A new social contract for America

How else to describe the results of a recent Rockefeller Foundation/Time magazine poll in which 49 per cent of 18 to 29-year-olds surveyed said that America was a better place to live in the 1990s and will continue to decline. Nine in 10 of all respondents agreed that just getting by is as hard as or harder than ever before. At the root of such pessimism is the failure of the nation’s social contract — the policies and institutions that support Americans as they pursue their economic and personal goals — to keep pace with the dizzying changes of the past two decades.

The programmes designed to help Americans navigate the economy were conceived for a static, relatively closed economy in which higher education was valued but not essential, retirement was significantly shorter, and two-parent, single-income families predominated. In other words, the current social contract is as antiquated as the typewriter it was written on. It is no surprise, then, that Americans are awash in insecurity. To bring the social contract up to speed with the 21st-century economy, we need bold policies that satisfy one or more of the “Four F’s:”

Flexible. During World War II, employers began to offer health insurance to compete for workers amid federally imposed wage controls. Subsequently, employer-based insurance and pension programmes became the backbone of the social contract. This system has, however, proved inadaptable to the modern job market. By focusing policies on individuals rather than institutions, the government could create a far more efficient and compassionate system of social benefits, through mandatory, portable health insurance or automatic 401(k)s, for example.

Family-friendly. The cost, economic and emotional, of raising a child well has never been higher. Investment in early-childhood education is an easy and obvious recommendation, as is enacting policies that encourage a more flexible workforce.

Forward-looking. Policymakers often focus on rewarding previous efforts or consolidating already-won gains. While at times noble (Social Security) and at others just politically expedient (mortgage tax deductions for vacation properties), they do little to encourage future behavior that will benefit society as a whole or increase self-sufficiency. The next social contract should be built with an eye on what long-term results can be expected.

The welfare reforms of the mid-1990s are instructive in this regard.

Fiscally sustainable. Whoever wins the White House will inherit massive deficits and trillions in debt. The next president must rebalance our fiscal priorities and take steps to control wasteful spending. However, a new social contract should not be bound by the constraints of an old tax system.

A progressive “consumption” tax that would eliminate income levies for all but the wealthiest 1 per cent of earners, broaden the revenue base, and recalibrate the incentives of the current tax code would significantly bolster the development of a new social contract.

These principles and policies do not fit neatly into the ideology of either political party. Nor, as it turns out, do most voters. But these proposals offer a common-sense, practical road map for restoring faith in the nation’s promise and allowing individuals and families to pursue the American Dream. — The Christian Science Monitor