Social Insurance

by digby

This essay in the New York Times is an excellent primer on the government’s role in risk management. And he uses the term “social insurance” which seems to me to be a great way to describe the safety net in a way that people can readily understand.

I particularly like this:

The financial markets had prided themselves on their expertise in pricing and managing financial risk prudently. But left on their own, they proved that they could not even manage properly as simple a transaction as a mom-and-pop mortgage loan, let alone fancy derivatives such as the collateralized debt obligations (C.D.O.’s) that were based on sloppily-written mortgage loans and the credit-default swaps (C.D.S.’s) meant to insure the value of these C.D.O.’s, but without adequate reserves to back up that credit insurance.

In the end, like teenagers who hate Mother’s strictures when all is well, but run to Mommy whenever they get in trouble, the swashbuckling oligarchs of the financial sector ran to government for cover, owning up once again to the time-honored mantra of this country’s legendary rugged individualists:

When the going gets tough, the tough run to the government.

Another term for “government risk management,” of course, is “social insurance.”

It is a social contract with government that Americans quietly love, but in the shouting matches that now pass for our “national conversation” on public policy so often profess to hate — as when they cry for government to stay out of Medicare, or when they sit on their beachfronts in the Hamptons waxing worried about government intrusion in the economy, all the while basking in the security of federal flood insurance.

Read the whole thing. Social insurance is a great way of describing what liberals believe government should provide to its citizens. You simply can’t have a dynamic society where people are petrified to take any risks for fear they will lose everything. And you can’t have a society where the oligarchs are unregulated or they will take ridiculous risks and depend upon the people to bail them out.

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