Event Transcript: Refugee Policy in the 21st Century

In September 2018, the Niskanen Center hosted two panels exploring refugee policy in the 21st century featuring leaders from academia, government, think tanks, and refugee resettlement organizations. The first panel explored the strategic and national security case in favor of refugee resettlement, and the second examined how the U.S. can harness private sector support to improve refugee resettlement outcomes.

The event was co-sponsored by the National Immigration Forum, the International Refugee Assistance Project (IRAP), Human Rights First, and the United States Conference of Catholic Bishops.

C-SPAN coverage is available for the first panel and for the second panel; the transcript is also available for the first panel and second panel. The links below provide highlights from both panels.

Panel I: The Strategic Case for Refugee Resettlement 

• Idean Salehyan outlines the strategic case for refugee resettlement.
• Idean Salehyan contextualizes the security risks of refugees.
• Idean Salehyan explains the refugee resettlement procedure.
• Idean Salehyan speaks about the skills that refugees bring to America.
• Idean Salehyan explains the history of bipartisan support for refugees
• Linda Chavez explains how refugee resettlement is important to the idea of being an American.
• Linda Chavez discusses “I came to America as a refugee.”
• Linda Chavez compares American and European refugee integration.
• Linda Chavez explains how fears about assimilation are not new, but unwarranted.
• Scott Cooper explains how refugee resettlement furthers a valuable national narrative.
• Scott Cooper explains how refugee resettlement is crucial for maintaining regional stability and maintaining important alliances.

Panel II: Community Involvement in Accepting Refugees

• Jennifer Bond outlines the general success of private resettlement in Canada.
• Jennifer Bond explains why communities need to lead the resettlement process.
• Jennifer Bond talks about the value of community sponsorship in expanding overall support for refugees.
• Chris Gersten explains how the refugee program is essential for American moral leadership.
• Chris Gersten recommends that governments partner with sponsorship groups.
• Chris Gersten defends the refugee program.
• Chris George outlines the growth of IRIS and community based sponsorship in Connecticut.
• Chris George explains why community based sponsorship delivers better results than traditional resettlement methods.
• Chris George highlights the growing interest of the American people in resettlement.

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Niskanen Center Releases New Policy Vision Paper

Today we are excited to release a new paper that provides a detailed overview of the Niskanen Center’s distinctive policy vision. Entitled “The Center Can Hold: Public Policy for an Age of Extremes,” the paper was coauthored by Niskanen scholars Brink Lindsey, Steven Teles, Will Wilkinson, and Samuel Hammond. You can find it here. 

In the paper, we argue that American liberal democracy is currently experiencing a crisis of legitimacy. That crisis began with Donald Trump’s victory in the Republican primary and was underscored by his improbable elevation to the presidency: Neither of these events could have occurred in a healthy, stable, well-governed polity.

We contend that new governing approaches are needed to resolve the crisis:

There is only one sure way to quiet our populist distempers and restore faith in democratic institutions, and that is for those democratic institutions to deliver effective governance. The failures of governance are what got us into this mess; public confidence in government will return only when government demonstrates through successful problem-solving that such confidence is merited.

Success in this effort will require not just new policies, but a whole new way of thinking about policy. The center can hold, but first it must be fortified with new convictions. There are, to be sure, many reasons why our political system has failed to address the mounting problems and dissatisfactions of the 21st century. But one crucially important and widely neglected factor is that the two prevailing ideological lenses, on the left and right, have gaping blind spots that render the most promising path forward invisible.

On economic policy issues, the traditional axis of conflict is “pro-government” on the left and “pro-market” on the right. Overcoming our present malaise, however, will require bold moves in both directions simultaneously. We need both greater reliance on market competition and expanded, more robust, and better-crafted social insurance. We need more government activism to enhance opportunity, and less corrupt and more law-like governance. To clearly see these needs and how best to answer them, it is necessary to use a new ideological lens: one that sees government and market not as either-or antagonists, but as necessary complements.

Rejecting today’s ideological polarization over the size of government as a false dichotomy, our hybrid vision combines the best aspects of the “pro-market” right and the “pro-government” left:

Another way to put the same point is to say that we reject both market fundamentalism on the right and democratic fundamentalism on the left. In other words, we don’t believe that either a well-functioning market economy or a well-functioning representative democracy is self-creating, self-executing, or self-sustaining. Market fundamentalists are prone to arguing that all you need to get markets up and running is to get government out of the way—in other words, the less government, the better. Democratic fundamentalists make the mirror-image mistake, arguing that all you need to get democracy to work better is to grant government more powers—that is, to shift more and more decision-making from private actors to officials of a democratically elected government. We, by contrast, believe that the functioning of both markets and democracy depends on how they are structured: the right structures produce good results, while the wrong structures can cause disaster.

To restore flagging economic dynamism, we advocate far-reaching regulatory reforms to unwind distorted rules that favor privileged insiders at the expense of everyone else:

Regulatory capture is broadly defined as insider domination of the policymaking process resulting in regulation for the benefit of the industry rather than the public. This dynamic has led to badly distorted policies that throttle innovation and growth even as they redistribute income and wealth to a favored elite at the top of the socioeconomic scale. The result is massive misallocations of resources ranging from the financial sector to health care to where Americans live and work, and a corresponding diminution of economic dynamism and opportunity.

At the same time, however, we need to bolster programs of social insurance to address dislocations caused by creative destruction and maintain political support for robust market competition:

It’s worth reminding ourselves what is at stake in this discussion. In the face of inevitable shocks caused by creative destruction, political systems can be fundamentally destabilized in the absence of effective systems of social insurance. The contemporary rise in anti-market populism in the United States is a clear case in point….

Preparing for the next economic shock, be it from trade, a recession, or rapid technological change, calls for major enhancements to our unemployment and income security systems, up to and including a dedicated federal funding stream for subsidized employment programs.

Without strong income supports that put a floor beneath displaced workers and systems that smooth the transition to new employment, political actors and the public tend to turn against the process of creative destruction itself. Put differently, a lack of social protection begets protectionism, as the quite reasonable demand for economic security is instead translated into popular support for trade barriers, inflexible labor regulations, industry bailouts, and precautionary impediments to new technologies, all of which conspire to further undermine economic security over time through sclerosis and stagnation. This is why countries with some of the largest welfare states also have some of the most dynamic private-enterprise systems, and vice versa. By filling in for missing insurance markets, a robust welfare state works hand-in-hand with flexible market processes to produce broad-based prosperity.

Our policy vision represents a sharp break from the prevailing orthodoxies of left and right, and is therefore hard to pin down with a handy, reductive label. Although we make the case for bold reforms, we believe the essential spirit of our project is one of moderation:

The goal of the moderate is not to achieve perfection according to a single, unbending standard, but to strike a rough and workable balance among a variety of valid yet competing and perhaps unreconcilable objectives. In these disordered times, restoring balance will require major policy changes, and we do not shrink from the challenge. Yet our goal is not to make the world conform to some abstract, rationalistic schema. Rather, it is to work successfully and effectively within the world as it actually is, with all its messiness and confusion.

In the spirit of moderation, we have attempted to learn from and incorporate what is best in competing ideological traditions. We hope that the new synthesis we offer can help move our divided society toward the best version of itself and away from the toxic tribalism that afflicts us today.

Read our entire policy vision here.

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COMMENTS SUBMITTED TO DHS ON PUBLIC CHARGE

On October 10, 2018, the Department of Homeland Security (DHS) issued a notice in the Federal Register (83 Fed. Reg. 51114) proposing to prescribe how it determines whether an alien is inadmissible to the United States under section 212(a)(4) of the Immigration and Nationality Act (INA) because he or she is likely at any time to become a public charge and requested comments on or by December 10, 2018.

The ultimate totality of the circumstances determination must be designed to keep the rate of false positives less than half the total rate of positives, but does not have to be designed so as to minimize the rate of false negatives. This will decidedly impact how strong different kinds of evidence are for inference about the likelihood of any given alien becoming a public charge, as well as the appropriate levels for various thresholds.

To ensure consistency, objectivity, and more accurate determinations that are consistent with the criteria established in the INA, DHS should provide guidance on how a totality of the circumstances likelihood determination should be reached using evidence-based methods, namely using a base rate as a prior probability which can be updated based on the evidence about a given alien. Starting from the “inside view” of the evidence about a given alien rather than the “outside view” of base rates about the reference class of all aliens would likely lead DHS to significantly more false positive determinations.

DHS should estimate a base rates—both before the rule takes effect and again after a sufficiently long interval to account for disenrollment—for the proportion of aliens non-exempt from public charge inadmissibility who would be considered public charges. This base rate should then be considered the prior probability that an alien is likely to become a public charge. DHS should also estimate average levels of receipts, durations, and other kinds of evidence in the totality of the circumstances so that officials may compare any given alien’s evidence to average levels and make appropriate updates in the right direction.

Full comment available here.

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Video: Ed Dolan Debates Job Guarantees at Brookings

Last Thursday, Niskanen Center senior fellow Ed Dolan debated the feasibility of a federal job guarantee on a panel for the Brookings Institution’s Hamilton Project, titled “Identifying Key Considerations for Shaping Effective Employment Support Proposals.” A time-stamped link to the discussion is available here (59:40).

Ed, who wrote on the topic of job guarantees and employment supports for the Niskanen Center here, brought his usual charm and clarity to the discussion, highlighting the lack of intellectual rigor among many proponents of job guarantees, and the need for thinking through employment support policies in the context of a broader understanding of the labor market.

 

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Our Lost Vocabulary of Social Insurance

Social insurance programs are at the center of American politics. In fiscal terms, Medicare and the Social Security Administration’s programs for retirement, disability, worker’s compensation, and worker’s life insurance amount to roughly 41 percent of the federal budget. This fiscal centrality, however, does not rest on anything like a broader, public understanding of what makes social insurance social — and thus why such programs are so important in American political life. On the contrary, over the years our vocabulary of social insurance has become increasingly replaced with a vocabulary of welfare and redistribution, creating a fundamentally misleading impression about most of what the federal government does.

In the mid-1930s, when the retirement and survivors insurance programs had their legislative start, university-educated Americans had every reason to be clear about what distinguished social insurance from its commercial counterpart. Indeed, most undergraduate programs in the social sciences took up social insurance’s rationale and history. But note the data measuring the historical use of the expression in three of America’s most important daily newspapers. The changes recorded are startling. By the end of the 20th century, the category of social insurance had seemingly lost its place in the vocabulary of American politics.

This is particularly unsettling because of the enormous importance of social insurance programs in American history. The Great Depression, which wiped out the savings of most American families, caused multiple bank failures, and saw an unemployment rate of some 25 percent, prompted demands for substantially increased government protection against economic disaster. “Welfare” was the term used for programs that made poverty status the precondition for financial aid, and President Roosevelt acknowledged that immediate aid to poor families was required. But his case for increasing the footprint of American social policy was based on the principles of social insurance, not merely poor-relief narrowly construed.

By the 1970s, social insurance programs had become major components of the federal government, but also the targets of ideological and budgetary attack. Social Security retirement, Medicare, disability, and unemployment insurance were increasingly labeled as simply “entitlements,” and charged with contributing to out of control spending via unaffordable benefits. This allowed critics to advocate for a much smaller social policy commitment, urging a less costly “safety net” for the deserving among America’s poor citizens. The semantic bait-and-switch can be seen with Google’s Ngram viewer, which tracks word frequencies across the American English corpus.

Yet the principles and judgments incorporated in the concept of social insurance remain central to the major policy debates of our time, most dramatically in the debates over health care reform and the affordability of Social Security retirement benefits. They are relevant to the backlash against the Affordable Care Act and to the debate, rekindled recently, between the advocates of “Medicare for All” and advocates of Medicaid expansion as the next step toward universal health coverage. More generally, they are crucial to addressing the broader conservative critique of government’s role in American social policy.

So, What is Social about Social Insurance?

Social insurance, like commercial insurance, is about protection against financial risk. It is “insurance” in the sense that people contribute to a fund to protect themselves against unpredictable financial risks. These include outliving one’s savings in old age, the early death of a breadwinner, the onset of a disability that makes work difficult if not impossible, the high costs of acute illness, involuntary unemployment, and work-related injury. Yet unlike with commercial insurance, contributions are not prices in a market and thus do not depend on the contributor’s risk profile (unless commercial regulations say otherwise, in essence creating “social” insurance through the backdoor). Instead of a contract between an enrollee and an insurer, social insurance is a system of shared protection among the insured, most comparable to mutual insurance in the commercial realm, with contributions made in proportion to one’s market income. In social insurance, the “insurer”—whether a government agency or a corporate body with a joint labor-management board—is the agent of the contributing enrollees. And unlike commercial insurance, the social insurance “contract” mandates participation by law, since otherwise adverse selection would cause its unraveling.

Social insurance spreads the costs of coverage according to a different logic than that of commercial insurers. The same risk in commercial insurance carries the same premium price. The greater the risk, the higher the price of coverage. Social insurance, by contrast, operates on the premise that contributions are calculated according to one’s income and benefits according to one’s needs. But the central political feature of social insurance is that the contributors are also beneficiaries. This is not the case with social assistance programs with means-tested eligibility standards. As important as such programs are for those who experience poverty, taxpayers do not in general identify with welfare beneficiaries.

How much difference does it make that most contemporary reporting on social insurance programs, and much social science scholarship, ignores their conceptual underpinning and distinctive operational features? Should popular voices in American social policy be criticized for using proper names to describe programs without explaining their distinctiveness from means-tested welfare programs? I would not be writing this essay if I did not believe, as one of three co-authors, that the title of our 2014 book — Social Insurance: America’s Neglected Heritage and Contested Future — identified an important problem.

“Entitlement”-talk

Words make a difference to all thinking about public policy, but this is especially the case where conflicts are over fundamental values. Consider, for example, the common use of “safety net” as a collective description of programs as diverse as Medicare and Medicaid, old age Social Security, food stamps, disability insurance, and homeless shelters. This expression collapses the distinction between means-tested welfare and social insurance programs into a metaphor suggesting that recipients have to “fall” into poverty to warrant help. This is the opposite of social insurance, which represents a platform on which one can stand before economic risks arise. The term “safety net” is even more ambiguous, particularly when modified by terms like high or low, porous or tightly knit, threadbare or generous, or applied in situations when one’s financial resources are largely “spent.”

The use of public finance terms like “income transfers” further blurs the differences between cash benefits that one receives only after income and asset tests are applied and insurance payments that kick in without such tests. Then there is the term “entitlement,” which was meant to refer to the nondiscretionary nature of the spending, but now connotes an adolescent sense of entitlement among the beneficiaries. Neither term helps us understand the robust public approval of our major social insurance programs, and indeed, are often employed by opponents of social insurance in order to obfuscate an otherwise popular concept.

The negative connotation of “entitlements” is especially misleading. When one legitimately claims some social insurance benefit, the implication is that there is a corresponding duty to provide that benefit. That is the basis of the common sentiment among recipients of retirement income Social Security that they have earned their pensions. That widely shared sentiment largely explains the political fear that any substantial reduction in those benefits is a “third rail.” Few if any critics of the program criticize the appropriateness — or desirability — of OASI, the old age retirement and survivors insurance programs, on its own terms. Instead, they concentrate on claims that the programs are unaffordable. As a result, a large proportion of the public fears for their future despite the obvious political vulnerability of such critiques.

Understood as a technical budgetary category, entitlements in American fiscal policy are simply those programs whose benefits and beneficiaries cannot be adjusted without statutory changes. Administrations cannot simply reduce a program’s benefits or change its eligibility rules on their own. That entails constraints on administrative flexibility, reflecting the idea of stable governmental commitment to social insurance protections over long periods.

Using the entitlement category in two senses is confusing and in that respect harmful. What citizens believe about the appropriateness of a program is a distinct concept from the budgetary rules about changing its provisions. Both are important, but when was the last time you, the reader, saw this distinction explained when the entitlement term was used? Instead, “entitlement” is used like a four-letter word in diatribes about the supposedly troubled future of social insurance programs.

“Solvency”-talk

Still another source of linguistic confusion is what I will call solvency talk. When policy discussion turns to the fiscal projections of social insurance programs, critics and defenders alike turn to the trust fund. If the old-age retirement actuaries forecast a revenue projection of X in 25 years and the projected outlays of Y equal more than X, the “trust fund” is, according to this logic, in trouble. It will no longer have enough to meet its “bills” at that date. And if that shortfall were to continue, the necessary result would, in this framing, be insolvency, even though few policy experts seriously doubt the sustainability of programs like Social Security given fairly modest reforms, nor the political catastrophe of allowing the trust fund to run dry. In this sense, solvency talk is a lot like the threat of government shutdown created by the Federal debt ceiling — a crisis manufactured from the intransigence of elements on both sides of the aisle rather than anything fundamental.

Reflect for a moment about budget forecasts of Department of Defense outlays. Nobody writes about the military department going “broke” or becoming “insolvent” no matter how fast the growth in the budget. Indeed, no sensible analyst would make 20, 30, or 40-year forecasts for defense expenditures. Some analysts, in discussions of the future of Social Security make conditional forecasts long into the future. These are said to be useful exercises, reminding the public that commitments now have long-term effects. But the very preoccupation with solvency generates unnecessary anxiety. Since DOD does not have a “trust fund” budgetary categorization, its future outlays are presumed to be ones over which future governments have some control.

The same legal control is available to the Social Security Administration and the Congress. The confusion is even worse in programs that combined different funding mechanisms. For instance, funding for Part A of Medicare comes from the social health insurance trust fund (HI) while Part B is funded from general revenues and beneficiary premiums; it cannot go broke, but it can be reduced. That prompts solvency talk about Medicare’s future without clarification of how the program differs in two of its component parts.

The background of most solvency questions is the widely reported growth of the future retiree population. The Census Bureau projects that the over-65 population will soon make up 20 percent of the population. Such projections, unaccompanied by estimates of what increases in funding social insurance programs will require, prompt concern. Dire predictions of “insolvency” or cuts in retirement benefits get reported in the media without much scrutiny. As a public speaker, I face such questions regularly. I urge my questioners to dwell for a moment on how a growing proportion of senior citizens can be politically compatible with large reductions in future Social Security benefits. Put another way, how could the “sacred cow” of Social Security — in the language of its critics — face such a fate under conditions that, if anything, only cement its political sanctity?

There is another irony here that warrants discussion. The original use of trust fund language in social insurance had more to do with trust than with funds. President Roosevelt rightly felt in the 1930s that the contributory ethos of social insurance would come to be central to its secure political status. A population believing that each contributing worker had earned their social insurance benefit would not tolerate substantial budgetary cutbacks. The idea of a trust fund, then, was to emphasize the special status of a program whose benefits would be decades after a contributor’s payments. Its design is to enforce time-consistency, and its language is meant to highlight reliability. Yet sadly this language has since been turned upside down, bringing needless fear of “running out” of funds and thus uncertainty about the future. Roosevelt’s protective rhetoric backfired as the original understandings of social insurance weakened, even while the popularity of the programs remained substantial.

Social Insurance, Our Neglected Heritage

There are at least two plausible criticisms of this essay’s argument about the importance of relearning the appeal of social insurance principles. One is that the world has changed dramatically since the birth of social insurance in the late 19th century, let alone since the 1934-35 Committee on Economic Security provided a blueprint for expanding social insurance in American public life. The other is that changes in long-standing European social insurance programs show that major adjustments in the American programs are required as well.

The claim that the world has changed does not necessarily mean that the economic risks against which social insurance programs offer protection have been fundamentally altered. Consider every one of the risks noted in this essay — outliving one’s savings, involuntary unemployment, medical costs, and disability. Not one has disappeared, and social insurance programs for each have been implemented in wealthy democracies. I doubt, in other words, whether social insurance is in any conceptual trouble.

But that does not mean social insurance programs don’t need to adapt to contemporary circumstances. The spread of contract employment has been particularly challenging for European countries where social insurance is a function of trade unions and other sector-level organizations. It is equally obvious in the US that employer-provided health insurance puts a damper on labor market flexibility. Reduced employment in regular jobs with health coverage will demand the search for other sources of provision. These and other realities of our changing economy will only bring to the fore the central claim of this essay: Social insurance programs dominate American social policy but what that means for our politics is too little understood or explained. And that criticism extends not only to harried reporters but to a significant amount of the public policy community, as well.

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Theodore (Ted) Marmor is a Niskanen Center adjunct fellow and Professor Emeritus at The Yale School of Management.

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Does Anyone Speak for the Poor in Congress?

Studies: “Poor Representation” and “Putting Inequality in Context”
Interviews: Kris Miler, University of Maryland; Christopher Ellis, Bucknell University

The rich have more tools to influence politics and policy than the rest of Americans, but what about the poorest citizens? In an age of increasing economic inequality, who, if anyone, represents their views and their interests in Congress? Kris Miler finds that Members of Congress in high poverty districts are not the champions of the poor. Instead, Democratic women and minorities from urban districts tend to introduce bills about poverty but have trouble getting them passed, leaving the poor without effective representation even in times of rising poverty. Christopher Ellis finds that Members of Congress are usually more responsive to the opinions of the rich than the poor in their districts, but moderates and Democrats in competitive districts with unions do represent the opinions of the poor. Low-income constituents are only sometimes visible and have a hard time holding their representatives accountable.

Transcript

Check back on 12.6.18 for the full transcript of this episode.

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The Last True Republican President

Yesterday I went to pay my respects to former president George Herbert Walker Bush as he lay in state in the U.S. Capitol Rotunda. The crowds were considerably thinner than what I remember from when I went to see former president Ronald Reagan lying in state in the same place in 2004, when the lines of people who wanted to see his casket snaked all the way around the Mall. Fourteen years ago, I waited all night to get into the Capitol by daybreak, and there was a palpable feeling of being present at the passing of one of the greats of our time. Bush’s memorial was a solemn and respectful occasion, but it was not charged with anything like the same world-historic electricity as Reagan’s.

The contrast would not have surprised Bush, who in his later years held no illusions about his legacy. “I feel like an asterisk,” the one-term president told his biographer John Meacham. “I am lost between the glory of Reagan — monuments everywhere, trumpets, the great hero — and the trials and tribulations of my sons.” However, Bush may be of more interest to history as the last president of his kind.

Bush was the last president to have been shaped by the distinctive culture of the New England WASP upper class and the gentlemanly values inculcated at prewar prep schools like his alma mater, Andover. He exemplified many of the best characteristics of that culture, including a basic personal decency, an even temperament, an inclination toward self-deprecation, and an obligation toward public service — not to mention his endearing habit of producing uncounted thousands of handwritten, personal notes.

But he also reflected that culture’s starchy discomfort with open displays of emotion as well as its difficulty in comprehending the experiences and perspectives of the less fortunate.

He was the last president from the so-called “Greatest Generation” that was shaped by the searing experiences of Depression and war. He was, in fact, the last president to have been alive during World War II. As a Navy pilot in that conflict, Bush engaged in combat and emerged a war hero. None of his successors ever fought in a war.

Bush was the last president to have been a member of the U.S. House of Representatives and the Republican Party leadership (as chair of the Republican National Committee). He was the last president to have been an ambassador (to the United Nations and China) and the only president, ever, to have been director of the Central Intelligence Agency.

Despite his half-hearted efforts to pass himself off as a Texan, Bush was the last president who represented Eastern establishment values of prudence, pragmatism, tolerance, measured judgment, and internationalism. At the same time, he revealed himself to be willing to subordinate his principles to the higher need of winning elections in a Republican Party that was becoming increasingly Southern and conservative.

As an undergraduate at Yale, Bush had led a fundraising drive for the United Negro College Fund, but in 1964, running for the U.S. Senate in Texas, Bush opposed the landmark Civil Rights Act that ended Jim Crow segregation in the South. Once in office as a member of the House of Representatives, however, Bush was able to recover his conscience and courage, voting for the 1968 Fair Housing Act in the face of angry criticism from his Houston-area district.

A similar pattern recurred later in his career. As Reagan’s vice president, Bush brokered a congressional deal to strengthen the Fair Housing Act and enable the government to enforce its provisions. But when he ran to succeed Reagan in 1988, he countenanced a nasty campaign that used the menacing mug shot of “Willie” Horton to aggravate white fears of black crime, effectively Southernizing the Republican stance on race relations.

Bush’s victory over Democratic candidate Michael Dukakis made him the first sitting vice president to be elected to the presidency since Martin Van Buren in 1836. In hindsight, the election is notable for Bush’s having received a higher percentage of the popular vote (53.4%) than any of his successors. Bush also was the last Republican presidential candidate to win California.

Our forty-first president held the White House for the Republicans for a third consecutive term — the only time either party has achieved this feat since the Roosevelt-Truman era. Following the phenomenally popular Reagan, Bush promised continuity rather than change. Bush’s invocation of a “kinder, gentler America” was interpreted as a backhanded criticism of his predecessor, but his domestic agenda was much the same as Reagan’s, though with more emphasis on voluntarism (the sometimes-mocked “thousand points of light”) and education reform.

Bush’s ability to enact major domestic programs was in any case limited by Democratic control of Congress throughout his presidency, and by budget constraints created by the deficits that had exploded during Reagan’s presidency.

Bush was the last moderate Republican president, and the last to uphold that now-diminished faction’s values of fiscal prudence, social tolerance, consensus building, and multilateral cooperation in foreign policy. His centrism had been the reason for his selection as Reagan’s running mate, in order to reassure voters who worried that Reagan was too ideologically extreme.

Bush did his best to allay the suspicions of Reagan and his conservative followers — by renouncing his former support for Planned Parenthood, for example — but he never fully succeeded. His wife, Barbara, was the last Republican presidential spouse to support the Equal Rights Amendment. Friends said she was privately pro-choice; publicly, she called for keeping abortion out of Republican convention platforms.

Bush’s fundamental loyalties were to the traditional Republican Party rather than the conservative movement or his own brand of populism. He enraged Reaganites with many of his appointments, including moderate-leaning James Baker as secretary of state, Richard Darman as director of the Office of Management and Budget, and Colin Powell as the first African-American chairman of the Joint Chiefs of Staff.

Bush advocated for the 1990 Americans with Disabilities Act and secured passage of an updated and expanded version of the Clean Air Act. He openly defied the National Rifle Association by supporting a ban on AK-47 assault rifles — something all but unthinkable for a Republican president today. He later resigned as a life member of the NRA in protest against executive vice president Wayne LaPierre’s characterization of federal agents as “jack-booted thugs.”

While Reagan gets far more credit for pushing the Soviet Union towards collapse, it was Bushwho was in office when the Berlin Wall fell in 1989, when Germany reunified in 1990, and when the Soviet Union dissolved in 1991. Bush’s muted public response to these epochal events stood in sharp contrast with Reagan’s rhetorical approach; Reagan almost certainly have commemorated these epochal events in ringing terms as victories for America and freedom. But Bush’s studied avoidance of triumphalism may have helped to avoid a backlash by hardliners in Eastern Europe and brought the Cold War to a peaceful conclusion. The WASP reserve paid diplomatic dividends.

Indeed, Bush was the last president to have entered office with significant experience in foreign policy. His signal accomplishment as president was the assembly of an international coalition to oppose Iraqi dictator Saddam Hussein’s invasion of Kuwait in August 1990. Through masterful use of personal diplomacy, Bush secured the financial and military backing of 39 nations for the U.S.-led Operation Desert Storm as well as a United Nations Security Council resolution authorizing “all necessary means” to reverse Iraq’s occupation.

The resounding military victory in the first Gulf War offered the promise of what Bush called a “New World Order,” marking the last moment when it seemed that powerful but self-restrained American leadership could usher in a new era of global cooperation, solidarity against aggression, and respect for international law and human rights. (Some critics, missing Bush’s emphasis on American restraint, heard Orwellian overtones in the “New World Order” phrase.)

Bush was the last Republican president who seriously believed in the party’s legacy of fiscal conservatism — though, again, he found himself awkwardly tailoring his views to maintain his political viability in a changing era. He had once railed against Reagan’s “voodoo economics” — the idea that tax cuts pay for themselves — then recanted when picked to be Reagan’s vice president, and later as a candidate for the presidency.  At the convention at which he was nominated, he made the Clint Eastwood-like pledge “Read my lips: no new taxes.”

But as president, Bush returned to the long-held Republican orthodoxy that while lower taxes were desirable, to cut taxes when the federal government was running a deficit was senseless: It would spur inflation and drown the economy in red ink. Republicans also had traditionally believed that raising revenues as well as cutting spending was a legitimate response to growing deficits.

The 1990 recession, combined with the savings and loan crisis that had begun during Reagan’s presidency, convinced Bush that tax increases had to be part of an overall deficit-reduction package. The ensuing deal, reached by necessity through negotiations with Congressional Democrats, included an increase in the top marginal tax rate, from 28 to 31 percent, in exchange for spending cuts and mechanisms for controlling future deficits.

The right wing howled that Bush had betrayed them (and his own sacred lip-reading oath), and predicted that the budget deal would wreck the economy while doing nothing to reduce the deficit. Both predictions proved false. The Budget Enforcement Act contributed significantly to the economic boom and budget surpluses of the ‘90s.

Bush and his economic advisors argued that the 1990 tax increases, as a share of GDP, were less than half of those Reagan had accepted in 1982 (in response to the eruption in deficits sparked by the excessive tax cuts of the year before), and that Reagan had in any case raised taxes eleven times during his presidency. But by this time the conservative movement’s orthodoxy of tax-cutting had replaced the old Republican orthodoxy of fiscal responsibility, and most Republicans in Congress voted against the budget deal.

At present, Bush is the last president to have lost a reelection campaign. His 1992 defeat stemmed from a number of factors including the primary challenge mounted against him by paleoconservative Patrick Buchanan, Bush’s seeming unresponsiveness to public anger over the economic slowdown, and widespread concern that the Republican Party had veered too far to the right in responding to the “culture wars,” the Los Angeles riots, and other polarizing events.

But the lesson most Republicans chose to draw was that Bush had committed political suicide by raising taxes and alienating the party’s conservative “base.” Because that framing won out, Bush may go down in history as the last Republican president ever to agree to a tax increase.

Bush achieved partial vindication when his eldest son, George W. Bush, won the presidency in 2000 and was reelected in 2004. But his son’s terms in office cemented the new identity of the GOP as a predominantly Southern and Western party, dominated by ideological conservatism and evangelical religion, committed to unilateralism abroad and tax cuts at home, and characterized by hostility toward science and political compromise. The Republican Party under President Donald Trump has moved even further toward populism and away from the moderation that had defined the GOP throughout most of its history.

Most tributes to George H. W. Bush have remembered him for his decency, gentlemanliness, civility, and willingness to work with people who disagreed with him. But beyond his personality, and even beyond his accomplishments, history may remember him as the last true Republican president.

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The Risk of Climate Change is Manageable, Not Necessarily Affordable

The release of the Fourth National Climate Assessment report has stirred up a considerable amount of debate about the costs of climate change, and whether action or inaction will end up being the costlier approach in the long-run. Steven Koonin’s Wall Street Journal op-ed takes the view that the economic damages from climate change are relatively affordable, and that “changes in tax policy, regulation, trade and technology will have far greater consequences for American’s economic well-being.” The view that the economic damages of climate change will not amount to much, and that policies put in place to mitigate climate change should be the real cause for concern, have been echoed by Bjorn Lomborg, as well as IER’s Robert Murphy.

While Koonin’s claim that a 4% reduction in U.S. GDP by 2090 is not catastrophic may well be valid, the failure to seriously acknowledge the affordability of decarbonization and the inadequacy in which he deals with the uncertainty that surrounds these estimates weakens his argument.

Koonin, Lomborg, and Murphy downplay the economic toll this kind of reduction in GDP can have, and claim that those who emphasize the costs climate change can entail are contributing to unnecessary hysteria. To add some perspective to how large a 4 percent reduction in GDP is, consider that the entire US defense budget in 2017 was 3.6 percent of GDP. Moreover, the Great Recession of 2008 reduced US. real GDP by 4.3 percent, the largest decline in the post-World War II era. I highly doubt that those authors would dismiss the economic and social harm the Great Recession had on the U.S..

Koonin concludes that the U.S. economy in 2090 would be no more than two years behind where it would have been absent climate change, but his analysis precludes a breakdown of the costs associated with mitigating climate change. The costs of decarbonization are even more negligible than expected climate damages. According to the Deep Decarbonization Pathways Project, the cost of decarbonization of the current energy infrastructure over the next few decades is expected to be .8 percent of 2050 GDP, and even at higher cost assumptions it is under 2 percent of 2050 GDP. In this context, Koonin’s 4 percent seems fairly large compared with the costs of decarbonization. However, what is of more concern than the relative costs of action vs inaction on climate change, is the way Koonin handles the uncertainty inherent in estimating these damage functions.

Koonin argues that humans’ impact on the climate is rife with uncertainty  while he acknowledges that economic impacts are “less certain still,” he attributes this uncertainty to unknown modes of adaptation—and then proceeds to base his entire argument on the conclusion that an increase in global temperatures of 9˚F results in a 4 percent reduction in U.S. GDP by 2090. The uncertainty in estimating economic damages does not simply arise from yet unknown modes of adaptation, but is a result of the uncertainty inherent in modeling the very extreme temperature distributions, catastrophic tipping points, and their ensuing economic damages. Failing to consider the small, but non-negligible risks of extreme outcomes, and the staggering costs that could potentially follow, is simply irresponsible. This is the central premise of Martin Weitzman and Gernot Wagner’s insightful book “Climate Shock.”

Weitzman and Wagner argue that climate risks have fat-tail distributions, where the risks of very extreme warming outcomes fall much more slowly than your standard bell-curve, and they estimate the risks of experiencing catastrophic warming of 6˚C≤ to be around 10 percent.

Source: Climate Shock: The Economic Consequences of a Hotter Planet

The authors demonstrate that attempts to quantify the impacts of extreme warming are a practice in compounding uncertainties, essentially rendering it impossible to predict how costly damages will be. It is precisely because of how difficult these costs are to predict that climate damages could be tremendously larger than we anticipate. The fat-tail risk of climate change essentially breaks the cost-benefit analysis approach to this problem. When that view is broken, we must view climate change mitigation policy as a sort of planetary hedge to avoid these catastrophic low-probability events. That being said, it cannot be that we should spend literally any amount of money to avoid the small chance of catastrophe. However, it is even less defensible to pay nothing and ignore the risks to future civilizations.

Koonin, Lomborg’s and Murphy’s  dismissal of the costs of climate change in carrying no serious threat — is not only irresponsible, but highly misguided. The failure to acknowledge the possibility, as small as it may be, of staggering economic damages brought on by catastrophic climate changes render Koonin’s article to an incomplete discussion of the issue.

There is a need to consider the worst-case scenarios and accept that estimating predicted damages is at best a guess. The appropriate role for policymakers would then be to determine the least-cost approach to achieve a warming limit, rather than specify exactly what are targets should be. Addressing the inherent uncertainty in predicting the impacts of climate change is the best case for swift action, and is the fundamental reason for implementing climate change mitigation policy as a form of planetary insurance.

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Starting Over: The Center-Right After Trump

A Niskanen Center Conference on Tuesday, December 11, featuring: 

Welcoming Address from:

Maryland Governor Larry Hogan

Keynote speech by:

Anne Applebaum, Pulitzer Prize-winning journalist and historian

Panelists include:

David Frum
William Kristol
Mike Murphy
Jennifer Rubin

Please reserve your place at the conference now by sending an RSVP to events@niskanencenter.org.

Event Description

WHEN: December 11, 2018
WHERE: The Spire (750 First Street NE (top floor), Washington DC)

Donald Trump has had a hurricane-like effect on the Republican Party. The 2018 midterm elections have forced center-right Americans to reconsider their relationship to the Trump-driven conservative populism that has come to dominate the GOP.

The Niskanen Center will present an important public analysis of this new political reality, featuring conversations with some of the nation’s leading thinkers and activists on the center-right. Panels will focus on political prospects for a new center-right, and the policy ideas and ideals that can revitalize the post-Trump Republican Party.

Registration will begin at 8:30 AM and lunch will be provided.To reserve your spot, RSVP to events@niskanencenter.org. Below is an agenda with a full list of speakers and panelists.

Welcoming Address (9:00 a.m.):

Maryland Governor Larry Hogan

Keynote speech (12:45 p.m.):

Anne Applebaum, Pulitzer Prize-winning journalist and historian

Panels:

Lessons Learned (9:30-10:40 a.m.)
Jerry Taylor (Moderator)
Mona Charen
William Kristol
Jennifer Rubin
Peter Wehner

Beyond Polarization: Republicanism for Republicans (10:45-11:55 a.m.)
Brink Lindsey (Moderator)
Mindy Finn
Pete Peterson
Jonathan Rauch

 Political Prospects for a New Center-Right (1:30-2:40 p.m.)
Geoffrey Kabaservice (Moderator)
Whit Ayres
Juleanna Glover
Mike Murphy

Beyond Small Government: In Search of a Governing Center-Right (2:45-3:55 p.m.)
Will Wilkinson (Moderator)
Oren Cass
David Frum
Megan McArdle

Space is limited. You may reserve your seat at the conference now by sending an RSVP to events@niskanencenter.org.

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We Should Pass Seasonal Worker Reforms in the Lame Duck

For years, states have been clamoring for more H-2B visas —which cover seasonal, non-agricultural work — because they’re necessary to keep American businesses alive during their peak seasons. Not only do we need more visas —the annual cap of 66,000 is expanded most years by DHS with an additional 15,000 visas — we need to think of the visas in terms of when the market needs them, like when states declare natural disasters. As Congress continues to debate government funding bills in the lame duck session, lawmakers should look to increase or double visas to ensure we have the necessary labor we need. 

The H-2B visa is a temporary employment visa granted to seasonal non-agricultural workers, such as those who work at resorts or for landscaping companies. Each visa allows the individual worker to work and reside legally in the country for the season—usually up to ten months—or a one-time period of up to three years.  

In order to acquire an H-2B visa, the immigrant’s employer must petition for it. This includes making a definitive showing that there are not enough U.S. workers willing, qualified, and able to do the work, that hiring the foreign worker won’t affect the wages and working conditions of any similarly employed U.S. workers, and that the need is actually temporary.  

The federal government made significant rule changes in 2015 in order to provide more worker protections to both foreign and U.S. workers. These included adding additional U.S. worker recruitment requirements and layoff protections, as well as wage and work hour requirements for foreign workers. They also provided retaliation prohibitions against employers, a prohibition against withholding or destroying any immigration documents, and a prohibition against placing the worker in a job not petitioned for.

Both Democrats and Republicans with businesses in their states have called for a cap increase for years. In many cases, businesses reliant upon these visas to either limit their business or close, thereby also harming their U.S. workers by putting them out of a job. Some states have taken drastic measures in order to keep their businesses open, such as Maine, which conditionally commuted the sentences of a number of prisoners in order to fill the labor shortage.

Labor shortages are exacerbated by the staggering number of recent of disasters. In 2017 alone, states in the U.S. made 135 major disaster declarations, requesting that the federal government provide relief for disasters ranging from hurricanes, to floods, to wildfires and tornadoes — all are increasing both in frequency and economic cost; the wildfires that occurred in Northern California’s wine country this year were the costliest in history, with claims nearing $9.4 billion.

These shortfalls intensify when there are multiple disasters close in geographic proximity or multitude. The 2017 hurricane season is officially the most expensive on record, with two major hurricanes — Harvey and Irma — hitting the same coastlines, and Hurricane Maria ravaging Puerto Rico. All told, the U.S. suffered more than $200 billion worth of damage from 17 named storms.

When Hurricane Katrina stuck New Orleans in 2005, immigrants were welcomed  to the city to work as carpenters, electricians, and plumbers. At the time, it was much easier for construction firms to find laborers in a hurry when it came time to cleanup and rebuild because the Bush administration chose to ignore the legal status of the largely undocumented population that helped rebuild the city. Under the Trump administration, that is no longer the case, and many disaster areas are reeling.

When Hurricane Harvey smacked Houston and devastated the Texas coastline last August, the aftermath saw homes destroyed, vehicles totaled, schools shuttered, drinking water contaminated, and businesses ravaged. The storm caused over $125 billion worth of damage, and displaced 13 million people from Texas, Louisiana, Mississippi, Tennessee, and Kentucky.

In addition to emergency funding, the city desperately needed laborers to erect shelters and temporary housing, restore power, and begin a massive cleanup, but few were available.

About two months after Harvey hit, the Bureau of Labor Statistics reported that there were 227,000 unfilled construction jobs. Even though Houston issued more than double the average number of permits for building single-family homes, homeowners are still waiting for new homes because no one is available to build them.

Employers in the Florida Keys are also reporting devastating labor shortages in the wake of Hurricane Irma. And shortages are not only affecting disaster-torn areas, but areas in need of renovation, and regions seeing growth.

When Harvey hit, job openings in the U.S. reported a record high at 6.2 million, with openings in construction increasing by the third highest number of any industry. Even though construction pay is nearly 10 percent higher — $29.24/hour — than the private sector average, nearly 82 percent of construction firms surveyed from the Associated General Contractors of America report said it will become harder to hire workers in 2018.

The logical step to filling the emergency needs created by national disasters is by increasing the availability of labor through our existing temporary worker visa system. But the government needs to let in more foreign workers — specifically H2A and H2B visa holders — when there are natural disasters that require an influx of laborers.

Permanently increasing the cap would also positively impact the businesses that use this program. The cap is consistently met, and Congress has already been raising the cap each year to deal with the number of applications submitted annually. As businesses continue to expand (as we hope they will), the need for seasonal workers will only increase. It would be beneficial to provide some certainty to the program by increasing the cap permanently rather than leaving businesses to hope and lobby to get the workers they need.

Congress shouldn’t leave town until they address this issue in December.

 

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Oren Cass’s Labor Theory of Value

At the center of Marx’s critique of capitalism is a labor theory of value. Namely, the notion that treating labor as a commodity to buy and sell alienates workers from the act of production, causing feelings of powerlessness, isolation, and self-estrangement — feelings that ultimately lead to revolution. 

It’s through this lens that I read The Once and Future Worker, the latest book from policy thinker Oren Cass. At first blush, the book is a forceful reassertion of classic conservative tropes: that work has intrinsic value; that earned success and self-sufficiency form the foundation for strong communities; and that the devaluing of work and family in favor of hedonistic, protean consumerism has undermined our moral fabric.

But beneath the surface is something much more novel, particularly coming from Mitt Romney’s 2012 domestic policy director. Indeed, far from the usual conservative manifesto, The Once and Future Worker is a scathing critique of globalization, open immigration, and the commoditization of labor — forces which Cass believes have ransacked working class fortunes across three decades of neoliberal hegemony, despite the ideological half-measures offered by bourgeois elites designed to merely absolve them of complicity.

Labor is Not a Commodity

While Cass avoids the usual Marxian jargon, his heterodox message shines through. The book centers around “the Working Hypothesis,” or the proposition that creating the conditions for productive and engaging work should be the lodestar of public policy, particularly for those whose marginal product is low or falling. The Working Hypothesis, Cass argues, stands in contrast to the economic pieties of elites on both the left and right for whom maximizing output, efficiency and consumption are considered the highest goods:

Workers have no standing, in this view of the economy; neither do their families or communities. Households that see their economic prospects plummet or their livelihoods vanish should ask for a government check and be placated when they get one … Like a medieval indulgence, a promise of redistribution cures all.

According to Cass, “maximize growth and redistribute the gains” has become the new “socially liberal but fiscally conservative” — the hollow mantra of an urban professional class for whom rural and working class decline is a statistical artifact of progress. There is undoubtedly a great deal of truth to this diagnosis. On the left, Cass points to means-tested Great Society programs as papering over the consumption deficits of poor households while doing little to build a bridge to productive self-sufficiency. On the right, Cass accuses Republicans and Chamber of Commerce-types of pursuing free markets and globalization, and the creative destruction they have wrought, with a compensating labor-market policy “that could best be described as one of benign neglect.”

The problem is not the market, per se. The market, Cass is happy to acknowledge, is an essential tool for efficiently matching supply with demand. Yet the labor market is unique in one critical respect: “People are not products.” When elites forget this, “Labor becomes one economic input among many.”

Accelerating productivity and automation aren’t to blame for working class woes, either. On the contrary, despite prophecies of robots rendering work obsolete, Cass marshals convincing data to show U.S. manufacturing productivity has essentially stagnated. More importantly, whether job destruction is from automation and globalization has very different implications. When a factory automates a process, output per worker rises and local labor demand may even increase. But when a worker is dislocated by trade, Cass notes, “the facility in which he once worked is likely gone, and the production now occurs somewhere else,” shunting less-skilled workers into lower paying service jobs or onto public assistance.

The Reserve Army of Labor

The harm is more than material. Citing work by MIT economist David Autor, Cass points out that “U.S. regions facing greater competition from China experience lower rates of marriage and higher shares of children born to single mothers and that this effect appeared only when the economic disruption affected male employment.” While cheaper Chinese imports may have grown the “economic pie,” people’s ability to produce matters more than how much they can consume, and that ability cannot be redistributed.

Rather than debate “the future of work,” Cass contends we should focus on the future for work; a future in which technological trends like additive manufacturing and e-commerce spur the creation of well-paying blue collar jobs within the country’s interior. Capitalizing on these trends will require adopting an orientation toward “productive pluralism” in which “people of diverse abilities, priorities, and geographies, pursuing varied life paths, can form self-sufficient families and become contributors to their communities.” That includes ditching the monomaniacal focus on one or two high-prestige career paths in favor of a culture (and multi-track education system) that confers equal legitimacy to a wide variety of modes of work and life, from the journeyman to the stay-at-home mother.

The U.S. labor market is not a hospitable place for those with less than a college degree or minimal technical training, a point Cass extends to our historical immigration policy: “If overall GDP growth is the goal, then all forms of immigration might make sense … But if improving labor-market outcomes for the nation’s less-skilled, lower-wage workers is the central objective, the economic case for unskilled immigration collapses.” Shifting to a skills-based immigration system and forcing undocumented immigrants to leave on a “Last In, First Out” basis, Cass contends, would send the reserve army of unskilled labor AWOL, tightening the labor market for native competitors.

Against Global Capital

Underlying Cass’s principle of productive pluralism is, in essence, a call for a diversified national development strategy. Marxian and other heterodox critics of globalization have long pointed out the way the World Bank and IMF’s “competitiveness” model of global development pushed poor countries into a static comparative advantage. While the remarkable growth of countries like Japan, Taiwan, and South Korea would have been impossible without trade liberalization, it is now widely accepted that their success depended on rejecting the laissez-faire model in favor of industrial policies that promoted investment in secondary industries and moved them up the value chain. As Cass notes, “Today, China is the primary practitioner of this mercantilism, and its gargantuan scale is producing unprecedented economic distortions.”

Yet Cass’s complaint is less with China than with our failure to fight back. While China steals our intellectual property and pushes an aggressive Made in China 2025 program, the United States suffers from having, in a sense, turned the World Bank’s neoliberal advice inward, producing a bifurcated comparative advantage in either low cost labor, or a few extremely high valued-added sectors that demand tertiary education outside the cognitive reach of most. It’s time to take the economy out of autopilot and deliberately promote industries in which ordinary people can add value. That’s less a matter of picking winners and losers, Cass maintains, than it is of enforcing a framework for balanced trade and capital flows, with smart public investments in areas like advanced manufacturing. Quoting the Indian economist Jagdish Bhagwati, Cass’s position is forthright: “It is time to shift the burden of proof from those who oppose to those who favor liberated capital.”

Policymakers should at least stop making the situation worse. In a detailed chapter on environmental policy, Cass rails against EPA regulations and the tendentious use of cost-benefit calculations for hastening the industrial sector’s decline. “Where, for instance, do deaths of despair fit into the calculus?” writes Cass, referencing research from Anne Case and Angus Deaton showing a dramatic spike in substance abuse, liver disease, and suicide among older whites—”the equivalent of nearly five hundred thousand extra deaths between 1999 and 2013.”

The New Source Review rule is particularly counterproductive, Cass argues. The rule was introduced to avoid disrupting existing facilities, while subjecting new facilities or ones undergoing major upgrades to onerous environmental reviews. As a result, if a manufacturing plant decides to expand, it risks triggering a review not just of its new facilities, but of older facilities that were previously grandfathered in. “An investment that once looked attractive might not go forward at all,” Cass notes, even if the upgrade would improve productivity and environmental impact simultaneously.

The push for environmental stringency at all cost may seem to contradict Cass’s supposition of an elite ideology based on maximizing output — “finally, something besides dollars and cents that counts.” Yet from day one, environmental policies have been enacted in order to correct supposed market failures or price negative externalities. As such, “clean air” becomes just another part of the ever expanding economic pie. This argument doesn’t quite work, however, as the flexibility of economics leaves open the question of why those externalities are the focus and not others.

It’s at this point that it becomes clear Cass’s problem is not with consumption or efficiency-based arguments per se, but with the way ostensibly neutral methods of “evidence based policy” are used to advance class interests. This classic dynamic of Marxian political economy must be painfully obvious for Cass as a senior fellow of the Manhattan Institute, where he has repeatedly witnessed the interests of New York City professionals trump the livelihood of the upstate region, despite being an economy devastated by deindustrialization. Look no further than Governor Cuomo’s statewide fracking ban.

Workers of America, Unite!

According to Cass, empowering American workers will ultimately require strengthening the relevance of labor unions, noting that “private-sector union membership has been plunging for decades, from 36 percent of the workforce in 1953 to less than 7 percent in 2017.” While the left points to right-to-work laws with some justification, the cause of the decline is much deeper. Federal labor regulations and transfer programs have supplanted much of what unions exist to negotiate in the first place. Meanwhile, the bargaining model prescribed by the National Labor Relations Act forces union bosses and management into an adversarial relationship that is both prone to abuse and ill-suited for the twenty-first century service economy.

Wholesale labor law reform could give workers space to experiment with new models of collective action, like worker co-operatives. Instead of being adversarial, a co-operative model of labor representation would strive to balance the competing interests of labor and capital. “Co-ops representing workers in negotiations with an employer could also provide a market-based alternative to the government’s employment regulation,” Cass argues, allowing much of the tax-wedge created by employer mandates to be waived.

Needless to say, adopting a worker co-op model across the board would be significantly disruptive, like Elizabeth Warren’s co-determination proposal on steroids. Nonetheless, “solidarity,” Cass notes, is a central component of Christian social teaching. It underlies John Paul II’s description of worker associations as essential “not only in negotiating contracts, but also as ‘places’ where workers can express themselves.” Germany’s worker councils, for instance, “are present at almost 90 percent of firms with more than five hundred workers and have significant authority not just to hold discussions but also to make operational decisions.” With the rise of the gig economy and fissured workplace, a smart labor reform would promote worker solidarity and input while (hopefully) preserving the benefits of flexible new forms of industrial organization.

Just Wage Theory

Taken together, the arguments in The Once and Future Worker present a coherent critique of hyper-globalization paired with a strategy for re-empowering the working class, from controls on the free flow of labor and capital, to education policies that valorize blue collar work, to laws permitting greater worker control over the means of production.

The wheels come off when Cass turns to his signature policy proposal: Wage subsidies. Given the social benefits of work, a subsidy that tops-up the wages for low-skill workers on every paycheck, paid for by defunding existing welfare programs, has a certain internal logic. But upon closer examination, wage subsidies belong to the same class of neoliberal “competitiveness” policies that Cass is otherwise consistent in decrying. At scale, they would take the U.S. comparative advantage farther down the low road of cheap, abundant labor, expand the kind of unproductive service sector jobs working class men supposedly hate, and hold back any chance of re-industrialization.

Inspiration from Germany’s Christian-Democratic model of a “social market economy” can be found throughout the book. Yet when Germany itself introduced a version of wage subsidies under Chancellor Schröder in the early 2000s, it was widely — and correctly — identified as a departure from the older inclusive-growth model. Indeed, labor productivity has largely stagnated in Germany in the years since, contributing to a sharp rise in wage inequality that culminated in the enactment of a national minimum wage in 2015, thus supplanting the model of labor-negotiated minimum wages that Cass claims to admire. Schröder was in many ways the German counterpart to Blair in Britain and Clinton in the U.S. — a center-left, “Third Way” liberal who pushed globalization — and thus an odd example for Cass to follow. However, whether Germany is actually the inspiration in this case is impossible to tell because, in a glaring omission, their experience with wage subsidies receives no discussion at all.

Instead, Cass argues that a U.S. wage subsidy would offset “subsidies given to foreign producers” and help communities “lacking the ability to export.” Granted, the German export manufacturing sector boomed after enacting wage restraint, but for reasons that America will never be able to replicate. In essence, Germany used wage subsidies and related labor market reforms to perform what economists call an internal devaluation, reducing their effective exchange rate with other Eurozone countries to artificially boost their current account surplus. This strategy won’t work for American exporters so long as the value of the U.S. dollar is free to appreciate in response to increased demand, even if it might help somewhat for dollar-pegged territories like Puerto Rico. Thus while a neutral industrial policy is surely preferable to discrete inducements for companies like Foxxconn to relocate stateside, say, Cass offers the wrong means to that end, distracted by superficially pro-work symbolism.

The same can be said about Cass’s disgust for payroll taxes. Employer-side payroll taxes superficially raise hiring costs, yet the low elasticity of labor means most of the burden really falls on workers. This makes payroll taxes more similar to broad based consumption taxes than costly labor regulation. As such, countries with stronger domestic manufacturing employment and more compressed wage distributions tend to rely heavily on payroll or value-added taxes. In Germany’s case, the payroll tax burden alone is roughly the size of payroll and income taxes in the US combined. Once again, Cass is tricked by semantic symbolism into supporting an even more progressive tax system, the kind typically found by necessity in countries without a strong middle class.

Internal Contradictions

Don’t get me wrong. Expanding and modernizing the Earned Income Tax Credit, the closest thing America has to a wage subsidy, is a great idea that may even pay for itself. Yet prioritizing something

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