President Obama made a key social science claim in his second inaugural address. He said, “the commitments we make to each other–through Medicare, and Medicaid, and Social Security [and presumably through other parts of the welfare state, too]–these things do not sap our initiative; they strengthen us. They do not make us a nation of takers; they free us to take the risks that make this country great.”
This passage includes a put-down of Mitt Romney’s controversial campaign comment that 47% of Americans supported Obama because they were dependent “takers.” (See an earlier post on the 47% comment.) More fundamentally, Obama’s statement asserts that government-provided security does not undermine individuals’ entrepreneurial spirit, but instead bolsters that spirit. An interesting – and controversial – hypothesis.
Many on the other side of the political fence are confident that Obama is wrong. The more economic security someone can count on, they believe, the less spur he or she has to try, to work, to innovate. The will-sapping aid could come from too-indulgent parents, or more important, from a too-indulgent government. This is the philosophy Romney was expressing, however clumsily, to a sympathetic audience. The “takers” are not taking responsibility for themselves.
Obama claims instead that economic security provides a safety net which permits and even encourages people to step out on the high wire or to make that daring leap into the unknown. Without the security, he implies, people are overly cautious, play it safe, and do not take initiative.
Who is right? Do government assurances weaken initiative or strengthen it? Both sides are right – but Obama probably more often.
As a matter of individual psychology, staring into the abyss of destitution spurs some people to push themselves further than they thought they could. There are up-by-the-bootstraps stories. But more often, staring into the abyss leads people to cling to the cliff side. Most innovators and entrepreneurs have not faced such dire threats; they had help and fallback positions. The youngsters Bill Gates, Steve Jobs, and Steve Wozniak could drop out of college and gamble on computer technology; if they failed, they were not going to be destitute and they could always return to school. Mitt Romney also famously said, when discussing how young people could succeed, that they should “take a risk . . . borrow money if you have to from your parents, start a business,” pointing to a sandwich chain owner as a role model – someone who had borrowed $20,000 from his father in return for half the business. Romney assumed that risk-takers do not, in fact, operate without a net or without a helping hand.
As to government programs, yes, some people take the safety net to be a hammock, or at least a resting place. Increasing unemployment insurance, for example, allows people to pass up going back to work longer. Easier rules for getting disability assistance allows workers who find cooperative doctors to, in effect, retire early. And certainly, many single mothers scammed the old welfare system (though many did so by working on the side).
Yet, in the broader picture, such programs more often provide the freedom to do more, not less. Unemployment insurance, for example, allows people to hold out for a real career and not just take the first job to survive. Social Security allows people to take a chance on changing jobs, knowing that the pension will follow them. Medicare means that middle-aged people do not need to hoard funds for their aging parents’ medical crises – and indeed has meant that many of the elderly have funds to help the next generation take risks. Add to these examples college loans, small business loans, tax credits for R&D, the house purchase tax deduction, disaster relief, and so on (see here), and it is clear that the U.S. government – even though much less supportive and insuring than governments elsewhere – subsidizes risk-taking.
From a long, historical perspective, as well, Obama’s claim sounds right. In Made in America, I argue that the increasing security of Americans over the last three centuries has empowered them to feel more in control of their lives, to take more control, to act more assertively. Some of our growing economic security (growing, at least, until the last generation) is the product of a thriving capitalist economy; much also is the product of greater government commitments (greater, at least, until the last generation) to a basic safety net.
In one short passage, President Obama captured a central debate Americans have been having about the role of government — and took the position most often correct.