The Great Risk Shift

There is a consuming controversy raging in America today over the nature ofeconomic well-being and prosperity, and whether most of us are facinguncertainty, greater risk, and insurmountable debt, or in fact have entered agolden era of unprecedented prosperity.

Jacob Hacker, a professor of political science at Yale, makes it clear wherehe stands: he argues that most Americans, with the exception of the very rich,face a degree of economic instability that once afflicted only the workingpoor. He debunks the idea that this can be attributed to poor economicchoices.

In his new book, The Great Risk Shift, Hacker offers a lucid and detailed primer on the economic problems that in his view threaten thesecurity and well-being of most Americans. "The forces that have createdthe new economic roller coaster—growing workplace insecurity, the newrisks of the contemporary family, and the erosion of stable economicbenefits—have swept through the lives of almost every American," hewrites.

This has come about because government and corporations that once providedwidespread benefits to citizens and employees have shifted these costs ontoindividuals and glorified the shift by labeling it "personalresponsibility." The first part of Hacker's book describes howideology and politics brought this about; he then describes how workers andfamilies now must bear a greater burden as private and public supporterodes.

In the real meat of the book, he suggests ways in which government andindividuals can alleviate the threat to what he regards as one of the bedrockprinciples of our way of life: "that economic security is the cornerstoneof economic opportunity."

Hacker does not favor erecting some huge government monolith to throw acornucopia of benefits at Americans, but wants to preserve the best elements ofexisting policies, with some major improvements. He understands people cannotbe insured against all the vicissitudes of life, but wants to reduce the impactof overwhelming risk and instability when they put crushing and unforeseeableburdens on individual families and reduce incentives. His arguments on healthcare and retirement are especially relevant in this regard.

On retirement, he explains how "reforms to our private pension systemcould make private retirement accounts work far better as a source of secureretirement income."

He tackles the tar baby of health care by proposing to expand Medicare topeople younger than 65, "with roughly half of Americans enrolled inMedicare and half in employer-provided insurance. This would dramaticallyreduce the number of uninsured, and additional costs would be reduced bysavings produced by the new system." This plan, which he calls MedicarePlus, would help to control costs and would "even out the nation'scommitments between young and old."

Hacker also proposes "universal insurance," which he describes asa "new insurance program that would protect workers and their familiesagainst catastrophic drops in their incomes and budget-busting expenses. Itapplies only if "existing public policies do not adequately protect familyincomes." He acknowledges these programs will entail costs, but arguesthey would be offset by reducing the "creative destruction" ofAmerican capitalism through such high-cost calamities as bankruptcy andemergency-room care, while protecting its dynamism.

Hacker offers many practical examples and relevant statistics to guide thereader through these thickets. He acknowledges the details are complex, butinsists the principles are clear and will mitigate the economic and emotionaldamage caused by traumatic insecurity and risk.

Some critics dismiss Hacker's arguments as an attack on prosperity andas "ideological posturing." Brink Lindsey of the Cato Institute wrote in The Wall Street Journal that Hacker simply ignores the huge advancesin material well-being racked up by the American economy since 1970. He assertsthat "most Americans are able to use savings and borrowing to maintainstable living standards even in the face of economic ups and downs."

Most AARP members can decide for themselves whether this statement is trueor not. In any case, Lindsey's criticisms do not really refute Hacker'sarguments, and even he acknowledges that Hacker's proposals for "makingsafety-net programs more responsive to contemporary economic hazards" areworth exploring.

These are complex ideas, and they may seem daunting to the great majority ofus who have trouble understanding how our Medicare and 401(k) plans work. ButHacker writes clearly and concisely for the layperson and makes a strong casefor practical, doable reforms that he claims will make life less hazardous andpreserve the most productive aspects of our unique economic system.

Bill Lenderking is a retired career foreign service officer who is now afreelance writer. He recently reviewed The Lay of the Land for AARP TheMagazine Online.

Read more Web-exclusive book reviews.