How Conservative Economics Leaves Families On Shaky Ground

Isaiah J. Poole

It should come as no surprise that as a result of the worst economic downturn since the Great Depression, the economic insecurity of average Americans is at an all-time high. What should be shocking is the insistence of conservative policymakers on heightening that insecurity, creating an economy that shifts increasing levels of risk onto people least able to manage that risk.

A new report by Jacob Hacker, Philipp Rehm and Mark Schlesinger offers new perspective on why the conservative efforts to decimate the social contract, from health care to retirement security, have to be fought. Simply put, ordinary families just can’t handle the Darwinian world that conservative policymakers want to drag them into.

The report also explains why, if anyone needed any more of an explanation, why voter disenchantment with progress on the economy was so widespread this past fall.

Based on a series of scientific surveys, the report, “Standing On Shaky Ground,” found that in the 18 months from March 2008 to September 2009, fully 93 percent of households experienced at least one substantial decline in their wealth or earnings or a substantial increase in nondiscretionary spending, most often for medical needs or assistance to family members. One-fourth of families experienced an income decline of 25 percent or more. Based on previous research, the share of Americans experiencing large income losses was higher in 2009 than at any point in the last quarter century, the report said.

But what the study also found is that a majority of families find themselves buffeted by multiple “economic shocks.” For example, three out of four households that experienced a job cutback also experienced a shock in another economic realm, either related to health care, loss of personal wealth (such as a decline in value of a home or retirement assets), or family (death, divorce or a relative’s financial crisis).

Mark Schlesinger, in discussing the report at a New America Foundation forum, said such multiple blows will thwart the best attempts of a working-class family to “save for a rainy day.” For these families, he said, “that rainy day turned into a rainy year, complete with mudslides, famines and an accumulation of other uncertainties that no one could reasonably be expected to protect against.”

The report also found that “28 percent of all Americans were either very or extremely anxious about their economic prospects” in surveys taken during 2009. One reason that statistic is significant is that households who believe their basic economic well-being is at risk are less likely to engage in the kinds of risks that could prove beneficial to themselves and to the economy as a whole, such as starting a business. Instead, these people will take a defensive crouch in order to buffet themselves as best they can against the next economic shock.

Given the report’s findings, why would we tolerate steps to dismantle the current Social Security system, leaving people to the wiles of the stock market; privatize Medicare and Medicaid, leaving people unprotected against uncontrolled increases in health care costs; and put further limits on the protections we have traditionally afforded working people when they become unemployed or disabled?

What we have seen, and the report helps bear this out, is that our current safety nets are already too tattered to protect families from the multiple economic shocks they may experience. Shifting more risks onto the families that are already having a hard time managing the risks they already experience is the wrong direction. We have to keep the goal of strengthening Social Security, health care programs and other income protection programs at the core of an economic growth and shared prosperity agenda.

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