A Perspective on the Year 2021: A Guest Editorial by William Arnone, Chief Executive Officer of the United States National Academy of Social Insurance.
This edition of Commentary offers reflections on the importance of the pivotal and potentially transformative times we are experiencing, from the perspective of the United States, with particular reference to social insurance and the work of the National Academy of Social Insurance. The past year has been another extraordinarily distressing one in many ways. The exhausting COVID-19 pandemic continues to wreak havoc on the lives of millions worldwide with no end of its variants in sight. The economy has not fully recovered from the recession, although there are promising signs for some subgroups of the population. America’s grand experiment in governance seems to be at an intensely polarized crossroads. Moreover, the financial futures of nonprofit organizations like the Academy remain uncertain; unlike many non-profits that were forced to close due to the pandemic, the Academy has survived. Our imperative now is to build on our momentum, grow, and have a more demonstrable future impact on public policy. Now, more than ever, the Academy’s ability as a trustworthy convener of expertise is essential to the development of sound public policy. Never before in the Academy’s over 35-year history have we had Study Panels, Task Forces, and other platforms focused on every social insurance pillar including Social Security,
Medicare, Unemployment Insurance, Workers’ Compensation, and Universal Family Care.
The modern welfare state had its origins in the late 19th century in Europe, beginning with “workingmen’s insurance,” which included forms of industrial accident compensation, health insurance, and old-age pensions. In the United States, the first form of social insurance was state-based Workers’ Compensation. The American blueprint was initially devised by Isaac M. Rubinow, whose landmark study, Social Insurance, was published in 1913. President Roosevelt’s Secretary of Labor led the drafting of the historic and monumental 1935 Social Security Act. It offered a capitalist alternative to full-fledged socialism. Historically, social insurance programs, like Social Security and Medicare, have filled major gaps that the private sector has proven unable to fill. Our nation has developed a delicate balance among the roles of federal and state governments, businesses as employers, and individuals, in providing social protection. The partisan atmosphere we are experiencing today has historical roots. Throughout our modern history, political parties have differed on how to achieve the right balance. The political lexicon is rife with charged labels deployed by ideological opponents of various approaches, like “creeping socialism,” “unfair redistribution,” and “greedy profiteering.” Demeaning and cynical references to public service and government officials are also widespread. Many times in the past, however, we have come together as a nation to address pressing problems that threatened to disrupt the social and economic stability that a well-functioning representative form of government and a sound economy requires.
The ecosystem of social insurance and related programs is a major factor in increased government spending today. Our nation has developed a hybrid mix of governmental and market-based policies directed at providing some level of economic and health security to its population. Unlike most other nations, the United States places greater reliance on private sector approaches that feature more “individual self-reliance” offered through a consumer-driven marketplace, which presumes a level of competition and equal access to goods and services. The American approach to social protection consists of varied, usually uncoordinated and sometimes conflicting, policies with disparate results, especially for communities of color and other minorities. Inequality remains a persistent source of potential social instability. This framework is a stark differentiator of the United States when it comes to health security, but also economic (particularly retirement) security. The United States remains seriously divided over a host of critical issues. One of the most significant is over the appropriate role of government in personal lives and in the nation’s economy. A recent issue of The Economist (“The triumph of big government,” November 20, 2021) explored this issue: Because of the pandemic, governments are spending increasing percentages of their Gross Domestic Products (GDP). Their debt-to-GDP ratios are increasing. Many countries have ageing populations that will demand vastly more spending on health care and pensions. It labeled this trend as part of the long-term threat of a big state. The economic impact of more government spending is that prices of the services welfare states provide, such as health care and education, grow faster than the economy because of their high labor intensity and low rates of productivity increase. The current spike in inflation supports this perspective. The difference between good government and bad government will be observed in societies that are fairer and a lot more prosperous. The nature, not the size, of the state’s interventions will be what matters most. The difficulty that the current Administration and Congress have had in passing both forms of infrastructure legislation is evidence of a breakdown in the degree of bipartisanship needed to address the nation’s most pressing problems.