The American Social Contract: From Drift to Mastery

Executive Summary

Our social contract -- the formal and informal, public and private arrangements by which we ensure economic security and opportunity -- has evolved over the course of American history in response to changing economic and political conditions and demographic realities. This evolutionary process, in which the balance between individual responsibility and the responsibilities of government, employers, and civil society has been struck and restruck, has proceeded in fits and starts. Change has come quickly at times of crisis and slowly, almost invisibly, at other times. Over the past three decades, transformations in the economy, in corporate governance, and in the nature of work have pushed the social contract out of balance. Unfortunately, these decades were also marked by political timidity regarding public action and have led to a period of drift. As a consequence, entry into the middle class is closing, American families are increasingly insecure, and inequality of income and wealth has reached unprecedented levels. Our social contract is overdue for rethinking.

To take command of our economic future and restore balance to the social contract, we would do well to be guided by three principles. First, we should keep in mind that security and opportunity are not mutually exclusive alternatives. If individuals are to take advantage of the opportunities inherent in a dynamic economy, they will need the security provided by social insurance, individual assets, and portable benefits. Second, we should not be constrained by preconceived notions about the appropriate size of government or levels of federal taxation. For example, we should be open to the idea that a system in which health care costs were effectively socialized, lifting a burden from private enterprise, could lead to strong economic growth. Third, the next social contract should be future-proof. We do not know what challenges we will face in the global economy of the future; the only safe bet is that change will come faster than we can imagine. We must make the next social contract resilient enough to help Americans navigate the global economy for many decades to come.