Canada, Clinton, and Fixing Social Security

Social Security's current obligations will create large cash-flow deficits, according to economists.

Social Security’s current obligations will create large cash-flow deficits, according to economists.

There are two commonly accepted beliefs in the Social Security reform debate: that Social Security is going to become more challenging to fund as the US population ages, and that something at the policy level ought to be changed in order to mitigate these challenges. Of course, not quite everyone agrees on these two things. Paul Krugman has argued that the latter belief is wrong, mainly because he thinks the former is overblown. He argues that the long-run fiscal cost is relatively small, and in any case justified by the value of the Social Security program. Most Americans, on the other hand, including 85% of economists in one survey, agree that something needs to change.

I think a third important fact–one that might be controversial–is that the broad question of how to reform Social Security is actually adequately settled by observers–it’s just politically unfeasible. When it comes to tweaks to the existing structure, a majority of economists support raising the retirement age or making more direct benefit cuts. Most propositions for reforms at the structural level involve some amount of privatization, where Social Security funds would be invested in private assets in order to give a higher rate of return and far bigger benefits in the future. These proposals would all lead to lengthened solvency for Social Security and would reduce the burden borne by future taxpayers. From a disinterested perspective, reforms like this make sense. The structural reforms would create a solvent, successful social safety net for generations at the price of some short term pain. Funding in advance, not pay-as-you-go. My point is not that there aren’t legitimate differences of opinion on this; it’s just that if it were left to the technocrats, economists or even academics instead of Congress, we’d already have reformed Social Security. In one case of pension reform, Canada, it sort of was left to the technocrats.

So before you think that Social Security reform is anything radical, consider this. In Canada, the most equivalent program to Social Security is the Canada Pension Plan (CPP). In the 1990s, it became clear that CPP was going to run out of money within a couple of decades. The party in control of the government at the time was the Liberal Party of Canada (which on most issues is to the left of both major US political parties). Under the leadership of the Liberal Finance Minister, Paul Martin (who later became Prime Minister), a plan was quickly developed and implemented to save the CPP. The first major change was to reshape the CPP by increasing payroll taxes and reducing payouts. The government realized that the population was aging and that the old structure wasn’t working. Because of the quasi-authoritarian nature of majority governments in Canada, the public was obliged to agree. More significantly, the government created the Canada Pension Plan Investment Board (CPPIB). Whereas Social Security simply collects payroll taxes and buys US Treasury bonds (which fund the federal government), the CPPIB would be a legitimate, funded, growth-oriented pension fund:

Dr. Cook-Bennett [founding chairperson of CPPIB] discussed the mission set out by the reformers in 1997 and the CPP Investment Board’s innovative governance model. “That mission was not just to implement a world-class governance model, but to build a world-class investment organization – an investment organization able to compete with the very best of the best in the private sector, while maintaining an extraordinary degree of public accountability.”

Dr. Cook-Bennett also outlined a number of key features of the governance model: an independent, arm’s-length relationship with governments; an experienced management team that reports to an independent Board of Directors, not governments; a clarity of purpose through a singular, investment-only mandate; and a high level of transparency in operations. Further, the CPP Investment Board invests CPP contributions, not tax revenues. (From the CPPIB website)

The second paragraph seems not only to contrast the reformed CPP with the old CPP, but also perhaps with Social Security. Why would Canada, a country whose most established political party names itself “Liberal,” be the North American country to move toward a market-oriented pension fund? The new CPP has been a widely-acclaimed success. Why hasn’t the US made similar changes, when it obviously needs them? It’s not that no one has tried. Congressional Republicans led by Paul Ryan have made proposals to Barack Obama that involved partial privatization. George W. Bush failed multiple times to bring Social Security reform legislation into Congress. I wondered whether the pragmatic neoliberal Bill Clinton had favored Social Security reform, and it turns out he did. According to The Pact: Bill Clinton, Newt Gingrich, and the Rivalry that Defined a Generation, a book I haven’t yet read, Clinton and House Speaker Newt Gingrich had agreed on a plan to reform Social Security and Medicare in 1997. According to the author, it was only the Lewinsky scandal that derailed the process. Public opinion and Congressional attention turned away from policy and toward Clinton’s misdeeds.

The 1990s are gone. The new millennium has seen a collapse in the prosperity-driven political consensus that appeared to be building in the Clinton era. The paths taken by Canada and the United States have been divergent since then. Canada has seen profound reductions in government spending and taxation, increasing prominence on the world stage, and lasting political and economic stability. America, while still great, has found itself a victim of its own vices, repeatedly missing chances for reform and progress that have come from both wings of the American ideological realm. Twelve years after Clinton stepped down, America might be too politically divided to pass meaningful Social Security reform (let alone Medicare reform). The narrative of progress arrested by moral impropriety, symbolized in Clinton’s actions, has become America’s story. The struggle over Social Security, and all other federal policy, is not one of good versus evil. It’s one of competing, legitimate visions of society. These visions could be brought into focus, but it would take a unifying political superhero that neither Mr. Obama nor Mr. Bush has been.

Society is Catching Up With its Environment

It’s no secret that humans don’t understand everything. It’s easy to astonish yourself with the amount of things you don’t know, just by clicking “random article” on Wikipedia. What’s amazing is what humans do understand, and what they are good at. Language is something for which humans have an incredible natural ability. Nearly everyone is able to communicate complicated meanings to others using words and sentences, and by a young age. We’re also really good at being empathetic–a virtue that hasn’t really been observed in animals toward non-kin. We also intuitively understand narratives and patterns, which helps us make sense of things we’ve never seen before. But despite our strengths, humanity has some catching up to do.

A person’s or group’s particular mindset or approach to the world  (the word matrix might fit here, see last post) can’t be easily reduced. I wouldn’t argue that either genetics or upbringing or socializing singly explains the reasons we think the way we do–but clearly all of these matter. No matter what, changes in our mindsets take time. Because of our highly innovative, globalized world, society may be changing faster than our mindsets are able to adapt. Here’s one example.

Folk economics

Economics sounds like quite an academic thing to have “folk” culture built up around. But we form beliefs and make everyday decisions on the basis of economic assumptions. Many of the assumptions the average person holds are correct: “If there’s a drought, food prices will rise”; “We have to make trade-offs when using resources”; “Stores sell products based on what people want to buy.” But people also hold many assumptions that economic theory and empirical evidence seem to say are incorrect. A 2003 paper by Paul Rubin, from which the term “folk economics” is derived, notes as its main point that people tend to think of economics in “distributive” terms, caring more about how wealth is allocated than they do about how or whether it is produced. The problem with this innocuous-looking way of thinking is it rests on the assumption that the total amount of wealth in the economy is generally fixed, and the corollary belief that one person’s gain must be another’s loss.

This folk belief–economists refer to it as zero-sum thinking–isn’t always and everywhere wrong. For example, in a 150-person hunter-gatherer community, wealth is essentially fixed because of the constraints of that economy. To become rich, an individual hunter probably would have to impoverish others, by stealing or cheating. The obvious and important point is that our modern economy is nothing like that prehistoric economy. Ours has division of labor, established markets and progressing technology which constantly open new opportunities for profit. There is essentially no one in our society who directly produces their own goods and services, as was the case with early humans. We all benefit from the gains of mutually beneficial trade. Wealth is created through economic action, not simply moved around. These ideas are virtually unquestioned by economists. They’ve learned a different way of thinking that adapts itself much better to our modern economy than the limited, pre-industrial mindset many of us have.

To illustrate, think about the difference in wealth between North America and Africa. Americans and Canadians prosper, for the most part, while many Africans struggle to meet basic needs. One common intuition that arises from this is that North Americans have “more than their share”, and that perhaps this happened as a result of Westerners taking resources from Africans. This can’t be dismissed out of hand as an explanation, of course, but researchers have not accepted this idea of theft or transfer as accounting for the different levels of wealth. One important observation is that both Africans and North Americans are much richer than they were, say, 300 years ago. In fact, the average wealth per person, as measured by GDP or other measurements, has increased right in step with population in both continents–the opposite of what you’d expect with a zero-sum mindset. The story is not one of transfers of wealth from one continent to another (although to an extent that has happened), but one of different rates of growth; how quickly wealth is created. This can give us hope: even with a world whose population continues to grow, we can work for and expect growing prosperity for everyone.

Zero-sum thinking isn’t the only way that “folk economics” manifests itself. A majority of economists believes the minimum wage increases unemployment and hurts young people and minorities, while a majority of non-economists tend to support the minimum wage, believing that it raises wages. Economist Scott Sumner at TheMoneyIllusion recently posted an excellent list of concepts that non-economists tend not only to misunderstand, but to ignore and resent.

Of course, I’m simplifying. Not all groups have the same mindsets about economics. Some have had more time to adapt to global capitalism, and some already may have had a more favorable mindset toward it, contributing to its rise. And economists themselves can’t possibly have it all figured out. One practical challenge for now may be to identify which groups have the mindsets that are most favorable to economic prosperity and try to train our intuitions to mimic theirs.

Economics isn’t the only area where our intuition lags behind. I think we could use an upgrade when it comes to media addiction, hostile group mentalities, and measuring risk, to name some that have occurred to me recently. I might expand on these ideas in later posts.

The Righteous Mormon Mind: How Moral Foundations Theory Makes Sense of Latter-day Saint Culture

Mormon Sister Missionaries

Both men and women embark on 18 to 24 month proselyting missions for the LDS Church.

There’s a fascinating, widely acclaimed book I was drawn to recently: The Righteous Mind: Why Good People are Divided by Politics and Religion, by Jonathan Haidt. Haidt’s approach to our society’s incivility, that of a moral psychologist, is humble, well-reasoned, and sensitive; and a little polemic—he might even be described as cynical if his carefully constructed theories about human morality were not so even-handed, so perceptive, so true-to-life.

He has accomplished the unusual feat of attracting widespread and positive attention from conservatives, moderates and liberals, both believers and atheists, all of whom find a new method of expression to their views in his profound “moral foundations theory.” As a Mormon reading his book, I found it refreshing how much I had in common with this atheist psychology professor, and felt no hostility toward him for his views, even when he rather quickly summed up religion as a group adaptation (I think that to an extent, he’s right). Recent events have re-introduced America to a once-marginalized minority that now finds itself spread throughout the United States, and more recently, the world. Mormons are unique in American life, even uniquely successful by many measures. Although The Righteous Mind does not discuss Mormonism, Haidt’s ideas may help us explain the virtues of Mormon culture; as well as helping Mormons understand their own faith better by gaining an honest outsider’s perspective.

Of the three core analogies Haidt uses in his book, the one I’ll explain for the purpose of this discussion is that of the “six moral taste receptors”. Haidt argues that we make moral judgments almost instantly. We know when something is “just wrong,” not because we arrived at the conclusion after reasoning, but because our intuition tells us so. Reasoning comes later. He aptly compares this intuitive sense to taste. The analogy becomes more powerful as he separates taste into its five receptors (sweet, salty, bitter, sour and savory), and argues (in a satisfyingly empirical way) that morality can likewise be effectively reduced to a handful of simple moral foundations, at least for the purposes of theory. He labels these: care/harm, fairness/cheating, liberty/oppression, loyalty/betrayal, authority/subversion, and sanctity/degradation.

Haidt describes the particular way that these foundations play themselves out in individual or collective settings as “moral matrices,” mindsets that we find very difficult to step outside of. They are the products firstly of natural selection on the individual and on the group, but also of environmental and circumstantial factors—they emerge and evolve in ways none of us can fully understand. Haidt wisely stays away from overly normative analysis of morality in his book. He doesn’t suggest or offer ideal or preferable moral matrices, but rather enjoins sensible pluralism in the public sphere, and I fully endorse this view. Society requires diversity of opinion and practice. Haidt also observes, however, that our morality exists not to further any abstract rationalist goal, but by virtue of its nature to lead us to convert scarce resources around us, physical or otherwise, into offspring who will do the same. He praises prosocial, productive behavior within groups, giving attention to that which is almost universally seen as moral.

This is where Mormons come in. Social scientists for decades have observed the noticeably low violence, strong families, high level of education, and charitable dedication of Mormons. (Adherents.com has a collection of Mormon-related data here.) They seem to avoid much of modern social disease. (You may not agree—there are drawbacks to the culture I won’t take time to address here.) It is common to ascribe these trends to the Latter-day Saint health code, to a persevering pioneer history, or to simple religious indoctrination. These factors are real, but paint an incomplete picture. For whatever reason, Mormon morality has emerged as a full, nuanced blend of the six moral taste receptors.

Here’s a very brief summary of my ideas. If there’s interest, I’ll expand on each of them in later posts.

  1. Care/harm: Despite the perceived veneer of harsh conservatism, Mormons don’t turn their backs on those who are suffering. Each adult member is assigned a few families in their local congregation to watch over, and help in whatever way possible if needed, in the home teaching and visiting teaching programs. Many young Latter-day Saints embark on 18 to 24 month proselyting/service missions. Mormonsandgays.org, a new official website, is a compassionate outreach to the gay community which often feels spurned by Christian groups. Mormons favor peace over war and believe that helping the poor, Mormon or not, is a moral obligation.
  2. Fairness/cheating: Everyone in the church is expected to hold a calling (voluntary assignment), contribute tithing and live by church standards. Everyone contributes to the spiritual and temporal community and can expect help if they begin to fall.
  3. Liberty/oppression: Mormons are egalitarian. There is no paid clergy, even at high levels of church leadership. Talks and lessons in church are by various members of the congregation, not by pastors. Authority is tempered by liberal equality; it is only to be maintained by virtue of “persuasion, by long-suffering, by gentleness and meekness, and by love unfeigned.” (Doctrine and Covenants 121:39-46) Mormons are expected to “gain their own testimony” of the religion’s truth; it is not acceptable to complacently rely on one’s family’s beliefs.
  4. Loyalty/betrayal: Mormons have an extraordinary unity of doctrine and practice compared to most other religions. When as a member of the church you meet another active Mormon, you feel you already know them. There is an immediate kinship of faith. For Latter-day Saints, family is central, essential and divine, and parenthood is the highest mortal calling.
  5. Authority/subversion: Mormons believe that the church is really Jesus’ church. With Christ as the supreme authority, social order is maintained in a strong hierarchical structure of church leadership. This sounds tyrannical to modern ears, but it is arguably well balanced by “care” and “liberty.”
  6. Sanctity/degradation: Mormonism has a strong sense of the sacred; in that sense it is extremely conservative. We believe in the sanctity of life, sex, marriage, God, nation, family, truth and justice. Active Mormons are connected deeply to each other and to God by ritual: the sacrament, baptism, and temple ordinances/rites.

It’s difficult to convey the particular feeling of being Mormon. It is a deeply religious way of living. It is formally dogmatic; there is not compromise on the fundamental spiritual truths that define a Mormon. But it is also morally adaptive. If you confront a Mormon with a classic “moral dilemma,” you’ll likely find that they’ll respond by appealing to the guidance of the Holy Spirit, which speaks to each person subjectively. In this way Mormons are slaves neither to ends nor means, and they do not commit themselves fully to individualism without the responsible consideration of the collective.

This isn’t meant to be a shameless endorsement of the Mormon way of life, and I don’t intend or expect to convert anyone. I hope Mormon readers would take away a new perspective on their faith. I hope other readers would be able to apply the same ideas to their own faith, or worldview. That’s really what Jonathan Haidt has given me through his excellent book. I run the risk of making his ideas too sacred—his book enjoys the company of the Scriptures in my short list of favorite books.

Comments would be appreciated! On a personal note, I’ve never blogged before. Feel free to give me constructive feedback. And let me know what you think of Haidt’s book, and how it applies to Mormonism or to your own way of living.

Update: Thanks to Jonathan Haidt for linking to this post from his site, here.