from a pool of the top-third of college graduates.  – Arian Hassani | Program Associate

Is “Health IT” an Opportunity for Consensus?

In John Castellani’s “We must reform health care” (The Washington Times, 9/18/07), it appears that “Health IT” could be a jumping point for re-examining the nation’s health care system.  Only last week, Phillip Longman’s “Vista” plan, laid out in “Best Care Everywhere” (Washington Monthly, 9/11/07) proposed a health care system in which new funding would be provided to health care servers of last resort, in exchange for a VA-like, full-scale modernization of medical databases.  If The Washington Times and The Washington Post can see eye-to-eye, is it possible that our nation’s political, business, and civic leaders can too?  – Lonny Stern | Communications Director