The Next Social Contract

By Reid Cramer and Ray Boshara
Special to's Think Tank Town
Thursday, May 17, 2007; 8:50 PM

The initial round of presidential primary debates leaves no doubt that the presidential horserace has already broken from the gates. While some may lament the early departure -- given that votes will not be cast for another 8 months -- the absence of incumbents vying for each party's nomination has created a wide open race, one where the stakes are remarkably high.

Although most of the press coverage to date has focused on the daily stream of polls, jibes, and behind-the-scenes intrigue, the coming election represents our first real chance to remake the social contract for the 21st century. Our nation's social contract -- the "deal" or "grand bargain" between citizens, employers and their government about the rules of basic economic security and upward mobility -- is breaking down. The good news is that we have an opportunity to adjust it for the future before it erodes further into obsolescence. Any presidential candidate who fails to grasp the significance of this historic moment will either propose an inadequate patchwork of small plans, or big but anachronistic solutions to problems of the last century.

This is because programs dependent on the assumptions of the industrial era -- such as lifelong employment with a single firm and employer-provided benefits -- are rapidly falling out of step with an information-age economy characterized by global labor markets, shortened job tenures, heightened capital mobility and rapid technological change. At the same time, real wages have stagnated, health care costs and consumer debt have soared and savings have disappeared. As a result, more and more Americans feel increasingly vulnerable to the vicissitudes of the modern economy.

In past eras, there was a more common understanding of the rules of the game and the distribution of rights and responsibilities among workers, employers and the government. Yet today many of the tools that formerly gave individuals the security they needed to navigate a dynamic economy have become obsolete, leaving many to fend for themselves.

Presidential candidates should certainly be asked for specific proposals that respond to these conditions. But a defining challenge for the presidential aspirants is to match their policy papers with a set of guiding principles that can serve as a blueprint for the next social contract. These principles would, by their very nature, need to reflect the shared values of the American people and underscore the social objectives government action intends to achieve. Once these principles are established, policy can be crafted to serve these ends and garner the necessary public support to enact far-reaching reform.

We suspect Americans will be able to agree that going forward we need policies that are designed to encourage entrepreneurship and risk-taking, promote long-term growth and wealth creation, and encourage individuals and families not as employees, but as citizens. This is why the next social contract must be citizen-based, lifelong, and supportive of families and economic growth. Taken together, these principles offer a vision for the kind of society we should aspire to become, serving as the social and political glue which binds people together in a cohesive collective.

Making the social contract citizen-based means that benefits aimed at individuals should flow directly to them rather than through employers or other intermediaries, and they should be fully portable so that eligibility is not contingent on where you work, where you live or what communities you belong to. Moreover, the next social contract should extend throughout the life course, supporting families as they raise young children. Currently, we seem to have socialized old age and privatized care of the very young. A better approach would be to begin at birth by guaranteeing health care, pre-school and asset accounts for all children. And we should adopt policies that help families balance their work and family responsibilities through, for instance, greater access to flex-time and family income insurance. Furthermore, the goal of the next social contract should not be to eliminate poverty through as-of-right income transfers, but to ensure that everyone is given a stake in our shared prosperity through broad-based asset ownership.

Since America's founding as a democratic republic, American aspirations -- our optimistic expectation of a better life for ourselves and our children -- haven't changed one bit. What has changed, especially in the last generation, is the nature of risk. Today households have assumed a greater share of economic risks once shouldered by employers and the public sector. The next generation of political leaders will need to modernize the social contract to prevent these risks from becoming debilitating. To do so, the new contract will have to make clear the risks against which individuals need to be insured, the public goods government is committed to provide, and an understanding of how the burden of paying for these social protections will be shared.

The candidate best able to articulate a new set of mutual obligations between America's citizens, employers, and government may be the one most capable of helping us all rewrite the kind of contract that will allow us to thrive together well into the 21st century.

Reid Cramer is Research Director and Ray Boshara is Director of the Asset Building Program of the New America Foundation.

© 2007 The Washington Post Company