We need to build new safety nets
TEXT OF COMMENTARY
KAI RYSSDAL: That monthly inflation report we started with today -- up 1.1 percent -- has gotten most of the attention. The really scary number, though, is the year-over-year comparison. Prices in June '08 were 5 percent higher than June a year ago. The biggest jump in 17 years. Granted, we're still a long way from the hyperinflation of the 1970s. But commentator Robert Reich says what happened *after that should give us pause now.
ROBERT REICH: What economists have called "The Great Moderation" -- a period when the business cycle evened out, and neither inflation nor recession posed much of a threat -- began in the mid-1980s, and now appears to be over. It was good when it lasted. But it led the nation to think we didn't need much by way of social insurance.
No one knows for sure what caused the Great Moderation. Some had credited the increased sophistication of financial markets, and the wisdom of the Federal Reserve Board. Hindsight suggests it was more luck than anything else.
Well, folks, it turns out the Great Moderation was something of a fluke, and now tens of millions of Americans are in trouble with no safety net to help them.
That's because the apparent end of the boom and bust cycles led us to assume the economy would no longer impose such huge, unexpected, and arbitrary losses on large numbers of Americans. So, we basically got rid of the safety nets. We abolished welfare, let unemployment insurance wither, and paid scant attention when corporations eliminated defined-benefit pensions and cut health-insurance benefits. We even stopped worrying about the safety of small investors.
But now we have to rethink safety nets. Right now, nets are being spread for the wrong people. The giants of Wall Street along with Fannie and Freddie get bailed out, but there's still no relief in sight for most homeowners who can't pay their mortgages. Corporations that don't deliver on their pension obligations are helped out, but there's nothing for retirees and small investors whose savings are drying up because of Wall Street's decline.
Yet, I have to believe the end of the Great Moderation will eventually result in a broader safety net. Maybe not the old forms of social insurance but new ones like universal health insurance, earnings insurance, and savings accounts in which the dollars you put away are supplemented by government dollars.
The very rich and the biggest corporations don't need social insurance. Now that the booms and busts are back, the rest of us do.
RYSSDAL: Robert Reich is a professor of public policy at the University of California Berkeley.