Friday, November 15, 2013

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."

12 comments:

Bruce Wilder said...

Truly outstanding. Thank you.

Ed Ciliberti said...

Dr. Kaiser,

“Generations” was for me an interesting paradigm from which to view current and past events and to anticipate future ones.

As I watched 9/11 coverage it suddenly occurred to me to check again that page where the authors speak about the early 21st century crises. As you say, the scenarios there and in “Fourth Turning” are certainly not definitive in detail, but they are, in hindsight, remarkable prescient. After listing the possible scenarios, the authors start the next paragraph with the chilling question: “What if the crisis comes early?” Like you, I sense that the crisis did come early, thus the unrestrained, over-the-top Bush reaction.

Recently I finished reading Colin Woodard’s “American Nations”. Like “Generations”, it presents another paradigm through which to view events in North America. If you accept the essential correctness of the two, there is likely a dynamic intersection between the two. I wonder if you would care to address that likelihood, if you indeed agree with it, in one of your future columns.

Hpr_m33t said...

1We know the individual mandate was a conservative plan conceived by the Heritage Foundation. Progressive pushed for the "pubic option." We believed if the Obama administration hadn't passed a plan early in his administration, the Congress would have unlikely passed a health care plan at all—-like the Clinton administration. You'd probably also recall Medicare/Medicaid initial roll-out was turbulent: many public hospitals closed, only half of the poorest Americans were covered, and health care costs increased exponentially. It took decades of legislative reforms to make the system work as "efficiently" as it does today. Not sure why people expected Obamacare to be implemented without defects? And what was the Republican alternative? They have none outside further privatizing the entire system and cutting social security. So pick your poison, professor! And criticize Obama all you'd like. I assessed Obama was a moderate conservative, a "corpocrat" with social liberal leanings. Obama NEVER approached FDR’s depth, vision, or possessed the “testicular fortitude” to take on the entrenched private and political interests dominating this country. Obama’s entire political history suggested that. Finally, I can't imagine you'd believe John McCain or Mitt Romney would be doing a better job today. Or do you?

Unknown said...

Thank you for this excellent review of recent events. Your posts are always right on target, this one is above and beyond that. It is depressing to watch the ACA story unfold and I try to remain hopeful that it will succeed.

ed boyle said...

A definitive answer to where the fourth turning crisis was will only be in hindsight possible after the 2020s when a possible crisis like WWII could happen again, might be placed.

Now we have a mix of the last two crises, economic collapse with "civil war" tones between the parties. AS America has become what Great Brtiain was in the first part of the century, a giant with clay feet, the attacks are coming from all sides, internal divisions, external attacks from economic competitors, dissenting opinions (islamismus) within the global empire system, and "own goals" as they say in soccer,i.e. bad legislation as in ACA and general wastage at all levels and lack of insight into necessary changes in the society (prosecutibng the banks, reducing military output).

Essentially America is taking on more than it can chew. Peter principle at work here:

http://en.wikipedia.org/wiki/Peter_Principle

The Peter Principle is a proposition that states that the members of an organization where promotion is based on achievement, success, and merit will eventually be promoted beyond their level of ability. The principle is commonly phrased, "Employees tend to rise to their level of incompetence."

You havwe a massively fast growing country in the heydays of technological progress inheriting global hegemony from European powers(who for their part made a mess of it in theri time) and handling it quite well under the "Great Generation(GIs)" from Kennedy to Bush I then their kids and grandkids screwing it up massively as they take it all for granted while the upcoming powers in the world are knocking at the door wanting to take on the mantle of power(BRICS) or want to go back to old traditions(Islam) which our system(capitalism, throwaway society, infotainment, moral relativism) destroys.


"And this is the writing that was inscribed: mina, mina, shekel, half-mina. This is the interpretation of the matter: mina, God has numbered the days of your kingdom and brought it to an end; shekel, you have been weighed on the scales and found wanting; half-mina, your kingdom is divided and given to the Medes and Persians. —Daniel 5:25–28

Larry said...

I so look forward to reading your commentary Professor. You are gifted in putting the central issues of our time into perspective that simply puts me in awe of your insights.

ocasomedia said...

Two points Dr. Kaiser:
Totally agreed-Obama needed to focus on immediate practical steps to alleviate misery. I was in favor of slashing the Social Security tax both for individuals and for employers-any shortfall to be covered by funds later used for economic "stimulus"-AND slashing taxes on fuel and corporations with robust measures to use our vast natural gas deposits to do like other countries and get it to the consumers to use for transportation fuels thus slashing basic living costs. Stimulus should have been allocated towards
enabling energy companies to diversify into natural gas; offer it at the pump AND beat up the EPA to keep them out of the hair of businesses who want to offer off the shelf conversion technologies to consumers and businesses. In Peru natural gas costs half as much as gasoline. Why does Peru exploit this resource while we are oblivious to it? Why does it cost $4,000 to convert a car or light truck to this cheap wonder fuel when in 3rd world countries it costs one fourth as much??

Finally Dr. Kaiser I want to have you on our radio show Bill Martinez Live-regarding Road to Dallas-please contact me-Thanks!
Bill McIntosh

ocasomedia said...

Dr. Kaiser-right on! Obama needed fast measures to alleviate suffering. I think he could care less. Slashing social security taxes
and fuel costs plus boosting availability of super cheap natural gas for transportation fuel would have had enormous effects at helping the people. Obama care has been a train wreck-I dont get why we needed it.

ALSO I would like you to be on Bill Martinez Live which I help produce. Please contact me for an interview regarding Road to Dallas

StV said...

Dr Kaiser, you write as if Obama had a choice. The problem for Democrats is the loss of Marxism as an ideological counterbalance to capitalism. This has led the Dems to become just as beholden to corporate interests as the Repubs (whereas in the past they could have relied on unions for financial support).

As a GenXer, I am skeptical about ideological movements but, in this case, I would have loved to see Occupy Wall Street grow into something more. Perhaps in coming generations it will.

David Kaiser said...

StV, I think there is something to what you say. In the 1930s FDR consciously steered a course between the extremes of the right and left, and it would be easier to do that today if we had a left. Unfortunately the Boomer left became obsessed with race, gender, and how events are portrayed, rather than what actually happens, and reduced itself to irrelevance.

David Kaiser said...

Bill McIntosh,

You didn't tell me how to contact you! You can email me--KaiserD2@gmail.com. I'll be glad to do it.

DK

kristina Maria said...

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