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Sharing Risks in a New Era of Responsibility

By: Jacob S. Hacker
Published: April 2009

Health and Income Security Brief No. 13 ~ April 2009

In his inaugural address, President Obama spoke of a "new era of responsibility." By this he meant not only our own personal responsibility but also our social responsibility to each other – our place in what is often called the "social contract." A central aspect of the social contract is the sharing of risk. The twentieth century saw the creation of a public-private framework for the provision of basic economic security to Americans of all walks of life. Over the last generation, however, that framework has crumbled—a reality that is now unmistakable. And yet for far too long, our political leaders have neglected the increasing economic risks that have shifted onto middle- and working-class Americans. Even today, amid our pressing economic crisis, we are socializing risk at the top, but only beginning to debate the spreading of risk for the rest of Americans. The New Deal and the Social Security Act provide a revealing set of lessons for present-day economic reformers. The basic idea of the New Deal was to reinvent and reconstruct capitalism. Markets had spun out of control, and they needed taming. And markets certainly need taming again today. We need a new New Deal – a new public/private partnership based on the fundamental truth that security is not opposed to opportunity, but instead essential to opportunity. In a dynamic and flexible economy, well-designed social insurance is critical if Americans are going to have the confidence they need to invest in and achieve the American Dream.