The Bad Ideas Epidemic
The Daily Beast, January 26, 2010
After a year in office, Obama still hasn't moved America beyond dead ideas on health care, financial markets, and taxes. The case for why we need new thinking.
As Barack Obama marks his first anniversary in office, America confronts a harsh truth: While the worst of the Great Recession may be past, we haven't begun to fix the economy's deeper long-term problems because the president has failed to move us past the grip of dead ideas. Unless enough of us open our minds, raise our voices, and demand more, we'll emerge from the current crisis having avoided something worse, but also having failed to renew American prosperity.
This doesn't have to be the case. America doesn't have to settle for economic stagnation or the loss of global competitiveness when a better future is just a few fresh ideas away. But the battle to fix the economy starts inside our heads.
"Dead Ideas" is the phrase I use to describe conventional wisdoms that retain their power long after they make any sense. They're an eternal, universal phenomenon that plagues all of us, thanks to an essential vulnerability in human nature: our slowness in updating the way we think about the world even when the world itself changes radically.
It was the failure to explode a Dead Ideathe idea that Financial Markets Can Regulate Themselvesthat got us into today's economic mess. Think about it: Just a few common sense rules, none of them involving undue government intervention, would have made all the difference. Things like sensible capital requirements for banks and other financial institutions. Or a rule that those who originated those dubious "no down-payment, no proof of income" mortgages had to hold a continued ownership stake before they sold these debts to others across the system. Or what if investment banks had told executives that any bonuses they received by peddling mortgage-related securities that ended up imploding would be taken backor better yet, never awarded until the actual performance on which bonuses would be paid was known? These few simple changes, and the incentives for more prudent behavior they would have assured, could have helped avoid much of the pain that millions of families and businesses have endured.
But just as a big Dead Idea got us into this economic ditch, other Dead Ideas prevent us from getting out. Until we unearth and move beyond a host of Dead Ideas on health care, taxes, schools, trade and more, we won't find our way back to a durable prosperity. The urgency of dealing with a deep recession has blinded many of us to the need to rethink basic assumptions in our economic life. Unfortunately, the outlook for a revolution in Washington's thinking isn't good.
Consider three areas crucial to our long-term economic prospects, and how Obama (and the rest of Washington) have failed to move us past Dead Ideas.
. The Dead Idea at the heart of the health-care debate is what I call "Your Company Should Take Care of You," by which I refer to our employer-based system for providing health care, unique among advanced nations. Because of this link between employment and health coverage, 14,000 Americans have lost health coverage every day since the recession started. That's 100,000 a week, and millions since the recession began. President Obama's failure to challenge this archaic approach means that when the dust clears from the biggest health-care reform effort in decades, American business will be less competitive in the global economy and health costs will continue to soar. It also means that millions of Americans will continue to fall through the cracks.
. President Obama hasn't uttered a peep about the huge spending inequities between rich and poor districts that doom 10 million poor children to languish in failing schools. Nor has he fought for the national education standards that superior school systems abroad take for granted. So long as Obama fails to take on the Dead Idea that "schools are a local matter," we can't make the progress we need to. Richard Nixon was on the verge of proposing a major federal initiative to raise funding for poor schools to the level enjoyed by better-off districts, until he got distracted by Watergate. What does it say when America's first black president can't be as bold on behalf of poor kids as Richard Nixon was 35 years ago?
. President Obama has sold the nation a bill of goodsthe idea that we can stem the tide of debt and deficits, and repair our broken health care, schools, infrastructure, and other woes, while never raising taxes on people earning less than $250,000 a year. This is baloney. As every honest observer knows, once this recession is safely past, taxes will go up in the years ahead no matter who is in power. John McCain's top economic advisers from his 2008 presidential campaign have told me so themselves. That's because the baby boomers are retiring, which means the number of people on Social Security and Medicare will soon double. We already have trillions of dollars in unfunded promises in these and related programs. The math simply doesn't work at current levels of taxation.
But in his first year, Obama has refused to take on the Dead Idea that "taxes hurt the economy and they're always too high." As a result, he can't talk straight with the American people and can't lead the conversation we need on how to tax ourselves in smarter ways to promote growth even as we pay for the baby boomers' costly retirement and other pressing national needs.
The good news is that if even if our leaders lack the vision and spine to accelerate their demise, today's Dead Ideas are on their deathbed nonetheless. That's because they're on a collision course with realityand reality won't blink. Ten years from now, it will clear that the link between employment and health coverage is crazy; that the feds have to play a greater role in school finance and standards; and that taxes will have risen in ways that don't hurt the economy. But it makes all the difference if we can adjust our mental models of the world sooner rather than later. Remember, if we had exploded the Dead Idea that Financial Markets Can Regulate Themselves five or six years ago, much of today's historic economic turmoil could have been avoided. Today, if we summon the perspective and imagination to bury the Dead Ideas still in our midst, our future will be more secure.