In Praise of Unrealistic Ideas

01/31/2016 09:33 pm ET | Updated Feb 01, 2016

The core blockage of American politics today is that nothing in mainstream debate is radical enough to fix what's broken in the economy. Today, the vast majority of Americans are being left far behind a halting economic recovery. The typical American family has not gotten a raise in more than three decades.

The Sanders campaign on the populist left and the Trump campaign on the populist right are both emblematic of the fact that large numbers of Americans have concluded that the system is not serving them, and they want radical change.

The Trump voters, more likely to be older white males, working class or lower middle class, are sick of the fact that they seem to be losing ground every year. The question of whether they are losing ground to blacks, or immigrants, or Wall Street, or to jobs leaving our shores, gets blended into a blur or undifferentiated anger. The fact that they keep hearing that the economy is in recovery is all the more enraging.

Trump frightens the Republican elite both because he is uninformed and unpredictable, but also because he is in many respects the least conservative of the conservatives. He doesn't hate government and he doesn't have much use for Wall Street and free trade. But the Trump program, to the extent that he has one, doesn't address the deeper causes of working class rage.

The Sanders voters tend to be younger, more driven by hope than by anger, and painfully aware that their generation has gotten the short end of the stick -- costly college loans, too few real jobs with career tracks, unaffordable housing, and a generational fable about how cool it is to live in a world defined by Facebook, Uber, Starbucks and Airbnb, even if incomes are low and unreliable. Maybe you'll invent a killer app, but maybe you won't. Will that be for here or to go?

These problems are not going away -- they are only deepening. And nothing on offer in mainstream politics is likely to fix them.

Radical ideas are outside the mainstream -- until they're not. Then, oddly, they become as American as apple pie. Radicals had to propose early versions of what became Social Security before the idea was taken up by the New Deal in 1935.
Then it became so popular as to be politically untouchable.

Here are three ideas considered fringe that are urgently necessary.

Medicare for all. The Affordable Care Act has enrolled millions of formerly uninsured. But the crisis of under-insurance continues. Many who are nominally insured cannot afford the deductibles and co-pays, which keep rising every year.

In addition, in order to get the ACA enacted, the Obama Administration had to basically accept a status quo health system with too much power for insurers and drug companies, and far too much money wasted on middlemen.

Bernie Sanders has proposed a single payer system to replace all existing health insurance programs. His critics make the fair point that Sanders' proposal requires an immense tax increase; that you can't imagine a Congress that would actually vote for it.

Sanders' supporters respond that a single-payer system would be so much more cost effective than the current fragmented mess that the savings would outweigh the tax increases. However, the people who would save on premiums would not necessarily be the ones whose taxes would go up. Employers might get windfall savings while individuals would have tax increase that exceeded their premium savings. Trying to universalize Medicare in a single stroke is probably a bridge too far.

But by raising this issue, Sanders puts into play a topic that has been considered off limits. And there are other paths to universal, single-payer health coverage that have been made more politically possible thanks to Sanders raising the issue.

For instance, we could allow everyone between age 55 and 64 to buy into Medicare. We could keep those premiums low by raising taxes, but only on the highest brackets.

Then we could give every child a Medicare card at birth, good until age 30. We could pay for it by folding all existing children's health programs into Medicare and top it up with a modest tax increase on the wealthiest. Kids are relatively cheap to insure.

This would set in motion political demands to raise the age ceiling, as young people turning 30 would be a ready-made movement for a rolling increase in continued coverage. Before too long, the pressure to add the generation of 30- to 54-year-olds would be irresistible.

Put money where it's needed. Here's another one. The Federal Reserve is keeping interest rates relatively low, and thinks itself brave to buy unprecedented qualities of government and mortgage bonds. The Bank of Japan, reaching the limits of cheap money, just announced it would keep interest rates negative. Obviously, cheap money as a cure-all has its limits.

During the 2008-2009 crisis, the Fed was pumping unlimited funds into banks. It still pumps money into the economy mainly via banks -- which then turn around and invest in risk-free Treasury securities rather than making loans that might be risky.

Meanwhile, the low wages, college debt, and outmoded infrastructure function as lead weights on the economy. So why limit the Fed's operations to banks?

The Fed might declare a jubilee on student debt and just buy up all of the outstanding loans and declare them paid off. A companion program could use tax revenues to drastically cut the cost of college tuition going forward.

The Fed could also announce that it was buying infrastructure bonds, so that we could finance a massive public investment program on the scale needed.

Wouldn't this be like creating money? Yes, it would, but that's the whole point. The problem today isn't inflation; it's deflation and depressed purchasing power.

Isn't this an insane, fringe idea? Actually, at different times, the idea of the Fed pumping money directly into a deflated economy has been proposed by Ben Bernanke on the right and John Maynard Keynes on the left.

For a recent discussion of this idea from an unimpeachably mainstream source, I recommend Lord Adair Turner's recent book, Between Debt and the Devil. Lord Turner used to head the British Financial Services Authority, roughly the equivalent of the U.S. Securities and Exchange Commission.

A universal living wage. Just a few years ago, a $15 minimum was considered a preposterously utopian idea. Now it's law in several cities.

See what I mean?


Robert Kuttner is co-editor of The American Prospect and professor at Brandeis University's Heller School. His latest book is Debtors' Prison: The Politics of Austerity Versus Possibility.

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