The Great Risk Shift

Courtesy Oxford University Press

Web-Exclusive Book Review

By Jacob S. Hacker (Oxford University Press)

Review by Bill Lenderking, January 2007

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

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

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

This has come about because government and corporations that once provided widespread benefits to citizens and employees have shifted these costs onto individuals and glorified the shift by labeling it "personal responsibility." The first part of Hacker's book describes how ideology and politics brought this about; he then describes how workers and families now must bear a greater burden as private and public support erodes.

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

Hacker does not favor erecting some huge government monolith to throw a cornucopia of benefits at Americans, but wants to preserve the best elements of existing policies, with some major improvements. He understands people cannot be insured against all the vicissitudes of life, but wants to reduce the impact of overwhelming risk and instability when they put crushing and unforeseeable burdens on individual families and reduce incentives. His arguments on health care and retirement are especially relevant in this regard.

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

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

Hacker also proposes "universal insurance," which he describes as a "new insurance program that would protect workers and their families against catastrophic drops in their incomes and budget-busting expenses. It applies only if "existing public policies do not adequately protect family incomes." He acknowledges these programs will entail costs, but argues they would be offset by reducing the "creative destruction" of American capitalism through such high-cost calamities as bankruptcy and emergency-room care, while protecting its dynamism.

Hacker offers many practical examples and relevant statistics to guide the reader through these thickets. He acknowledges the details are complex, but insists the principles are clear and will mitigate the economic and emotional damage caused by traumatic insecurity and risk.

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

Most AARP members can decide for themselves whether this statement is true or not. In any case, Lindsey's criticisms do not really refute Hacker's arguments, and even he acknowledges that Hacker's proposals for "making safety-net programs more responsive to contemporary economic hazards" are worth exploring.

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

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

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