Brief Thoughts on the Politics of the Safety Net and Work Incentives

by Reihan Salam

In an article on the origins of Paul Ryan’s ideological convictions, Joel Achenbach of the Washington Post quotes Theda Skocpol, a sociologist perhaps best known for her work on the history of social insurance in the United States:

Ryan’s critics say his vision of government sapping American vigor is a fantasy.

“I think it’s poppycock,” said Theda Skocpol, professor of government and sociology at Harvard University. “His ideas are very, very old, and a very abstract ideology. They’re interesting as an extreme statement of a very harsh worldview.”

She added: “I just don’t think there’s evidence that Americans don’t want to work. Americans are working harder for less pay in real terms.”

I found Skocpol’s statement interesting, as it seemed overly broad. Having followed Ryan closely, and having been critical of some of his policy initiatives, I don’t think he believes “that Americans don’t want to work.” Rather, I think he believes that in some cases, efforts to provide social assistance can undermine work incentives.

In recent years, the economists David Autor and Mark Duggan have been conducting fascinating research on disability insurance. We’ve discussed Autor and Duggan’s contributions on a number of occasions in this space. One of the basic insights of their work is that as labor market opportunities for less-skilled men have deteriorated, the relative attractiveness of going on Social Security disability insurance has increased. SSDI does not promise a good living by any means. The benefits are meager. Yet SSDI also provides medical insurance, the value of which has increased considerably in relative terms. And while the benefits are meager, they are more reliable than private wages for people working at the low-end of the labor market, who tend to bear the brunt of unemployment at the bottom of a business cycle. 

Note that there are no bad guys in this story. The workers who have seen their labor market prospects deteriorate are not trying to game the system Rather, they are trying to make their way in the world as best they can, for themselves and for the people who matter to them. SSDI and our broader labor market institutions are not structured very well to meet the challenges these workers face, which is one of the reasons why Autor and Duggan have proposed sweeping reforms. Another reason, however, is that Autor and Duggan see the current expansion of the disability rolls as unsustainable, as it will necessitate a sharp increase in spending that might divert resources from much-needed public investments.

It is fair to say that Ryan hasn’t addressed SSDI in any great detail, partly because, as Autor and Duggan note, the politics of the issue are problematic. Duggan, moreover, served on President Obama’s Council on Economic Advisors, and one gets the strong impression that his sympathies are with the center-left.

But the broader project of reforming the safety net is not really about a left-right clash. Regardless of one’s underlying ideological presuppositions, one can embrace the idea that social protections can inadvertently create work disincentives, and that this is a danger that we should be mindful of. 

The problematic aspect of Ryan’s agenda, in my view, is his take on Medicaid reform and (potentially) work supports. Yet this is why Ryan has initiated a constructive conversation: we can decide to spend somewhat more on programs like Medicaid and work supports than Ryan has outlined, but to do so we will need to raise taxes above postwar norms, and not just for high-earners. That is a case the Obama administration has not been willing to make to the detriment of having a rational, open conversation about our fiscal future.

The Agenda

NRO’s domestic-policy blog, by Reihan Salam.