The Audacity of Hope (22 page)

As the pace of globalization has picked up, though, it’s not just unions that are worrying about the long-term prospects for U.S. workers. Economists have noted that throughout the world—including China and India—it seems to take more economic growth each year to produce the same number of jobs, a consequence of ever-increasing automation and higher productivity. Some analysts question whether a U.S. economy more dominated by services can expect to see the same productivity growth, and hence rising living standards, as we’ve seen in the past. In fact, over the past five years, statistics consistently show that the wages of American jobs being lost are higher than the wages of American jobs being created.

And while upgrading the education levels of American workers will improve their ability to adapt to the global economy, a better education alone won’t necessarily protect them from growing competition. Even if the United States produced twice as many computer programmers per capita as China, India, or any Eastern European country, the sheer number of new entrants into the global marketplace means a lot more programmers overseas than there are in the United States—all of them available at one- fifth the salary to any business with a broadband link.

In other words, free trade may well grow the worldwide economic pie—but there’s no law that says workers in the United States will continue to get a bigger and bigger slice.

Given these realities, it’s easy to understand why some might want to put a stop to globalization—to freeze the status quo and insulate ourselves from economic disruption. On a stop to New York during the CAFTA debate, I mentioned some of the studies I’d been reading to Robert Rubin, the former U.S. Treasury secretary under Clinton whom I had gotten to know during my campaign. It would be hard to find a Democrat more closely identified with globalization than Rubin—not only had he been one of Wall Street’s most influential bankers for decades, but for much of the nineties he had helped chart the course of world finance. He also happens to be one of the more thoughtful and unassuming people I know. So I asked him whether at least some of the fears I’d heard from the Maytag workers in Galesburg were well founded—that there was no way to avoid a long-term decline in U.S. living standards if we opened ourselves up entirely to competition with much cheaper labor around the world.

“That’s a complicated question,” Rubin said. “Most economists will tell you that there’s no inherent limit to the number of good new jobs that the U.S. economy can generate, because there’s no limit to human ingenuity. People invent new industries, new needs and wants. I think the economists are probably right. Historically, it’s been the case. Of course, there’s no guarantee that the pattern holds this time. With the pace of technological change, the size of the countries we’re competing against, and the cost differentials with those countries, we may see a different dynamic emerge. So I suppose it’s possible that even if we do everything right, we could still face some challenges.”

I suggested that the folks in Galesburg might not find his answer reassuring.

“I said it’s possible, not probable,” he said. “I tend to be cautiously optimistic that if we get our fiscal house in order and improve our educational system, their children will do just fine. Anyway, there’s one thing that I would tell the people in Galesburg is certain. Any efforts at protectionism will be counterproductive—and it will make their children worse off in the bargain.”

I appreciated Rubin’s acknowledgment that American workers might have legitimate cause for concern when it came to globalization; in my experience, most labor leaders have thought deeply about the issue and can’t be dismissed as kneejerk protectionists.

Still, it was hard to deny Rubin’s basic insight: We can try to slow globalization, but we can’t stop it. The U.S. economy is now so integrated with the rest of the world, and digital commerce so widespread, that it’s hard to even imagine, much less enforce, an effective regime of protectionism. A tariff on imported steel may give temporary relief to U.S. steel producers, but it will make every U.S. manufacturer that uses steel in its products less competitive on the world market. It’s tough to “buy American” when a video game sold by a U.S. company has been developed by Japanese software engineers and packaged in Mexico. U.S. Border Patrol agents can’t interdict the services of a call center in India, or stop an electrical engineer in Prague from sending his work via email to a company in Dubuque. When it comes to trade, there are few borders left.

This doesn’t mean, however, that we should just throw up our hands and tell workers to fend for themselves. I would make this point to President Bush toward the end of the

CAFTA debate, when I and a group of other senators were invited to the White House for discussions. I told the President that I believed in the benefits of trade, and that I had no doubt the White House could squeeze out the votes for this particular agreement. But I said that resistance to CAFTA had less to do with the specifics of the agreement and more to do with the growing insecurities of the American worker. Unless we found strategies to allay those fears, and sent a strong signal to American workers that the federal government was on their side, protectionist sentiment would only grow.

The President listened politely and said that he’d be interested in hearing my ideas. In the meantime, he said, he hoped he could count on my vote.

He couldn’t. I ended up voting against CAFTA, which passed the Senate by a vote of 55 to 45. My vote gave me no satisfaction, but I felt it was the only way to register a protest against what I considered to be the White House’s inattention to the losers from free trade. Like Bob Rubin, I am optimistic about the long-term prospects for the U.S. economy and the ability of U.S. workers to compete in a free trade environment—but only if we distribute the costs and benefits of globalization more fairly across the population.

THE LAST TIME we faced an economic transformation as disruptive as the one we face today, FDR led the nation to a new social compact—a bargain between government, business, and workers that resulted in widespread prosperity and economic security for more than fifty years. For the average American worker, that security rested on three pillars: the ability to find a job that paid enough to support a family and save for emergencies; a package of health and retirement benefits from his employer; and a government safety net—Social Security, Medicaid and Medicare, unemployment insurance, and to a lesser extent federal bankruptcy and pension protections—that could cushion the fall of those who suffered setbacks in their lives.

Certainly the impulse behind this New Deal compact involved a sense of social solidarity: the idea that employers should do right by their workers, and that if fate or miscalculation caused any one of us to stumble, the larger American community would be there to lift us up.

But this compact also rested on an understanding that a system of sharing risks and rewards can actually improve the workings of the market. FDR understood that decent wages and benefits for workers could create the middle-class base of consumers that would stabilize the U.S. economy and drive its expansion. And FDR recognized that we would all be more likely to take risks in our lives—to change jobs or start new businesses or welcome competition from other countries—if we knew that we would have some measure of protection should we fail.

That’s what Social Security, the centerpiece of New Deal legislation, has provided—a form of social insurance that protects us from risk. We buy private insurance for ourselves in the marketplace all the time, because as self-reliant as we may be, we recognize that things don’t always work out as planned—a child gets sick, the company we work for shuts its doors, a parent contracts Alzheimer’s, the stock market portfolio turns south. The bigger the pool of insured, the more risk is spread, the more coverage

provided, and the lower the cost. Sometimes, though, we can’t buy insurance for certain risks on the marketplace—usually because companies find it unprofitable. Sometimes the insurance we get through our job isn’t enough, and we can’t afford to buy more on our own. Sometimes an unexpected tragedy strikes and it turns out we didn’t have enough insurance. For all these reasons, we ask the government to step in and create an insurance pool for us—a pool that includes all of the American people.

Today the social compact FDR helped construct is beginning to crumble. In response to increased foreign competition and pressure from a stock market that insists on quarterly boosts in profitability, employers are automating, downsizing, and offshoring, all of which makes workers more vulnerable to job loss and gives them less leverage to demand increased pay or benefits. Although the federal government offers a generous tax break for companies that provide health insurance, companies have shifted the skyrocketing costs onto employees in the form of higher premiums, copayments, and deductibles; meanwhile, half of small businesses, where millions of Americans work, can’t afford to offer their employees any insurance at all. In similar fashion, companies are shifting from the traditional defined-benefit pension plan to 401(k)s, and in some cases using bankruptcy court to shed existing pension obligations.

The cumulative impact on families is severe. The wages of the average American worker have barely kept pace with inflation over the past two decades. Since 1988, the average family’s health insurance costs have quadrupled. Personal savings rates have never been lower. And levels of personal debt have never been higher.

Rather than use the government to lessen the impact of these trends, the Bush Administration’s response has been to encourage them. That’s the basic idea behind the Ownership Society: If we free employers of any obligations to their workers and dismantle what’s left of New Deal, government-run social insurance programs, then the magic of the marketplace will take care of the rest. If the guiding philosophy behind the traditional system of social insurance could be described as “We’re all in it together,” the philosophy behind the Ownership Society seems to be “You’re on your own.”

It’s a tempting idea, one that’s elegant in its simplicity and that frees us of any obligations we have toward one another. There’s only one problem with it. It won’t work—at least not for those who are already falling behind in the global economy.

Take the Administration’s attempt to privatize Social Security. The Administration argues that the stock market can provide individuals a better return on investment, and in the aggregate at least they are right; historically, the market outperforms Social Security’s cost-of-living adjustments. But individual investment decisions will always produce winners and losers—those who bought Microsoft early and those who bought Enron late. What would the Ownership Society do with the losers? Unless we’re willing to see seniors starve on the street, we’re going to have to cover their retirement expenses one way or another—and since we don’t know in advance which of us will be losers, it makes sense for all of us to chip in to a pool that gives us at least some guaranteed income in our golden years. That doesn’t mean we shouldn’t encourage individuals to pursue higher-risk, higher-return investment strategies. They should. It just means that they should do so with savings other than those put into Social Security.

The same principles are at work when it comes to the Administration’s efforts to encourage a shift from employer- or government-based health-care plans to individual Health Savings Accounts. The idea might make sense if the lump sum each individual received were enough to buy a decent health-care plan through his employer, and if that lump sum kept pace with inflation of health-care costs. But what if you work for an employer who doesn’t offer a health-care plan? Or what if the Administration’s theory on health-care inflation turns out to be wrong—if it turns out that health-care costs aren’t due to people’s cavalier attitude toward their health or an irrational desire to purchase more than they need? Then “freedom to choose” will mean that employees bear the brunt of future increases in health care, and the amount of money in their Health Savings Accounts will buy less and less coverage each year.

In other words, the Ownership Society doesn’t even try to spread the risks and rewards of the new economy among all Americans. Instead, it simply magnifies the uneven risks and rewards of today’s winner-take-all economy. If you are healthy or wealthy or just plain lucky, then you will become more so. If you are poor or sick or catch a bad break, you will have nobody to look to for help. That’s not a recipe for sustained economic growth or the maintenance of a strong American middle class. It’s certainly not a recipe for social cohesion. It runs counter to those values that say we have a stake in each other’s success.

It’s not who we are as a people.

FORTUNATELY, THERE’S AN alternative approach, one that recasts FDR’s social compact to meet the needs of a new century. In each area where workers are vulnerable—wages, job loss, retirement, and health care—there are good ideas, some old and some new, that would go a long way toward making Americans more secure.

Let’s start with wages. Americans believe in work—not just as a means of supporting themselves but as a means of giving their lives purpose and direction, order and dignity. The old welfare program, Aid to Families with Dependent Children, too often failed to honor this core value, which helps explain not only its unpopularity with the public but also why it often isolated the very people it was supposed to help.

On the other hand, Americans also believe that if we work full-time, we should be able to support ourselves and our kids. For many people on the bottom rungs of the economy—mainly low-skilled workers in the rapidly growing service sector—this basic promise isn’t being fulfilled.