April 23, 2018
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We’re All At Risk

Risk is the word of the day. For government officials trying to get the national and state economies working again. For the big corporations trying to figure why they failed or are failing. But risk also is a concern of the rest of us.

This new recession is hard on the wealthy but is hardest on the poor and middle class, as was the Great Depression of the 1930s. Then and now, risk for the masses has involved the grave possibilities of job loss, unexpected illness or injury, loss of a home, and the prospect of retiring into poverty.

Risk long ago was an individual concern. Families faced hard times by themselves and helped each other to survive. Things got much worse in the Great Depression, and the risks were too much for many families and individuals. President Franklin D. Roosevelt’s New Deal dealt with the emergency by putting in place a safety net that spread the major risks throughout the nation on the classic insurance principle. Unemployment insurance eased loss of a job. Social Security helped finance retirement and disability.

In 1965, President Lyndon Johnson’s Great Society created Medicaid and Medicare to serve health needs of the aged, the disabled and the poor. Business helped employees face risk by starting traditional fixed-rate pensions as a standard part of compensation.

The whole system worked rather well until a growing movement took offense at what it considered “socialism” and went on the attack. Its leaders included Presidents Reagan and both Bushes. They pressed the issue of “moral hazard,” the allegedly inevitable chain of events that insurance against risk reduces the incentive to avoid risk. Their slogans were “Personal Responsibility” and George W. Bush’s “Ownership Society.”

They tried at least to cut back Social Security and have succeeded in persuading many younger Americans that Social Security, Medicare and Medicaid will no longer exist by the time they retire.

To replace social risk management, they promoted “private risk management” through such devices as Individual Retirement Accounts and Health Savings Accounts. Business has been discontinuing traditional pension plans and substituting 401(k) plans in which employees manage their own investments and experience the risks of the market.

Jacob S. Hacker, a professor of political science at Yale, has told the whole story in his 2006 book, “The Great Risk Shift: The New Economic Insecurity and the Decline of the American Dream.” A revised edition came out last January as the current meltdown was well under way.

If you feel uneasy, it will help explain why.

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