Romney's Misleading Attack on Social Insurance
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The Fiscal Times
September 25, 2012

Republicans have made it very clear that if they take power in November, they intend to cut government social insurance programs. In their view, these programs sap the incentive to work and create a nation of moochers who live off of the taxes paid by productive members of society. Mitt Romney’s comment about the 47 percent who have supposedly become "dependent on government" reflects this line of thought. However, Republicans have unwittingly provided a strong argument against cutting social insurance with their “maker-taker” rhetoric.

One argument for social insurance is based upon the benefit of sharing the risks we all face in a capitalist society. Capitalism is better than any other economic system at promoting economic growth and providing us with the goods and services that we need – it certainly dominates socialism. But capitalism is also subject to turbulent fluctuations.

There are boom times and recessions, and sometimes the recessions are deep, prolonged downturns that impose large costs on workers who have done nothing at all to deserve such a fate. They do their jobs diligently day after day to support their families, then suddenly find themselves without a job and without a secure future when their place of employment fails because of a recession, structural change, or bad decisions by owners and managers. The purpose of social insurance is to spread these costs widely across the population instead of having them concentrated on the families of the unlucky duckies who lose their jobs or experience other misfortunes they had no hand in creating.

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Social Insurance can provide other benefits as well. How many people are stuck at a job they hate because they can’t afford to lose health insurance benefits? How many more people would take a chance at opening a small business – the backbone of job creation – if they knew they could still have health insurance and a secure retirement, and if they knew there was a safety net to catch them if they failed? Social insurance helps people open new businesses or take new jobs, and this provides a better match of workers with firms and encourages new innovation.

However, Republicans see these programs through the maker-taker lens described above despite the evidence against this view, and argue they should be curtailed on this basis. But this argument doesn’t hold up even on their own terms. There is a strong reason to support social insurance that comes out of the false maker-taker, producer-moocher distinction that Romney, Ryan, and other Republicans have made in the presidential campaign.

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The taker-maker foundation for social insurance begins with the insistence of those at the top that “I made that.” They may have gotten their ideas from the research department, put engineers and architects in charge of designing and executing the plan, left much of the training of workers to our educational system, used public infrastructure for water, electricity, and the delivery of raw materials, and relied upon police and fire protection to secure the investment. But when the product is completed and it’s a highly profitable success, we’ll be told “I made that.” The success is mine alone.

The people who undertake such ventures do deserve credit for their entrepreneurial skills. But if the self-described makers are going to claim full ownership of the good outcomes, as they do, then they also have to take full responsibility when things don’t go so well – for example when there is widespread unemployment and all of the difficult problems for households that come with it. After all, why should the working class pay the costs if the economy is in the hands of the so-called makers? The makers get all of the upside, but any downside should be socialized and shared broadly, is that how it works?

I’d prefer a society where we recognize that we are all in this together, good and bad, but if the “makers” are going to claim they are responsible for all the success in the economy – they whine loudly at any suggestion that profits should be shared with the working class to, say, offset rising inequality or support social insurance programs – then failure is theirs alone too. They must accept that it is their responsibility to offset the costs they impose when their individual or collective decisions create problems for working class households.

That means supporting monetary and fiscal policies that spur the recovery of output and employment when the economy underperforms so that people can get back on their feet as soon as possible. It also means doing what their false portrayal of social insurance recipients tries to avoid, paying higher taxes to support social programs that mitigate the losses to working class households unlucky enough to have their fortunes depend upon the abilities of the all too fallible “makers.”

Unfortunately, however, as we’ve seen, there’s little chance that those who see themselves as makers will take the personal responsibility for their actions that they are so quick to point to as lacking in those who rely upon social insurance programs in difficult times.

University of Oregon macroeconomist Mark Thoma writes primarily about monetary policy its effect on the economy. He has also worked on political business cycle models. Thoma blogs daily at Economist’s View.