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How to demolish the oligarchy in 3 easy steps

American democracy has been tainted by lobbying and corporate interests. How do we fix it? Blow it all up


Michael Lind
April 24, 2015 1:59PM (UTC)
This story has been corrected since it was originally published.

“Equal rights for all, special privileges for none.”  That was the motto of Jacksonian democracy. I’m generally not a fan of Jacksonian politics in general, but Jacksonian hostility to “class legislation,” or different policies for different classes and categories of citizens, is an idea that people on left, right and center can embrace. Case in point: We need to replace a bewildering miscellany of tax and economic security programs targeted at different constituencies with a few simple and universal policies that are identical for every Americans, rich, poor and middle class.

Let’s start with health care. Following the passage of the Affordable Care Act, we Americans now have a means-tested program for the poor, Medicaid, divided between the federal government and the states; another means-tested, state-based program for children, SCHIP (State Children’s Health Insurance Program); a purely federal system for the elderly, Medicare; employer-based health insurance subsidized by the tax code; a system of tax-subsidized individual health insurance for working-age people purchased through exchanges; and the Veterans’ Administration, a separate system for retired military personnel.  And those are only the major public health care programs.

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That’s right. We have six separate, major American health care programs, with different streams of revenue and based on different systems. Medicaid and Medicare are single-payer, multiple provider. The Veterans Administration is single-payer/single-provider. The ACA exchanges are based on an individual mandate. Medicare and the VA system and the subsidy to employer-provided health insurance provided by the federal tax code are purely federal policies. Medicaid and the exchanges and SCHIP are partly federal, partly state-based.

Are you still with me, class? Quiz tomorrow.

America’s health care policies are a dog’s breakfast. America’s retirement policies are a dog’s breakfast that a dog barfed up later.

We have a universal, federal public defined benefit (DB) system: Social Security. We have federal tax subsidies to employer-based DB pensions.  And that’s not all. We have a variety of tax-favored private defined contribution (DC) systems, including IRAs and 401(k)s.  Oh, and most public employees—teachers, fire fighters, police—are covered by separate, public DB pension plans—huge pools of state-controlled money frequently raided by state legislators or milked by finance-industry friends of corrupt state governors and mayors.

By my count, that’s four distinct major retirement systems in the U.S.

Education? We have public provision: public K-12 and public community colleges and state universities. Outside of this system of direct public educational provision, we have a separate system of federal student loans. And a third system of federal grants. And because three incompatible systems of aiding higher education are not enough—this is America!—we have yet a fourth, completely different system of tax-favored college savings accounts. America’s system of funding higher education is not quite as insanely complicated as our health care and retirement systems. But we’re getting there!

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The political scientist Steven Teles calls this kind of baroque public policy “kludgeocracy.” Another way to describe it would be that Rube Goldberg gets elected and promotes various goals—health care, retirement security, educational access—by means of needlessly elaborate contraptions involving candles, levers, and gerbils running on wheels.

Who benefits from this complexity? Lobbyists, tax preparers, accountants, and rent-seeking parasites in the private sector who figure out how to game these needlessly elaborate systems to skim money from taxpayers and rate payers. Complexity is the friend of corruption. Simplicity, on the other hand, promotes democracy. So here’s a suggestion, in the spirit of Jacksonian frontier violence as well as Jacksonian democracy:  Blow it up.

Blow it all up.  Blow up retirement policy, health care policy, and education policy. Replace them with simple, universal, purely federal policies that are the same for everybody, no matter what your income or age or state of residence.

Equal rights for all, special privileges for none.

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Total demolition is not necessary. We can pick one or two of the existing systems in each area and expand them and universalize them, while demolishing the other policies.

Let’s start with health care policy. What should stay and what should go?

In good Jacksonian fashion—“equal rights for all”—we prefer universal programs which treat all citizens of all economic classes identically to means-tested programs based on income. So we will keep Medicare and Obamacare (the exchanges) and get rid of the means-tested programs, Medicaid and SCHIP. It also makes no sense to maintain a separate medical system for retired military personnel, and recent scandals have cast doubt on the argument that the VA is a  model of good medical practice.  So let’s scrap the VA as well.

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We could combine universal Obamacare for working-age people with universal Medicare for the elderly.  Or we could choose between two universal, lifelong systems: universal, lifelong Medicare or universal, lifelong Obamacare.

The main problem with U.S. health care is not on the payer side, but on the provider side—the Big Pharma oligopoly, the hospital oligopoly and the physician cartel use their monopoly power to extort excessive payments from American society. The solution, used even by countries like Switzerland with purely private, individual-mandate systems, is “all-payer regulation”—the conversion of the medical-industrial sector from a group of price-gouging profiteers into a publicly-regulated utility with regulated prices. As long as medical prices are regulated and profiteering drug companies, hospitals and doctors are reined in, then health care will be affordable whether you have lifelong universal Medicare or lifelong universal Obamacare.

Next let’s blow up American retirement policy. Let’s begin by phasing out employer defined benefit (DB) pensions. Your retirement income, like your health care access, should not depend on particular employers.

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The biggest employer pensions are those of state employees. Many state employees were left out of the Social Security system in 1935 because state public pension systems already existed. That was 80 years ago. It’s the 21st century. All American workers—public and private alike—should be part of a single universal retirement system, independent of particular employers.

If we get rid of tax-favored pensions from public and private employers alike, we are left with a public DB pension—Social Security—and various private defined contribution (DC) plans like IRAs and 401(k)s.  Most other democracies have a mix of both systems. We can as well. Let’s have a two-tier system: Social Security plus a federal, tax-favored DC plan on top of it (preferably one less easily gamed by sleazy, fee-skimming money managers).  The left and right can fight over the relative proportions of Social Security and the tax-favored defined contribution plan. But progressives and conservatives might be able to agree to phase out public and private defined benefit pensions.

Education policy? Here, too, there is a need for incineration, followed by reconstruction.

The student loan system has turned out to be one of the biggest policy errors in American history—saddling students with debt while enriching bankers and indirectly subsidizing bloated university administrations.  So let’s get rid of federal student loans.

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Let’s get rid of Pell grants, too.  Pell grants go to students who can’t afford to pay for college. But this misdiagnoses the problem, which is affordability on the provider side, not lack of income on the part of the student. We already have a system of public community colleges and state universities. Why not make admission free to all students who get in, as President Obama has suggested in the case of community colleges? We don’t charge students admission to public K-to-12 education.  We pay for it with taxes. Let’s have a taxpayer-funded K-16 system.

Most American students go to public institutions of higher education.  What about the minority of students who go to private colleges and universities? Wealthy private universities, like Yale and Harvard (I went to the former, and have taught at the latter) could afford free admission for everyone, not just the needy. If their greed leads them to continue to soak middle-class and upper-class students, at least the Ivies and other private universities can provide scholarships for low-income students. Private universities are tax-exempt institutions. They ought to act like charities, not hedge funds or for-profit conglomerates. So here’s an idea: Limit tax-exempt status to private universities with free tuition for all students. If schools want to charge tuition, let them be taxed as for-profit corporations.

We have now, in our thought experiment, blown up and burned down American health care policy, American retirement policy, and American higher education policy. We have then built, upon the smoldering ruins of present-day complexity, a new, simple, universal, purely national system that is the same for every citizen, rich and poor.

In health care, there is only universal, lifelong Medicare or lifelong Obamacare—a single federal program with portable benefits, the same for everybody, with no role for the states or private employers at all.  Simple.

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Equal rights for all, special privileges for none.

In retirement policy, there are only two universal federal programs:  Social Security, and a simple, universal defined contribution private savings plan on top of it.

Equal rights for all, special privileges for none.

In higher ed policy, we now have two simple systems of free higher education. All public community colleges and state universities now offer free tuition, paid for by state taxes and federal grants.  Tax-exempt private colleges and universities also offer free tuition, paid for out of their tax-favored endowments.

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Equal rights for all, special privileges for none.

Fantasy? In the short term, sure. The well-paid parasites who profit from complexity will see to that. But there are two kinds of politics: Moving the ball and moving the goal-posts. This is about moving the goal-posts. This is about the next generation, not the next election.

Rome was not built in a day, and the antiquated, crumbling, rat-infested fire hazard that is American public policy will not be condemned, demolished and replaced by a clean, modern, solid structure overnight. But the sooner we start the demolition, the better.  In the meantime, “Equal rights for all, special privileges for none” would make a good campaign slogan in 2016.


Michael Lind

Michael Lind is the author of Land of Promise: An Economic History of the United States and co-founder of the New America Foundation.

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