Online Extra: From Welfare State to "Enabling State"

The old, paternalistic 20th-century model isn't viable says Will Marshall of the centrist Progressive Policy Institute

Will Marshall, president of the Progressive Policy Institute, a centrist think tank affiliated with the Democratic Leadership Council, does not believe that the U.S. faces a choice between rugged individualism and welfare-state dependency. He discussed his "third way" approach to the social safety net with BusinessWeek White House Correspondent Richard S. Dunham. Here are edited excerpts of their conversation:

Q: Is the concept of an economic safety net relevant in today's Information Age?


We're moving from a welfare state to an enabling state in which public activism [government action] is all the more necessary against the enormous inequities and dislocation brought about by global capitalism. The prospect of downward mobility has become a much more palpable threat to many people. We are asked by our government and our employers to take greater economic risks, but we don't have the same safety net.

The anchoring concept is shared responsibility. People know that the old New Deal safety net has frayed and cannot be rewoven. People understand that government and big corporations cannot any longer guarantee good jobs for life.

Q: So what do we expect the government to do for us?


People are not looking for the old, paternalistic safety nets. They are looking for ways to empower themselves economically. They want a government that equips them with new tools for security and success. That's a different model than the 20th-century welfare state, with top-down distribution of entitlements.

Defending the old, paternalistic 20th-century model isn't viable. Neither is completely dismantling it.

Q: What are some of those tools to provide security and economic empowerment?


People under 50 want more personal choice and control [in retirement savings, health care, and education]. Universal pension accounts that would be personal and portable. Health-care tax credits for transitional health-care between jobs. Workers should control more of their health insurance and make it portable.

Home ownership is the most important safety net. We need a 21st-century version of the Homestead Act. We need a nation of trust-fund babies with accounts that can grow over time and be a passport to college and home ownership.

Q: How would you deal with Social Security?


Nobody except the arch-privatizers is in favor of full privatization of Social Security. We need a two-tiered system that keeps a safety net and places much greater emphasis on personal savings. Democrats can't be AWOL from the whole debate about expanding personal savings and building capital. We need to widen the circle of capital ownership to allow workers to get wealth-producing financial instruments.

Q: Should government protect workers from the risks of bad investments?


If we try to insulate people from economic risk, we will deprive them of the economic upside that the global economy has to offer. But they need fundamental protections to deal with health care, pensions, and ownership. The new volatility is inseparable from the prospect of economic reward. What we need are policies that expand the winners' circle and help people manage risk in new and creative ways.

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