The American Social Contract Michael Lind New America Foundation October 2010

The American Social Contract 1 I. Adequate income for workers II. Economic security for non-workers Two elements:

Policies Promoting Adequate Income for Workers Land for Homesteads (1800s) Abolition of Slavery (1860s) Immigration Restriction (1880s- 1920s) Female Protective Legislation (1900s) Outlawing of Child Labor (1900s) Minimum Wage and Hours Laws (1930s) Full Employment (Monetary and Fiscal) (1940s- ) Wage Subsidy to Low-Income Workers (i.e. EITC) (1970s- ) 2

3 Low Market Fundamentalism New Deal (Living Wage) High Neoliberalism (EITC) Nordic Social Democracy Subsidy Wage Low High

Economic Security for Non-Workers Accident, illness, old age, loss of a job. These are the Four Horsemen that ride roughshod over lives and fortunes of millions of wage workers of every modern industrial community… I. M. Rubinow,

The History of Economic Security in America Means-Tested Public Warfare (1700s- ) Employee Benefits (1900s- ) Contributory Social Insurance (1930s- ) Tax-Favored Private Accounts (1970s- ) 5

Alternative Methods of Providing Economic Security 6 Employee Benefits Social Insurance Private Accounts Health Care Employer- Provided Health Insurance Medicare, Medicaid Medical Savings Account Retirement Security Employee Pensions Social SecurityIRAs, 401(k)s

7 The Problem with Private Accounts

The Limits to Redistribution 8 Political- Racial and Ethnic Diversity v. Solidarity Economic- Danger of Relying on Volatile Incomes of the Rich for Revenue

A Solvent and Politically Sustainable Social Contract Adequate Income for Workers: The High-Wage, Low-Subsidy Model A Living Wage Economic Security for Non-Workers Universal, Contributory Social Insurance The Link Between the Two High Median Wages Sustain Universal Social Insurance Based on Payroll Taxes 9