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Stop Socializing the Downside and Privatizing the Upside

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Cross-posted from New Deal 2.0.

I have been watching Clint Eastwood films lately and thinking about his role in fueling the belittlement of government. In Dirty Harry, for example, the Eastwood character is a loner who stands up to lily-livered bureaucrats who lack the cojones to do what needs to be done and to morally corrupt politicians who cave in to bad guys for a living. This kind of film was part of a sustained, and dazzlingly effective, cultural agenda to discredit government.

A key mechanism of enforcing this view is the snarl -- it's not really an argument -- that having the government undertake any given task is... socialism.

For thirty years, Democrats have lacked a cogent response. In the debate over health care, they tried to counter the socialism charge by designing reform according to Republican principles: no to single payer, no to the public option, yes to private health insurance (an industry so inefficient that Americans spend one third of their health care dollars on paperwork, but I digress).

Democrats are left still facing sneers of socialism. Trying to counter this charge by messing around with policy design details is a strategy fated to fail. What we need instead is a way of reframing the debate that begins to reverse the discrediting of government.

The financial crisis presented a golden, largely squandered, opportunity to begin this process. No better time than the present. Americans recently heard reports of bank profits so high that major banks are declaring dividends. This presents a teachable moment to send a much more effective message than Obama's old fashioned populism that demonizes bankers as "fat cats."

Here's a fresh response: What conservatives are proposing is to privatize the upside of the economy while socializing the downside.

Take the banks. Back during the Great Recession, they were only too happy to socialize risk. But now, with profits aplenty, banks have lost interest in sharing. After we socialized the downside risk, now they want to privatize the upside risk.

This doesn't make a whole heck of a lot of sense. But it's a consistent theme in Republican proposals. Take the new Republican health care proposal. It wants to preserve for private industry the right to insure relatively healthy people off whom insurers can make a profit. Again, Republicans want to privatize the upside and let industry keep those profits, and socialize the downside -- and then deride government for needing to levy taxes to cover the costs of shouldering that risk.

A similar dynamic is at work at the local level. A recent California ballot initiative makes it more difficult for local governments to impose fees on developers as a condition of approving development. The fees required the developers to pay for the costs of the water, sewers, schools, and parks that would serve the new subdivisions. Not surprisingly, the developers hate fees because they prefer to socialize the costs of infrastructure and privatize the profits of development.

So here's the message: The next time Republicans snarl "socialism," Democrats need to re-examine the baseline assumptions. Often you'll find a proposal to privatize profits and socialize risk. Calling that out is the first step towards changing Americans' negativism towards government.

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