Over the weekend I awoke from a vivid nightmare that provided a fresh perspective on our national epidemic of middle class anxiety.
In my stupid dream, I engaged in a big-stakes game of rock-paper-scissors with some smug high-rollers and eventually lost everything --- wiping out every one of my bank accounts, erasing all my investments, destroying the totality of my retirement savings, and even giving up my home. I got up from the bed drenched in sweat, literally shivering with dread at the prospect of breaking the news to my wife. After 22 years of marriage, how could I tell my life’s partner that due to my inexplicable foolishness we had been completely ruined?
As nightmares go, this early-morning terror couldn’t count as particularly realistic. I’ve never taken a special interest in playing rock-paper-scissors-- though I had been fascinated by a recent news stories about a much-heralded “world championship” for the dumb but addictive hand game. I’ve also sworn off gambling for more than twenty years—ever since I lost a painful total of $800 playing an elaborately devised, “can’t miss” blackjack system during a trip to Vegas for a lecture.
But even if I didn’t need to fear the specific threat of squandering my family’s resources on a reckless game, the fearful, dreamy experience of sudden collapse, of instantaneous destruction, felt both real and relevant. In fact, the great majority of Americans worry on either a conscious or unconscious level about the possibility that some unforeseeable factor ruthlessly will obliterate the fruit of long years, even decades, of hard and dedicated work. Even people who have painstakingly saved their money, building up equity in their homes or establishing reassuring numbers in their investment portfolios, know that the sudden loss of a job, or a medical disaster, or a law suit or divorce, or a catastrophic investment –not to mention a hurricane, earthquake or flood – could shatter their carefully constructed personal security.
In this peerlessly prosperous country, it takes an annual income of more than $940,000 to qualify for the top 1% of all earners and it’s possible that folks who make that much, and who have many millions salted away, may feel relatively safe from unexpected reverses. For the other 99% of us, however, the sense of middle class vulnerability remains inescapable and acute.
That’s why all the impressive statistics about our constantly rising standard of living mean so little to most people. So what if we own bigger houses, drive cars, operate more and niftier gadgets, eat dinner out with vastly higher frequency and, in hugely increased numbers, send our kids to college? On one level, we can’t deny that we enjoy greater privileges and wider opportunities than any prior generation, but these gifts feel unsatisfying when they can so easily disappear. When demagogues and opportunists whine about “The War on the Middle Class” they seem vaguely credible not because of the hardships that characterize our mostly fortunate lives but because of the sense insecurity that sours our blessings. What good is a great house with a beautiful view and rising equity if you lose your job and the bank forecloses?
Middle class insecurity is such an obvious, overwhelming factor for so many tens of millions of Americans that one can only marvel that both of our major political parties have done so little to address or temper it. Democrats continue to focus on issues like raising the minimum wage—which might help some of the lowest paid workers enter the middle class, but will do nothing to reduce the vulnerability of more fortunate Americans (including those small businessmen who will suffer from such a raise). The Republicans continue to concentrate on blocking tax hikes and new regulations – policies that will help individuals and businesses accumulate wealth but don’t serve to protect that wealth from sudden reversals of the medical, legal, employment, or natural disaster varieties.
Despite their different policies and preferences, both parties emphasize protecting the ability of ordinary Americans to get ahead and improve their status while an emerging majority is apparently less concerned with gaining more than they are with defending what they’ve already built. In fact, most people understand the idea (on a visceral level at least) that heightened security comes with a cost – and that’s a cost they seem more and more willing to pay.
Consider the recent debate over Social Security. The benefits remain modest and the costs are shockingly high, but most Americans appear willing to sacrifice real money and real opportunities to avoid any lingering fears that they will be destitute in old age. The typical American household with two wage-earners now spends more than $5,000 a year on Social Security (if you count the so-called “Employer’s Contribution” which constitutes that much extra pay that could go to the worker). With even a minimal rate of return from, say, a typical CD, this payment would amount to more than $60,000 in ten years, or more than $270,000 in a typical working lifetime. This sort of nest-egg could generate a substantial annuity for every retiring worker – equaling current Social Security payments, while still providing hundreds of thousands of dollars to pass on to heirs.
Why can’t everyday citizens do the math and see that they would come out way ahead saving on their own rather than encouraging government to raid their weekly paychecks for the meager pay-offs of Social Security? Why did the public response prove so harsh and vitriolic when President Bush suggested using even small amounts of the government grab to create personal retirement accounts? In part, people cling desperately to Social Security because they trust the government more than they trust the vagaries of markets, or trust themselves to make regular or wise contributions for their own welfare. For a clear majority of Americans, they prefer trading the ability to get ahead now for the promise of security in the future.
The same calculation drives the rising clamor for “universal health care” --- the breathtakingly expensive (and hugely appealing) idea that government will take care of paying all medical bills for everybody. The push for this new entitlement isn’t based on the notion that Uncle Sam must pay for your regular check-ups, or the routine procedures that even healthy people require. Tens of millions of Americans – especially those below middle age – don’t bother to pay for health insurance because they don’t expect to get sick, and they’d rather pay for the minor medical expenses that they require rather than buying costly insurance to protect against disasters they hope to avoid. As time goes on, however, even the young and indestructible begin to age and to dread the greater risk of ill health. In this context, a lack of insurance – or of adequate insurance – greatly intensifies the sense of exposure. A government program like Medicare, extended to citizens of every age, begins to sound like a good idea, in forcing everyone to get the coverage they might otherwise try to skip.
Many other issues similarly play to the widespread Middle Class anxiety concerning the protection of past gains – thereby reflecting not the long-standing suffering and misfortunes of typical households, but their recent successes in enhancing their status, and the plausible fear that these hard-won advances will quickly be reversed. This fear obviously stands behind the lingering desire on the part of many working Americans for decisive government action against the perceived evils of “globalization” and free trade. Abundant economic evidence proves that the relatively unfettered flow of goods and services creates far more jobs than it costs—by a ratio of at least two to one – and the current unemployment rate (an historically low 4.4%) hardly confirms all the dire predictions that NAFTA, or GATT or the WTO would throw tens of millions of our loyal citizens out of work. Nevertheless, the undeniable, society-wide benefits of free trade offer cold comfort to any of those individuals who have lost jobs, or who live in fear that their work will be “shipped overseas” to low-wage competitors in China or India.
All attempts to dismiss or minimize such concerns sound elitist, out-of-touch, patronizing and off-putting. If a caller to my radio show speaks for many of his fellow citizens and expresses the fear that his job will fall victim to globalization, it’s not appropriate to respond by citing our booming economy and the likelihood that he’ll find another job, eventually.
The first, most important step in dealing with the national tidal wave of Middle Class anxiety is to take it seriously, to acknowledge its logical basis and to shape a responsible reform agenda to deal with its sources. Those plans must begin, however, with the acknowledgement of three uncomfortable but incontrovertible facts about some of the most popular of the proposed governmental initiatives meant to provide more security for the middle class ---
1) Many, it not most, governmental “security” programs simply don’t work
2) Even the security programs that do work come with a steep, sometimes punishing economic cost, and
3) Any effort to assure economic security inevitably involves a loss of freedom.
1) The chances are, your favorite governmental initiative to protect your prosperity will fail in achieving the desired result. The ongoing drive for protectionism and trade restrictions represents a case in point. There’s no evidence that tariffs or import quotas can save manufacturing jobs in an increasingly global economy – not when communications and transportation and technology make internationalization all but inevitable. President Bush made one of his biggest mistakes by giving in to political demands for steel import restrictions – a move that raised the cost of doing business for US automakers and delivered further setbacks to those already struggling companies. One of the key challenges in keeping the US economy strongly competitive in international markets is limiting the burden of regulation and governmental interference. Bureaucratic intrusion for the sake of “economic nationalism” (monitoring and regulating the percentage of American-made parts, for instance) is still bureaucratic intrusion and inevitably hurts rather than helps our competitiveness. North Korea offers a salient example of uncompromising protectionism, and a national economy that has deliberately turned its back on global trade. It’s true that North Koreans face no danger whatever of losing their jobs to foreign competitors but those (slave labor) jobs also fail to create enough wealth to keep the populace from mass starvation. Of course, no U.S. advocates of “economic security” initiatives will point to North Korea as an example of the changes they seek. They will much more likely point to “enlightened” European welfare states like Sweden, where workers famously draw generous state pensions if they ever lose their jobs or find themselves unable, for health or personal reasons, to work. This guarantee of state support for the idleness option has now led nearly 20% of able-bodied Swedes to opt out of the labor market and to live on government funds provided by their neighbors – an intolerable situation that led to the election of a promising new right-center government in Stockholm that’s ostentatiously committed to rethinking and retooling the nation’s sclerotic welfare state.
2) Every effort to guarantee financial security through government programs comes with a significant cost attached. The drive for protectionism, for instance, ignores the fact that every American is a consumer as well as a worker. Even in the doubtful event that high tariffs and import restrictions worked to protect jobs and wages in some industries, they would also raise the cost of living for everyone – including the workers they’ve been designed to help. It made sound like a great idea to raise the cost of TV sets imported from China, but that means that we’ll all pay more for TV sets in general, with less downward, competitive pressure on the cost of the product. By the same token, “universal health care” offers the appealing prospect of somebody else taking care of your medical bills but the institution of such a sweeping program in the United States will undoubtedly increase the overall cost of health care. If government pays for all medical services, the demand for such services will undoubtedly go up --- much as the demand for fruits and vegetables (another healthful factor in our lives) would go up if the feds suddenly offered to pay for your bananas and artichokes. The cost of this “free” medical care will ultimately, inevitably fall on taxpayers at every level and will cripple entrepreneurial activity – much as the crushing burden of health benefits and pensions handicap most companies today. A universal health care system doesn’t mean that medical services are suddenly free—it just involves an even more complicated, even more inefficient and indirect system for paying for them. Ultimately, the cost of financial security supposedly guaranteed by government programs will fall on everyone in the form of reduced growth in the overall economy. Earlier this year, the government of France attempted to deal with that nation’s horrifyingly high rates of unemployment (more than double what we experience in the U.S.) by loosening some of the rules regulating private employment. The French proposed that employers be given a freer hand in hiring or firing workers during the first two years that they worked at a given job, before the strict European “job security” legislation kicked in and made termination all but impossible. Despite abundant indication that this change would help provide first time employment for many frustrated, impoverished members of the younger generation, the French left organized demonstrations, riots and lavish property destruction before the Chirac government backed away from the modest but desperately needed reform. Yes, the French (and many of their European colleagues) guarantee worker security with far more extensive regulations than in the United States, but this system also guarantees anemic economic growth, reduced social mobility and strictly limited opportunity for young workers trying to take their first steps toward the middle class.
3) All plans to provide definitive protection from various middle class nightmares will end up reducing the freedom that made the middle class status possible in the first place. People pursue wealth not only to make them feel secure from fears of homelessness and hunger but to enhance their freedom of choice in conducting daily life or laying long-term plans. If you’ve built up some assets or resources you’re earned more choices – about where you send your kids to school, what sort of home you want to occupy, how much time off you want to devote to your vacation, whether you eat out tonight or consume leftovers from Thanksgiving, and so forth. “Economic Security” measures invariably reduce the range of available choices and so reduce the freedoms that middle class status supposedly provides. For instance, one of the biggest, most crippling financial disasters for any individual often involves divorce. I know a friend with two children below the age of seven suddenly forced out of a comfortable home and forced to start over because of an unanticipated marital breakup. In divorce settlements, both parties often lose (with only the lawyers coming out ahead), giving up homes, investments, lifetimes of saving. Should government protect us all from this sort of middle class nightmare by making it impossible for couples to get divorced? One could make the argument that this change would benefit individuals as well as society, but nearly all Americans would resist it as an unacceptable limitation on personal liberty. An essential element in freedom involves the freedom to fail – in personal relationships, in business, in every arena in life. Much of the economic growth of recent years has been driven by small businesses that sometimes become big businesses and end up employing thousands at the same time that they’re changing the world. Most often, however, small businesses fail. Any attempt to prevent such failures would involve a restriction in the free competition that makes possible the most significant successes. Restrictions in freedom – including the freedom to fail – will only undermine the entrepreneurial energy that makes possible both social mobility and prosperity.
This recognition brings me back to the silly dream that provoked these reflections in the first place. In my irrational nightmare, I lost my personal economic security because of foolish gambling on the rock-paper-scissors game. We all know that “gaming” (as it’s euphemistically called) amounts to a sucker’s bet and threatens the savings and viability of innumerable American families. I’ve spoken on the air many times of the dangers and destructiveness of gambling and expressed my fervent opposition to government sponsorship of this industry (through state-run lotteries and the like).
Does this mean that we should make all Americans more secure by outlawing gambling altogether? Of course not, because ---
1) it wouldn’t work –people would find a way to gamble anyway
2) there would be a high cost involved – driving the control of gambling even more firmly into the hands of criminal elements and
3) such a change would reduce our freedom – which includes the freedom to lose your money in idiotic games of chances (perhaps, even, rock-paper-scissors) that are invariably stacked against you. The freedom to make money requires the freedom to lose money.
This recognition that mobility must work both ways – that you can’t eliminate the prospect of downward mobility without severely limiting the chances for upward mobility – represents the beginning of wisdom in coping with today’s middle class anxiety. That anxiety feels more intense than ever before precisely because more Americans than ever before have progressed into the middle class.
When ‘60’s icon Janis Joplin sang “Freedom’s just another word for nothin’ left to lose” (in a song written by Kris Kristofferson) she defined an essential truth, and helps explain why most of us worry about our futures and don’t feel particularly free. Today, most Americans have something to lose---we’ve accumulated enough possessions and resources that we’re more concerned with protecting our current status than we are with vaulting even further ahead in our position in society.
But we shouldn’t allow our defensiveness about what we’ve achieved to destroy that distinctively American spirit of adventure that made our progress possible, or to erase our faith in the future or ourselves. In describing the unparalleled prosperity and success of the United States, Professor Walter A. McDougall of the University of Pennsylvania emphasizes “the American people’s penchant for hustling.” In “Freedom Just Around the Corner,” he notes that “Americans have enjoyed more opportunity to pursue their ambitions, by foul means or fair, than any other people in history” and defines a nation of “builders, doers, go-getters, dreamers, hard workers, inventors, organizers, engineers, and a people supremely generous.”
May we continue to live up to these traditions, rather than placing unjustified trust in the government to sustain and protect us from the potential mistakes and reverses that Americans have always experienced – and overcome. There’s no reason to assume that if they’re told the truth about the ineffectiveness and high, freedom-busting cost of nearly all governmental “security programs,” the people won’t be able to count on themselves for defense against various middle class terrors – including even the sweat-inducing nightmare of rock-paper-scissors.
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