Defense Crouch

In the circles I travel in, the analytic point of the Third Way's months-old analysis "The New Rules Economy" and their just released "Middle Class Compact" are very controversial. Roughly speaking, Third Way asserts that middle class families are better off than most progressives say. To me, though, this is all a bit besides the point. When you bore down to policy specifics, Third Way frames the problems in pretty uncontroversial ways. On health care, for example:

Under the old rules, businesses could afford rising wages and generous benefits for their employees. Now they are competing in a global economy, and soaring health care costs have made yesterday’s calculation difficult. In fact, rising health care premiums cut $3,250 a year from the paychecks of average workers. We now have to rein in health care costs and shift some of the burden away from businesses so they can readily increase wages while remaining globally competitive.

Control costs, shift responsibility away from employers. Pretty uncontroversial stuff, if a bit on the timid side. But their actual proposal is this: "Enable small businesses to pool together to purchase insurance for their workers at lower prices." Now, look. I'm on the timid side in terms of what's advisable to propose, and this is just laughable by any standard. For most workers and most employers it just won't change anything. And even for small business owners and employees it doesn't do much. At best, it puts your typical small business in something closer to the position of a large business, which just gets us back to the point that health insurance costs are growing at a frightening pace.

Comments

"Enable small businesses to pool together to purchase insurance for their workers at lower prices."

This is just the ticket to save GM and Sons Car-making Shoppe.

Posted by Njorl | June 15, 2007 1:26 PM

It doesn't even necessarily do that. A small business pool is very different than a single large business, because the small businesses entering the pool will often select in on the basis of age or health status. The total size of the pool is irrelevant to that problem.

Posted by mq | June 15, 2007 1:34 PM

Njorl,
Speaking of GM. I just heard on CNBC that the Big Three will try to cut pay and benefits 33% in the upcoming contract. The current one ends either the end of August or sometime in Sept. 33%!!! It might be the start of a negotation ploy, but still. It smells like a strike might be looming. And The Third Way creeps think that the middle class is doing great? Tell those asshats to get out of Washington DC. They need to see more of America.

Posted by Joe Klein's conscience | June 15, 2007 1:36 PM

Third Way and the DLC are just trojan horses for the GOP. That's been obvious to everyone but bend-over-backwards liberals like Matt and Kevin Drum for a long time. The rest of you just refuse to acknowledge it because you're weak and you hate confrontation.

Third Way wants to piss in our faces and tell us it's raining. Everything they talk about is a choice. None of them had to be made, they are not determined by physical laws of reality. They were policy choices made by the wealthy elite over broad public opinion. There was no great outcrying amongst the majority for these policies, indeed many were done against express public opinion. The elite knew what they were doing, and now they want to use the consequences of that choice to tell there was nothing they could do. They aren't simply disagreeing, they are outright lying. Just like those who support the war are lying when they say nobody could have predicted what happened there. A lot of people predicted both, and the elite swore they were just isolationist villians knew they were right. They just didn't care, they wanted what they wanted and they didn't care who got hurt as a result.

If this continues, there is very little reason to continue to pursue politics as a remedy for this problem.

Posted by soullite | June 15, 2007 1:41 PM

"Third Way and the DLC are just trojan horses for the GOP."

I think, at one time, they were a real strategic move designed to help the Democratic Party. They formed at a time when a move to the center on economic matters could enhance political power. That time is gone now. Today, they are just out to protect their turf. Rather than existing to create policies that help the party, they believe policies should be encted to justify their existance.

Posted by Njorl | June 15, 2007 2:03 PM

"...shift responsibility away from employers..."

To where? The middle class?

The statistics cited in that middle class compact are as misleading as the statistics they seek to over-rule. Calculations of median household income which include the richest 2 or 5% (who have gained the disproportionate share of the wealth in recent decades) are bound to be misleading. A more honest assessment of the situation facing the middle and working class would disinclude not only 22 and 85 year olds but the wealthiest Americans. Even if you also disinclude the poorest working Americans in the prime working years of your life I think you'll find a picture of stagnating incomes relative to inflation and the cost of living.

Posted by Linus | June 15, 2007 3:24 PM

I'd also like to know if this organization's formula also takes into account capital gains as income. It certainly sounds like it does which means that the massive gains the wealthiest Americans have been making through unearned income in recent decades and years are being used here to artificially puff up median household income and asset accretion.

Posted by Linus | June 15, 2007 3:37 PM

One other point: aside from the fact that the wonks need to devise better formulas for judging the condition of the working and middle class that exclude the disproportionate gains from earned (and especially) unearned income among the richest several percent, there are other figures that here and now tell us something about the experience of middle and working class people. The savings rate speaks not only to values but to necessity; a lot of people aren't saving because they can't afford to save. As many as 40% of baby boomers - now in their peak earning years - have saved almost nothing for retirement. Under a quarter of Americans have 401ks, and only 15% of working-age Americans have IRAs.

Posted by Linus | June 15, 2007 3:58 PM

Jesus, Linus, the median already *doesn't* include any effects from high wealth among the very rich. That's the whole reason to use medians instead of means. High school math...

Posted by mq | June 15, 2007 5:12 PM

I don't get it. Before, businesses offered "generous benefits," but now they have "soaring health care costs."

Don't these health care costs themselves constitute generous benefits?

Posted by ed | June 15, 2007 5:22 PM

"Jesus, Linus, the median already *doesn't* include any effects from high wealth among the very rich. That's the whole reason to use medians instead of means. High school math..."

That's right, stupid mistake. It doesn't mean though that the numbers aren't misleading. Here's a regional example: the home ownership rate in San Diego County is barely more than 50% (and less than 50% in the City itself). The median income for a household in the County is about 47k, and for a family about 54k. This is considerably more than the median income nationally, and of course the median income for households in their peak earning years is even higher. But the average cost of a home in the county is above 400k, and the median cost liable to be lower, no? Yet literally tens of thousands of working and middle class families can't afford to own a home in the county. And these same tens of thousands of families are every year battling increasing traffic, higher education costs increasing at well above the rate of inflation (the average cost of a public 4 year school is more than 10k a year, and the average cost of a private 4 year school is almost 30k; if people can't afford a 400k home how can they afford a 40k education for 2 or 3 kids?), and now rising food and energy costs.

Posted by Linus | June 15, 2007 6:07 PM

And yet this supposedly timid measure has been fervently opposed by Democrats in Congress for the last 8 years.

Posted by Thomas | June 15, 2007 6:17 PM

And to further illustrate the only valid point I made early on: I believe the savings rate is less a moral indicator than a financial one. Here's some compelling data: the savings rate among renters is 3% and the savings rate among homeowners without a HELOC is 0%; homeowners with a HELOC is NEGATIVE 16%. About 8% of homeowners have a HELOC. What this tells me is that there are a whole lot of homeowners stretched to the max simply being homeowners, and that home literally represents their only hope of saving for the future.

Posted by Linus | June 15, 2007 6:33 PM