The Missing Element of Obama’s Economic Plan

By Steven Hill, January 18, 2009, openDemocracy

Imagine a place where doctors still do house calls. Or where childcare is affordable, professional and widely available. Or where all new parents are paid to stay home and care for their newborns, and receive a monthly stipend to pay for diapers, food and other daily needs.

Or imagine a place where a young person doesn’t have to mortgage her or his future by going in debt to pay for a college education. Or where everyone has quality, affordable health care, and all workers receive two months worth of paid vacation and holidays every year, and paid sick leave too, as well as a generous retirement.

To most Americans, such a place sounds like Never-Never land. But to most Europeans, Canadians and the Japanese, this sounds like standard operating procedure. It is important for Americans to keep this in mind as we listen to President Barack Obama announce the goals of his new administration.

For example, in announcing his economic stimulus plan, Obama unveiled some badly needed measures, including rebuilding of roads, bridges and schools and increased renewable energy production. But his American Recovery and Reinvestment Plan misses an opportunity to more directly invest in the greatest “infrastructure” of all – the American people.

Public investment in physical infrastructure as a way of creating jobs and boosting consumer spending is a sensible strategy. However, it leaves American workers stranded by the same “ownership society” ideology that has been part of the problem. The fact is that the next economic recovery will be followed at some point by the next downturn. Without a different type of intervention, Americans will remain lacking in the type of institutional support and “social infrastructure” that is crucial for providing economic security in this uncertain age of global capitalism.

A more comprehensive solution has been crafted in many European countries, Japan and Canada. In these nations, a small amount of each employee’s and business’ income is redirected  into a pool of funding to pay for universal social infrastructure like affordable childcare, paid parental leave, paid sick leave, free or nearly free-higher education, affordable health care, job training programs, adequate vacation, sufficient retirement pensions and more. Providing such benefits to all residents lays a much stronger foundation for the middle classes in these countries than anything comparable in the United States.

For example, the US is one of only five countries that do not guarantee some form of paid maternity leave (the others being a few impoverished African nations and Papua New Guinea). Fathers are granted paid leave in 65 countries, but the US guarantees fathers – as well as mothers – nothing. A majority of Americans are not even eligible for unpaid parental leave.

The US is also one of only a handful of nations that have no national law guaranteeing paid sick leave, leaving some 46 million workers – 43 percent of the private industry labor force – without paid sick days. At least 145 nations provide paid sick days, since if you’re sick, it’s preferable to stay home and take care of yourself. In the US, the ill are forced to show up to work and infect their co-workers.

American detractors have decried this European, Canadian and Japanese way as that of a “welfare” state and “creeping socialism”, but nothing could be further from the truth. A better name for this system is a “workfare” state, since all of these supports are part of a comprehensive system of institutions geared toward keeping individuals and families healthy, productive and working. By building a safety net beneath their workers, those countries that have embraced certain social democratic reforms have put some meat on the bones of “family values”.

But in America’s “ownership society”, you are truly left “on your own”. In theory, this should lead to Americans paying less in taxes and having greater discretionary income, but this has been mostly an illusion. In return for their taxes, people in these other countries are receiving a whole host of benefits and services for which Americans end up paying extra for, out-of-pocket, via fees, premiums, deductibles and tuition, in addition to their taxes. When you sum up the total balance sheet, you discover that many Americans are paying out just as much as their counterparts in other nations, but receive a lot less for their money.

Properly understood, these workfare supports are a necessary part of infrastructure investment, just like the maintenance of physical infrastructure such as bridges and roads or spending on energy efficiency. This social infrastructure investment also creates jobs and stimulates consumer spending, even as it invests in the most precious resource of all – people.

By narrowly emphasizing investment in physical infrastructure in his economic recovery plan, Obama fails to recognize how social infrastructure must be a crucial part of the mix. A failure to invest in social infrastructure during this critical time will leave the American middle class on the same shaky ground where it has always stood, vulnerable to the current as well as future economic downturns.