America's Promise in A New Century

Policy Paper
Aug. 6, 2004

FROM: Karen Kornbluh
SUBJECT: America's Promise in A New Century
DATE: August 6, 2004

Americans are concerned as they have not been since 1992 about the future of their way of life in a global economy. They sense that their kids may be part of the first generation that does worse than its parents and they don't understand how this can be so when they are "working hard and playing by the rules."

President Bush has embraced the framework popularized by New America to explain changes in both the economy and the family. The diagnosis is right but, unfortunately, the prescription -- the Ownership Society agenda -- would make the patient worse. It would help only the dwindling number of those thriving in a global economy and increase economic insecurity for most families:

These are exciting times for our country. It's a time of amazing change. The economy is changing. The world is changing. In our parents' generation, moms usually stayed home while fathers worked for one company until retirement. The company provided health care, and training, and a pension. Many of the government programs and most basic systems, from health care to Social Security to the tax code were based, and still are based on those old assumptions.

This is a different world. Workers change jobs and careers frequently. Most of these jobs are created by small businesses. They can't afford to provide health care or pensions or training. Parents are working; they're not at home. We need to make sure government changes with the times, and to work for America's working families. You see, American workers need to own their own health care accounts. They need to own and manage their own pensions and retirement systems. They need more ownership so they can take the benefits from job to job. They need flex-time so they can work out of the home.

The right response to the changing family and economy is not to undermine the social contract further by asking families to "own" more of the risk inherent in the global economy, as the Ownership agenda proposes to do. Nor is it to appear to be patching the outdated social contract. It is to reform the social contract so it works to make families economically secure in the 21st Century economy.

The Narrative: Renewing America's Promise in A New Century

Over the last three decades, American workers became "global free agents," competing with workers around the world for wages and benefits, changing jobs every five years on average and, in one out of four cases, working in nonstandard (temp, part-time, free lance) jobs. So, earnings stagnated and health insurance and pension benefits shrank. At the same time, the costs of middle class life rose.

The result has been parents working more and more hours to pay the bills. The new "juggler parents" are stretched for time to care for kids and participate in community activities. A forthcoming Economic Policy Institute-New America paper reports that middle-class family income would have virtually held steady over the last 25 years if these families had not increased the number of hours they worked dramatically, in a radical departure from post-war trends. Families in the bottom two income quintiles would actually have fallen.

Stephen Roach of Morgan Stanley explained in a recent NY Times op ed that global "wage arbitrage" is finally upon us and we must act. He is only half right. We face global wage and safety net arbitrage. Alan Greenspan sees clouds on the horizon. He testified in June that the jobs problem "can be and must be addressed, because I think that it's creating an increasing concentration of incomes in this country and, for a democratic society, that is not a very desirable thing to allow to happen."

A poll conducted by pollsters Bill McInturff and Anna Greenberg for the New America Foundation found likely voters feel kids aren't being properly cared because parents are working harder to make ends meet.

Americans are eager to embrace the many advantages -- flexibility, autonomy and potential for upside -- of the new century. However, antiquated policies undermine their ability to succeed. The goals of our education, social insurance and workplace policies, created to give our grandparents the tools to build economic security and opportunity, are as critical as ever. The policies should not be abandoned. They must be reformed for the new era.

The candidate who convinces them he understands their plight and is best able to lead them into a brighter future has a great advantage. In 1992, Bill Clinton put forward a comprehensive agenda to create high paying jobs in a global economy. Married women voted for Clinton in 1992. In 1996 he won the support of married women and men. Arnold Schwartzenegger used the struggles of working families to introduce himself to the voters of California. He proposed an after-school initiative to address the problem of latch-key kids.

The New Agenda for America's Families

Reforms are needed to restore America's promise and address the global wage and safety net arbitrage. The New Agenda would include a number of signature New America Foundation proposals as well as new ideas for redesigning the safety net for the 21st Century.

Redesigning the Safety Net

  • Citizen-based Health Insurance, subsidized so that no one pays more than a fixed percentage of income.
  • Progressive Retirement (USA) Accounts.
  • International forum on safeguarding the middle class in developed countries and growing the middle class in developing countries.
  • Parent Accounts. Tax-preferred, refundable accounts for parents to save for the costs of raising children OR adopt the Clark tax reform proposal to combine the various child tax credits.
  • Work-Life. Expand FMLA, work with business to create more flexible workplaces by creating a new award and work with small businesses on adopting best practices.

Growing Wages

  • Learning Society. Put new science and math teachers in our schools. Devise a blueprint for a New Learning Network of the highest quality learning, appropriate to the needs of local employment opportunities, in every community.
  • National Economic Opportunity Council (combining NEC and OSTP) focused on creating quality jobs in a global economy through innovation, investment and infrastructure.
  • Entrepreneurial Capitalism Bank. Replace SBA with a new bank to spur small business creation and innovation out of the disparate small business funding programs.