E.J. Dionne and Mickey Edwards: Bipartisan Exchange
Part Two

Today we are proud to bring you E.J. Dionne, Jr. (who just published Souled Out) in conversation with Mickey Edwards(frequent OUPblog contributor and author of Reclaiming Conservatism). This is the second part of the series which will we be publishing all week, so be sure to come back and check our bipartisan exchange.

E.J. Dionne, Jr. is a syndicated columnist with The Washington Post, a senior fellow at the Brookings Institution and a professor at Georgetown University. He is the author of Souled Out: Reclaiming Faith and Politics After the Religious Right, which was published in January by Princeton University Press.

Mickey Edwards is a former Republican Congressman, founding trustee of the Heritage Foundation, and national chairman of the American Conservative Union. He is the author of Reclaiming Conservatism: How A Great American Political Movement Got Lost- and How It Can Find It Way Back.

Email Two

Dear Mickey,

Thanks for that thoughtful reply. We certainly seem to agree on a number of propositions. Let me begin by citing a few of your statements with which I am in accord (and with which most liberals and progressives also agree): “The Constitution . . . provides us with both empowerment and constraint. The constraints are obvious — authority is divided and individual rights are protected. But the people are empowered to create a representative legislature with the authority to determine the nation’s taxing and spending priorities. There is nothing in the Constitution that prohibits the people from deciding to create a collective response to widespread national concerns.” I also agree that just as it “would be wrong for conservatives to adopt a knee-jerk negative response to tax proposals or spending initiatives,” so would it “be wrong for others — liberals, progressives — to automatically assume that government is the answer to all problems: some require comprehensive national responses and some do not.” To pick the obvious example: I drive a Saturn; other people drive BMW’s. I see no reason why the government should guarantee me a BMW. (I like my Saturn just fine.) Virtually all liberals and progressives — and, for that matter, most social democrats — acknowledge the advantages of a market economy.

The issue is where the market fails, where it can lead to outcomes that are unjust (sometimes with help from government actions that favor the privileged), and where a collective or community solution is more practical than relying on the market. Health care is an excellent example. No market democracy in the world relies primarily on the market to deliver health care. Health care is not a good like cars or jewelry. It is a necessity. And we do not know when we go into the market what health care we or our families might need five or ten years from now. Moreover, the market creates incentives for companies to insure the healthy and cut off insurance from the sick. This is market failure pure and simple and a profoundly unjust outcome. There are many ways in which government could guarantee affordable health insurance for all. We could well end up with a mixed government-market system (the Australian system is an interesting model), but government will simply have to play a much larger role in health care than it does today.

Another example, raised recently at a Brookings lunch by Rep. Barney Frank: It often takes regulation by government to make markets work. For example the SEC rules make it much harder for companies to sell watered stock. We now have an utterly irrational approach to regulating the banking system, exempting some institutions from rules that we apply to others. The result is the mess we now see in lending where it’s very hard for even safe borrowers to get credit. We need a comprehensive form of regulation (by type of transaction rather than by type of institution) in order to restore confidence in the markets.

Social insurance is another vital function of government. Conservatives brag about the “creative destruction” of the marketplace. But lots of individuals, families and communities get caught up in that destruction, which is not very creative for their lives. It’s a paradox: People need a certain amount of economic security in order to be willing risk-takers in the marketplace. The revolt against free trade is a revolt against the bad deal a lot of Americans are getting out of an economy in which the overwhelming share of recent growth has gone to a small number of people at the very top of the wealth and income structure. That’s not leftist propaganda; it’s a fact. Those who advocate for free trade will have to answer the entirely legitimate grievances of those who see the current economic arrangements as a bad deal for themselves and their families.

Yes, that will mean taxes that are more progressive; more government action to protect pensions, including efforts to help lower- and middle-income people save; more help for students to attend college or receive training for good jobs; greater unionization; reform of our public schools that involves both real change in the way they work and fairer funding; smarter economic regulation; and, yes, universal health coverage.

All of these things are legitimate functions for a government in a vast market democracy. All are sanctioned by our Constitution. All would make us more competitive. Ours is not a capitalist system pure and simple. It is a system of democratic capitalism. We have forgotten the “democratic” part – and note, as Jack Kemp would say, that’s with a small “d.” Democracy has often stepped in to save the market from its own failures and excesses. This is surely a time when we need that to happen again. And that is why I believe that for all of your honorable and helpful efforts to rescue conservatism, the next period in our history is far more likely to be a liberal moment.

Warmest wishes,
E.J.

E.J.

You raise good points but it’s important to look not only at examples of failure but at the reasons for those failures. Take your point that our regulation of financial transactions is, as you put it, “utterly irrational.” That is primarily just an argument for rational lawmaking. The starting premise, to which we both subscribe, is that some degree of regulation and oversight is acceptable even in a society that values freedom and the market economy. For example, conservatives have always supported the state’s police function, including the policing mechanism you point to, the Securities and Exchange Commission. That different institutions operate under widely different rules is simply a failure of the Congress to perform its lawmaking function in a rational and comprehensive way. I have personally favored a “silo” approach to regulation of financial institutions, using a common, and comprehensive, philosophical starting point applied to all such institutions, but keeping each operating in its own sphere of expertise, where it can best meet its fiduciary responsibilities.

Keeping to the point above — that it is perfectly acceptable within a conservative context to impose some sort of legal standard or framework around business practices — I have no problem with requiring insurance companies to provide coverage for pre-existing conditions, nor do I have a problem with denying them the ability to cherry-pick among potential customers. But there will be no insurance companies unless they are allowed to set rates in some kind of relationship to the risk undertaken. I would not expect a person of 80 to be able to buy life insurance at the same price as a person who has just turned 25 because the company’s likelihood of having to pay when the insured-against event occurs would be considerably higher. If a person has been treated for cancer, or emphysema, or heart disease, the same concern applies. Insurers should be prohibited from denying coverage but should not be required to cover all people at the same rate.

This no doubt prompts you to raise your greater point, which is to involve the government in the business of insuring against illness, subsidizing premiums, subsidizing employer contributions to health care plans, or in some other way: as you put it, a “mixed” system. There is no constitutional prohibition against government undertaking such an expenditure. However, the same rule applies: the “insurer”, too, must be protected against unfairness. In this case, we, the citizens, would collectively be the insurers. It would be nice for the covered but unfair to the provider of coverage if there were no penalty (higher co-pay, for example) for people who smoke, who drink excessively, who are obese, who drive without seat belts, etc. My point here, as above, is that just as you want conservatives to accept rational expansions of government, liberals must also accept rationality as a part of the “new way” they desire. I do not think it impossible, E. J., that you and I could actually address these matters in ways that would meet the goals we share (affordable health care, protection against business malpractice).

I’m not sure we could find the same common ground in terms of investment. It’s a bit of a confusion to talk about risk-taking at the same time we talk about protecting against the “risk” part of that undertaking. There is no doubt that the economy would be helped by more investing but it’s also a truism that one should only invest that which he or she can afford to lose. At some point, it becomes counter-productive for society (that is, us) to hold people harmless for their own ill-advised actions. I fully agree with you that there are incredible abuses in the marketplace, starting with the outrageous salaries often paid to corporate executives (even when the companies they run are performing badly). But I don’t agree, E.J., that there is a revolt against free trade (Americans continue to invest heavily in corporate stocks); to my mind the revolt against globalization is not a revolt against free trade but against allowing our own sovereignty to be diminished by a mad rush to embrace more and more markets regardless of the sacrifices we must make as a country (the setting aside of labor laws, environmental laws, health and safety laws) in order to sell more cases of coca-cola and more Fords. Opposition to greed is not limited to liberals, E.J.

You list some of the changes you believe needed: let me address them. Taxes are already progressive; making the progessiveness steeper is one option (though, like the alternative minimum tax) it may be counter-productive, but a different, and fairer, option is to reduce the number of items that can be written off as deductions. If one exempts health care premiums, food, and housing costs from taxation (thus, a break for middle-income and poor Americans) and eliminates some of the write-offs the wealthier may now claim, the disparity will be reduced at the present rates of progressivity. I have always supported job training and college loan subsidies, not as “rights” necessarily, but as social investments by a nation that will in time reap benefits from those expenditures. I’m not sure why you put “greater unionization” in the mix; it may be considered a social good but the social goods you desire do not depend on union membership other than by adding greater political muscle to the equation. And if you think I will disagree with you about the need to reform public education, you’re mistaken: all one need do is engage students in conversations about the Constitution, the basic framework of American government, history and literature to see how high a price we have paid for the various educational experiments of the past half-century.

I agree with you that our system is not a system of pure capitalism but of self-government in which the rights of citizens are the highest priority; capitalism is an economic theory that rewards investment in exchange for which the investor provides goods and services. The problem we face is not that a free market doesn’t work but that we have drifted far away from its basic principles and today accept a system in which the investor too often provides less and reaps more. That is not free enterprise but a caricature.

As for your conclusion that we are now the dawn of a new “liberal moment”, i doubt that. America remains a right-of-center nation. But you may be right — and I hope you are — that we are entering a new period of adjustment, not to change our system but to make it work better than it has.