Equality and Its Discontents

The most complex issues can be hidden in the simplest of statements.  We cherish the Declaration of Independence for its ringing proclamation that “all men are created equal.”  Did that include women and slaves? Not for a very long time.  Did that mean just equal in opportunity?  Did that mean only equal before the law, or include all aspects of living, from education to health care to income?  We’re still working that out.  Two items in the news today are a CNN series on the continuing issue of income inequality and a furor over whether the Affordable Care Act will require some people to lose or change their current health insurance.  It so happens they’re different faces of the same coin.

We’ve had this preference in American society that all the good things in life be the result of hard work.  It goes back much further than Jefferson, to the Protestant Ethic, John Locke’s Labor Theory of Value, the Jamestown colony’s “if you don’t work, you don’t eat”, and on past Aristotle to cave man days when the success of the clan required hard effort from everyone.  Exploring and taming the  new continent of America required that kind of ethic.  Other societies had not always gone that route.  In other parts of the world and in Europe through medieval times, economic success was based on land and other forms of inherited wealth, and the measure of an aristocrat was how well he used his extensive leisure. In such societies massive income inequality is the norm. If you’re bright but still a peasant, that’s just the way things are.  But when a person’s economic success is based principally on his/her labor, and everyone feels they work equally hard, relative income equality becomes a key ingredient in the glue that holds society together. That’s why even fiscal conservative Herbert Hoover promised “a chicken in every pot.”  You worked, so you’re entitled to eat as much as the next guy.  Nowadays, that’s not always the case. 

Some of us, including corporations and a part, but not all, of the one percent, have found a way, as Buddhists might say, “off the wheel.”  The source of their wealth is no longer their direct labor, but the income derived, through the manipulations of skilled technicians, from financial instruments.  Derivatives have replaced landed estates.  A man’s investment bank is his castle.  The problem, as Aristotle long ago pointed out, is that such manipulations do not produce goods and services that provide jobs or food (or health care) to others.  Instead, they siphon away investments from the activities that do.  Creating jobs is no longer the priority, nor is rewarding skilled labor.  A consequence of that is the re-emergence of income inequality, just as it had existed in the landed wealth based societies of yesteryear.  But in a society that is based on the premise that your labor is the key to success, including your access to health care, disproportionate access to the necessaries of life is intolerable.

One way policy wonks analyze legislation is in terms of equity, the extent to which a law equally benefits or harms groups in similar circumstances. Horizontal equity requires, for example, equal treatment of all people of a same income level or over age 65.  Vertical equity requires fair treatment across socioeconomic classes or age groups.  That’s what the big arguments about redistributing income are about.  Transitional equity requires that when a law is enacted, people not be unduly harmed simply by its process of implementation.  For example, when SSA, to save money, began mailing monthly benefit checks throughout the month rather than just on the 3^rd, deciding how to handle the first month of the change for the people who had been getting a check on the 3^rd but now might get it on the 15^th was a major transitional equity issue.  The problem is that the various equity considerations work against each other, and must be balanced.  The wider the population served by the legislation, the tougher the vertical and transitional issues are.  That’s why, for example, when Social Security was first enacted, farm workers were excluded.  And of course there’s politics, which brings in a whole other bunch of considerations.

The ACA furor is about the fact that some people may face loss of an existing health insurance policy because the standards for health insurance set by the law require better coverage by the insurance company, and the insurance company decides to charge significantly more for that improved coverage. Their coverage of course was poor because their low pay could not cover better coverage under the existing system.  But improved coverage is a major goal of the legislation.  The problem exists because vertical equity requires providing the same quality of health care whether you’re earning $15,000 or $150,000.  But horizontal equity requires as broad a population covered as is possible, and not everyone’s income covers the same medical care in our existing system.  And transitional equity says no one should be unduly damaged in the process of improving coverage.  And politics says it’s a bitterly factional issue where no agreement is possible.  It looks like an unsolvable problem until you realize the general problem already had a solution, and shouldn’t exist in the first place.

The existing solution, obviously, is Medicare.  Medicare Parts A and B cover all those over 65 eligible under Social Security for a flat monthly fee within reach of all.  While it’s based on prior work which was paid vastly different wages, its costs are spread equally over the whole population.  Extending it to all ages solves the vertical and horizontal equity problems at one fell swoop.  It would also invest the attention of the whole country in solving the medical cost containment problems we face.  The remaining equity problems are health care for those not employed, the transitional impacts on the insurance industry and the factional politics.  The same problems were faced and dealt with at the enactment of the original Medicare legislation.  If our politicians are sufficiently grown up to lead, they can solve them now.

The underlying issue is the reliance we place on good health solely as a reward for labor, when we are unwilling to reward the laborer adequately enough for him/her to afford it.  That’s why it comes back to that income inequality issue again.  We think of income inequality as a purely economic issue, when in fact it influences every part of our lives.  Everything from our health to our education to the transportation we take is better or worse because of it.  Other places like Scandinavia have tackled the issue and are better off for it.  International rankings say not only their health care but their general happiness is better than ours for their having done so.  We started this country off by declaring the equality of all.  It’s time we looked past our factions toward a common vision of what that means.