The Crisis Goes On

Seventeen years ago I reviewed William Strauss and Neil Howe's new book, The Fourth Turning, for the Boston Globe.  As most of my readers here are well aware, they had divided American history into 80-year cycles in their earlier book, Generations, and in 1996 they predicted that a great national crisis would develop sometime in the next ten to fifteen years.  In one paragraph, I discussed their tentative speculations about what the crisis might look like, and added another thought of my own.

``The Fourth Turning'' is weakest on the point of greatest practical interest: what, exactly, the new crisis is likely to involve. The authors present a series of scenarios combining, in various ways, a financial crisis, a collapse of federal authority, a racial or regional civil war, or an international crisis perhaps involving terrorism -- but none of them seems completely convincing. Yet here, too, history is on their side. No one in the 1760s would have predicted the American Revolution; almost no one in 1928 would have foreseen either depression or world war. Only in the 1850s was the shape of the coming crisis fairly clear, and even then few if any would have predicted war on such a scale, fought to such a drastic conclusion. We must watch, perhaps, for problems that fashionable solutions can only make worse, since these are the ones most likely to spin out of control."

It seems to me this morning as I read accounts of President Obama's Dunkirk moment over health care that Bill, Neil and myself have all been vindicated.  All three of their proposed crisis events have occurred, beginning, of course, in 2001, when I am more convinced than ever that this great national crisis began.  But my last sentence has been repeatedly vindicated as well, and never more so than in the consequences of the health care roll-out.  And because of the dynamic I identified, Strauss and Howe have turned out to be much too optimistic about our ability to deal with any of these crises.  Because our elite's world view has been fundamentally flawed, we haven't been able to solve any of these problems.  More often than not, we have made them worse.

The first four years of this blog, coinciding with George W. Bush's second term, focused above all on the war in Iraq.  The Bush Administration had decided that it could relatively easily solve the problem of terrorism simply by removing dictatorial regimes and opening the Middle East to democracy.  Instead, they unleashed a wave of anarchy in Iraq that has now engulfed Syria and even Egypt, the leading power in the region.  The Bush Administration was not solely responsible for this development by any means, but it surely accelerated it.  In the same way, our involvement in Afghanistan, which the Obama Administration increased and prolonged, has helped spread anarchy into Pakistan, with consequences we still cannot foresee.

The financial crisis was an opportunity to undo the missteps of the 1990s, such as the repeal of the Glass-Steagall Act, and put the economy on a sound footing again.  But in part because President Obama's life had taught him to trust the system, he missed that opportunity and left our financial structures essentially in place.  No leading banker suffered any criminal penalties for practices that destroyed the world economy.  And not only has the Dodd-Frank bill still not been implemented, but last week's New Yorker includes an excellent article by Nicholas Lehman showing how the big banks and hedge funds are consistently staying one jump ahead of the federal government by finding new ways to behave irresponsibly.  It is hard to believe that we have seen our last financial panic--something the Boom generation did not experience once from 1943 until 2001.

And meanwhile, the authority of the federal government has been weakening.  As I have documented at length, it has been under ceaseless attack from the Republican Party for the last five years, an attack that has already had enormous consequences.  Barack Obama, meanwhile, used the large majorities with which he entered office to enact exactly one meaningful reform, the Affordable Health Care Act.  That was, I now believe, a terrible mistake.  What he needed to do in 2009 was what FDR did in 1933: to focus upon measures that would immediately alleviate the economic distress of the American people and reassure them that the days of panic were over.  Instead, he spent nearly 18 months on a large, complex, controversial piece of legislation that would not come into effect for an additional four years.  He has never recovered from the electoral disaster of the 2010 Congressional elections that resulted.  Now he faces new problems because of the flawed philosophy that that reform embodied.

When Franklin Roosevelt took office in 1933 he did not mince words about the causes of the economic crisis and what it would require.  He focused on the values of American society.  

”Our distress comes from no failure of substance,” he said in his first inaugural.   “Plenty is at our doorstep, but a generous use of it languishes in the very sight of the supply. Primarily this is because rulers of the exchange of mankind's goods have failed through their own stubbornness and their own incompetence, have admitted their failure, and have abdicated. Practices of the unscrupulous money changers stand indicted in the court of public opinion, rejected by the hearts and minds of men. . . The money changers have fled from their high seats in the temple of our civilization. We may now restore that temple to the ancient truths. The measure of the restoration lies in the extent to which we apply social values more noble than mere monetary profit. . .  Happiness lies not in the mere possession of money; it lies in the joy of achievement, in the thrill of creative effort. The joy and moral stimulation of work no longer must be forgotten in the mad chase of evanescent profits.” Our society in 2009 suffered from exactly the same ills, but we lacked leadership that would either identify them so frankly or do something about them.  Instead, the Obama Administration has tried to square the circle: to reform both the financial system and health care without substantially diminishing the profits those industries drain from our economy.  But because those profits are the problem, this strategy seems certain to fail.

The Obama Administration wanted to give every American good health insurance, but it decided from the beginning to do so in cooperation with the profit-based health insurance industry.  Karen Ignani, that industry's chief lobbyist (whom I have already discussed once or twice here), played a key role in the design of the health care act.  The act was designed to create private universal health care, in which young and healthy people would be pressured financially to buy policies while less well off Americans went into Medicaid or received subsidies to buy policies in exchanges.  This was among other things a bonanza for the health care industry, which would secure millions of new customers, partly at government expense.  

The would also have offer better policies to many Americans.  This is what is now causing the President disastrous political trouble, because he promised everyone that they could, if they wanted, keep the plan they had--even though the law was going to force the insurance companies to cancel many policies that didn't provide enough coverage.  There is an irony here:  the policies that are being cancelled were probably, for the most part, emotional security blankets that would not have saved their holders from financial catastrophe in the event of serious illness.  That is why they were cheap.  In addition--and I know of such cases personally--the insurance companies would have felt free to cancel the policies, before the new law was passed, if their holders became really sick.  But the policies were, therefore, cheap, and real ones will cost more.  That is what President Obama did not have the courage to tell the American public.

In the last two weeks, the news that millions of policies were being cancelled had threatened to replace the Democratic majorities that passed the law in 2010 with a bipartisan majority in both houses that would vote to repeal key parts of it.  And thus, the President yesterday decreed new regulations that would allow people to keep their old policies, as he had foolishly promised they could do.  And today, Karen Ignani and other health insurance spokesmen have announced that this step will wreck the administration of the law and disrupt the insurance marketplaces, because the companies set their rates based upon the requirement that millions of Americans would have to buy new, more comprehensive and more expensive policies.  It is impossible to say now what the outcome of this imbroglio will be, but it seems fairly clear that the health care law is not going to be implemented as planned.

In dealing with profound changes and crises in our national life, we have two political parties with different philosophies.  The Republicans want the government to abandon any pretense of seeking economic and social justice and allow economic power to rule us without opposition.  The Democrats still believe in greater equality and the provision of basic services, but they cannot make these things come true because they are now determined to do so within the context of our new economic system and its distribution of economic power.  We know, thanks to the experience of other countries, how to provide health insurance: to finance it through taxation, focus on keeping costs down by avoiding unnecessary treatment, and to make it the same for everyone.  Because we allow private companies to profit from what should be a public good, we pay about twice as much per capita as the Europeans do for only marginally better health care.  The attempt to provide universal coverage through the private system is, clearly, not working.  

Another problem has emerged, one that is inevitable if we regard health insurance as an individual, rather than a social, need. Millions of Americans are complaining (or soon will be) that they have to buy policies covering care they will never need.  Women in their 50s (and even men) will have policies covering childbirth, and so on.  But that is the essence of insurance: paying for any contingency that might affect any insured person, in order that the problems you yourself develop will be paid for.  As Judge Ginsburg so wisely noted in her opinion on the health care act, everyone needs health care sooner or later.  That is why we all should be willing to pay for it based on progressive taxation.

The ACA is a critical test of the government's ability to solve problems--a test the government has been failing for some time.  I fear that if it fails or is in effect repealed in the next few years, the Republicans will in effect have won the battle against government for the foreseeable future, whether they can get back into the White House or not.  The failure, however, will be only partially their responsibility.  The plan is in deep trouble because it embodies the fatal contradiction of the modern Democratic party.  Because its solutions are based on false assumptions, they have a tendency to make things worse.   "The fault, dear Brutus, was not in our stars, but in ourselves."