Amanda Stanhaus

Tag: north

Social Insurance: Current North American Debate

Originally submitted for an independent research project comparing North America’s welfare states with Professor Antonia Maioni at McGill University.

North America’s policy makers and interest groups debating the future of their respective welfare states have lost sight of the important role of social insurance in a capitalist system. J. Donald Moon understands a democratic welfare state to be “an attempt to solve a serious moral dilemma that necessarily results from the central role of markets in modern society.”[1] Moon defines self-respect as, “one’s belief that one lives up to certain standards that define what it is to be a person of worth,” and its preservation is key to an ideal democratic welfare state.[2] Moon’s argument features T.H. Marshall’s explanation of civil, political, and social rights that facilitate equal citizenship; together these rights create equal social worth, genuine equality of respect, and consequentially, the ideal democratic welfare state.[3] To create an ideal democratic welfare state that preserves self-respect, Moon outlines the three “institutional principles” of a welfare state: achieving full employment, ensuring universal provision of social services, and establishing a comprehensive program of social insurance.[4] Moon recognizes his “institutional principles” have internal limits and various implementation options, but in general they allow for social rights to be exercised, while maintaining self-respect.[5] Moon’s argument and his “institutional principles” represent the North American consensus that created their unique liberal welfare states. Now lacking a consensus view of Moon’s “institutional principle” of social insurance to shape program reform, misinformed interest groups dominate the retrenchment debate that is resulting in reforms dismantling the social insurance programs of North America’s liberal welfare states.

Given the capitalist systems of North America’s liberal democracies, social insurance is a moderate fix. When discussing common risks, such as birth into a poor family, ill health, involuntary unemployment, etc., Theodore R. Marmor, Jerry L. Mashaw, and John Pakutka explain that “beginning with Otto von Bismarck…the social provision of income protection against these risks has been a fundamental precondition for the flourishing of industrial capitalism. Looked at historically, social insurance is a deeply conservative idea and the major viable alternative to state socialism.”[6] Marmor, Mashaw, and Pakutka describe social insurance’s original goal “to cushion workers and their families from the many threats to economic security that capitalism produces while, as the same time, permitting the market economy to produce its undeniable gains in national income.”[7] However, social insurance must adapt to reflect current realities of its beneficiaries, as Marmor, Mashaw, and Pakutka explain, “[programs] that fit well in one era can become outdated in another. A society’s underlying sense of ‘fairness’ or ‘appropriateness’ in guarding against risks to loss of income from work can change as well.”[8]A philosophical consensus and resulting reforms must reflect the times to be relevant. Lacking a consensus view of social insurance, program reform debate is commanded by interest groups that promote retrenchment.

Lacking a consensus view in favor of social insurance, interest groups calling for privatization of social insurance programs in North America are shaping the program reform debate. The circumstances of both the U.S. and Canada are similar, Keith Banting and John Myles note, “Organizations that speak on behalf of the poor are weaker, and power has moved to institutional niches less responsive to redistributive interests.”[9] Traditionally, Banting and Myles describe liberal welfare states as: “reluctant to replace market relations with social rights; instead, they seek to provide a safety net for the ‘poor’ and to encourage the bulk of the population to rely as much as possible on private sources of economic security, including occupational benefits and personal savings.”[10] Critics of the welfare state and its social insurance programs are using this liberal welfare state tradition to their advantage. Banting and Myles explain, “the redistributive role of the state has always been less developed…In liberal welfare states, mere drift in social policy can represent a victory for conservative interests.”[11] The structure and tradition of North America’s liberal welfare states is facilitating program reform debate that lacks a common vision and is dominated by misinformed interest groups.

Liberal welfare states are being highly scrutinized due to an ideological shift that now supports reform to increase privatization and individual responsibility. Yet, critics misconstrue the role of social insurance in a capitalistic market. Marmor, Mashaw, and Pakutka explain critics’ understanding of social insurance, “Rather than being seen as supporting a capitalist system by cushioning its inevitable risks, social insurance arrangements are portrayed as undermining private markets and personal responsibility, or as threatening the overall fiscal health of the nation.”[12] Inherently, the payment and services of a social insurance system are inefficient. But, when these risks are insured publicly it is comparatively more efficient than when these risks are insured privately. Social insurance programs are essential to the maintenance of market capitalism as Marmor, Mashaw, and Pakutka explain, the risks insured by social insurance are not sufficiently dealt with in private insurance markets.[13] If a welfare state’s social insurance programs are privatized, insurance premiums will quickly become unaffordable, because of the problems of adverse selection–only the highest-risk people will sign up for insurance–and moral hazard–those insured will take on extra risks because they face no downside.[14] For example, if it is a personal choice to sign up for health insurance, only those who would utilize the insurance (i.e. those already sick) will register, and then premiums would exponentially increase, as the risk is concentrated among a small sick population. Public social insurance programs that provide coverage for large and various groups are the best way to spread risk and control costs. Marmor, Mashaw, and Pakutka explain that social insurance already provides what critics want to improve, “indeed, supporting a society based on a viable vision of [personal choice, individual responsibility, and market competition] is the fundamental function of social insurance. But social insurance programs designed to maximize personal choice and promote market competition will simply not deliver adequate social insurance protections.”[15] Privatizing social insurance programs is an oxymoron, as Marmor, Mashaw, and Pakutka note, “Making social insurance programs more ‘market-like’ is seldom a reform that supports family economic security or, in the long run, the market itself.”[16] Without a consensus view of social insurance, misinformed ideologues are mistakenly implementing “fixes” to improve personal choice, individual responsibility, and market competition that will only increase inefficiency in insuring against the inherent risks of a capitalist system.

A lack of a consensus view of social insurance plagued the passage and the ongoing implementation of the U.S.’s Affordable Care Act (ACA), which Marmor describes in his article, “Health Reform 2010: The Missing Philosophical Premises in the Long-Running Health Care Debate.” The U.S. was unlike other countries that simultaneously debated universal health insurance reform policies and the philosophical implications of a proposed reform.[17] Marmor notes Obama’s campaign for health reform repeated traumatic health insurance stories and sparked many partisan commentaries, but lacked a discussion defining fairness and solidarity in this instance.[18] Because the U.S.’s health reform debate lacked a philosophical agreement and the resulting law tinkered with a variety of existing programs, Marmor poses the question, “Is the absence of philosophical consensus an important element in explaining the very mixed reform result that emerged in March of 2010?”[19] The universal mandate central to the ACA continues the U.S.’s adherence to the Bismarck system and its definition of beneficiary: a worker, who contributes, receives program benefits.[20] Marmor, Mashaw, and Pakutka note that historically, Americans defined a “universal” social insurance program as one for “workers” or “contributors.”[21] Furthermore, the ACA continues the U.S.’s tradition of defining medical care as a market good.[22] In contrast, Marmor notes a common pattern of “equal access” in the universal health care programs of Canada, France, Japan, Holland, and Germany, as each country simultaneously debated program options and philosophical implications, and each country based its conclusion on the fact that medical care is a merit good.[23] Writing in Spring 2011, Marmor foreshadowed that the lack of philosophical consensus and reform coherence would weaken the durability of the ACA.[24] If such a debate had taken place, as it had in other democracies, Marmor notes that “while mass publics may not initially grasp the moral implications of reform, over time, experiential knowledge can often shift mass opinion in favor of the moral justifications originally offered by political leaders.”[25] Instead, Obama’s political opponents and their supporters attempted to dismantle the ACA, as there is no philosophical consensus to rally all citizens.

While Canada initially reached an “equal access” consensus regarding public health insurance, outpatient prescription drugs were not initially included in the single-payer model and interest groups have influenced the recent reform. The Canada Health Act is just one example of a Canadian tradition of defining a beneficiary as a resident; this definition stems from the Beveridge system, which is financed by general tax revenues, therefore all taxpayers receive program benefits.[26] Since 1984’s Canada Health Act, recent reforms reflect changes in philosophical consensus, technological capabilities, and fiscal abilities. Carolyn Hughes Tuohy describes these reforms as part of a hybridization phase, where “opportunities for reallocation and reinvestment are seized upon by certain actors within the healthcare system who see the potential to benefit from them….These actors determine the shape of reforms…joining forces with policy makers to influence the design of policy.”[27] As technological change has rapidly improved the capabilities and effectiveness of prescription drugs, pharmaceutical spending has increased; this increased spending is shouldered by individual Canadians, as many previous inpatient drugs have become outpatient prescription drugs.[28] Provinces have individually altered their out-patient prescription drug insurance policy to address this new issue. While there is great cross-provincial variation with regard to cost-sharing, there is a philosophical consensus prioritizing social assistance recipients as beneficiaries of provincial outpatient prescription drug insurance.[29] The province of Quebec has implemented the most substantial change with regard to outpatient prescription drug insurance, Tuohy explains, “Since 1998, all residents are required to have comprehensive insurance for prescription drugs, integrating employer-based coverage into an overall regime of public and private financing and offering a public program with an income-based premium for those without access to employer-based coverage.”[30] While preserving universality, in contrast to the Canada Health Act’s Beveridgean tradition of equal access to all taxpayers, Quebec’s outpatient prescription drug insurance reform incorporated a main tenant of the Bismarck system, as benefits are based on income and program contributions.[31] Tuohy believes private insurers will continue to be allies in reform, as they were in Quebec.[32] In general, the “politics of hybridization” that characterize health insurance reform call for a public/private partnership, as policy makers must identify allies within the private healthcare system and create opportunities for them within the public system.[33] Tuohy accepts the possibility of successful private/public partnerships, to address prescription drug insurance reform, as it is true to the Canadian consensus of social insurance, while utilizing the classic liberal reform style of debate shaped by interest groups.

The risks that led to the creation of North America’s post-war liberal welfare states are not the same risks of the modern economy; as North America’s social insurance programs are reformed, the debate must include a philosophical debate and the input of interest groups. The compromises of the post-war welfare state were based on single-wage earner families; the welfare state has failed to evolve with changes in the distribution of risk to the modern-day economy.[34] Banting and Myles note, across the OECD region, the economy, family structures, and compensation schemes have driven up inequality and “frozen” welfare states are barely able to stabilize income distribution.[35] To make necessary updates to modernize the welfare state’s social insurance programs, debate in North America would benefit from a philosophical consensus and a more comprehensive, informed understanding of how social insurance can complement the capitalist system and preserve private markets.

[1] J. Donald Moon,“The Moral Basis of the Democratic Welfare State,” in Democracy and the Welfare State, ed. Amy Gutmann (Princeton : Princeton University Press, 1988), 28.

[2] Ibid, 32.

[3] Ibid, 42-3.

[4] Ibid, 44.

[5] Ibid, 44 & 52.

[6] Theodore R. Marmor, Jerry L. Mashaw, and John Pakutka, Social Insurance: America’s Neglected Heritage and Contested Future (Los Angeles: CQ Press, 2013), 67 & 217-218.

[7] Ibid, 67.

[8] Ibid, 220.

[9]Keith Banting and John Myles, “Canadian Social Futures: Concluding Reflections,” in Inequality and the Fading of Redistributive Politics, eds. Keith Banting and John Myles (Vancouver: University of British Columbia Press, 2013), 416.

[10] Keith Banting and John Myles,“Introduction: Inequality and the Fading of Redistributive Politics,” in Inequality and the Fading of Redistributive Politics, eds. Keith Banting and John Myles (Vancouver: University of British Columbia Press, 2013), 4.

[11] Banting and Myles,“Canadian Social Futures,”417.

[12] Marmor, Mashaw, and Pakutka, Social Insurance, 67.

[13] Ibid, 218.

[14] Ibid.

[15] Ibid, 217.

[16] Ibid, 241.

[17] Theodore R. Marmor, “Health Reform 2010: The Missing Philosophical Premises in the Long-Running Health Care Debate,” Journal of Health Politics, Policy and Law 36, no. 3 (2011): 567.

[18] Ibid, 567 & 569.

[19] Ibid, 567 & Theodore Marmor and Jonathan Oberlander, “The Patchwork: Health Reform, American Style,” Social Science & Medicine 72, no. 2 (2011): 125.

[20] Katherine Fierlbeck, Health Care in Canada: A Citizen’s Guide to Policy and Politics (Toronto: University of Toronto Press, 2012), 219.

[21] Marmor, Mashaw, and Pakutka, Social Insurance, 241.

[22] Theodore R. Marmor, “Health Reform 2010,” 569.

[23] Ibid.

[24] Ibid, 570.

[25] Ibid.

[26] Fierlbeck, Health Care in Canada, 219.

[27] Carolyn Hughes Tuohy, “Health Care Policy after Universality: Canada in Comparative Perspective,” in Inequality and the Fading of Redistributive Politics, eds. Keith Banting and John Myles (Vancouver: University of British Columbia Press, 2013), 291.

[28] Ibid, 293.

[29] Ibid, 301-2.

[30] Ibid, 302.

[31] Fierlbeck, Health Care in Canada, 219.

[32] Tuohy, 305.

[33] Ibid.

[34] Banting and Myles, “Introduction,”25.

[35] Ibid, 19 & 32.

Random Walk


I had the most lovely solo Sunday afternoon. After successfully sending out my Sunday Brunch with Bettie newsletter, I took a random walk.

I walked east, then west, then north. I ran into friends and chatted. I strutted past an ex. I petted a pomeranian sitting outside of a newly opened cafe.

Sitting down with my shot of espresso and big glass of water, I read the investment classic, A Random Walk Down Wall Street by Burton Malkiel.

Just like why this Dem turns on Fox news every once in awhile, this value investor wanted to understand the index investor’s argument.

(click on the bold-faced vocab words:))

Here are the highlights:

Chimps are stock market champs

“The market prices stocks so efficiently that a blindfolded chimpanzee throwing darts at theWall Street Journal can select a portfolio that performs as well as those managed by the experts.”

The past does not predict the future

“A random walk is one in which future steps or directions cannot be predicted on the basis of past actions. When the term is applied to the stock market, it means that short-run changes in stock prices cannot be predicted. Investment advisory services, earning predictions, and complicated chart patterns are useless.”

Investors are in it for the long haul

“I view investing as a method of purchasing assets to gain profit in the form of reasonably predictable income (dividends, interest, or rentals) and/or appreciation over the long term. It is the definition of the time period for the investment return and the predictability of the returns that often distinguish an investment from speculation.”

Main takeaway: avoid temptation

“Investors who select a portfolio of stocks by throwing darts at the stock listings in the Wall Street Journal can make fairly handsome long-run returns. What is hard to avoid is the alluring temptations to throw your money away on short, get-rich-quick speculative binges. It is an obvious lesson, but one frequently ignored.”

If you want to delve deeper, here is the copy I read.


(Originally published on Amanda Stanhaus’s financial literacy blog: XO, Bettie.)

Ideological Nuances Created Distinct North American Welfare States

Originally submitted for an independent research project comparing North America’s welfare states with Professor Antonia Maioni at McGill University.

For the former colonies of British North America, the American Revolution was a watershed for current Canadian and American identity. The United States celebrates the people’s revolution, the heroic founding fathers overthrowing an oppressive state, and the creation of an original government structure; Canada lacks similar national heroes and myths, instead commemorating defeat and a long struggle to preserve the British Monarchy.[1] Canada’s loyalty to the Crown and Britain’s Tory tradition has made Canada a more law-abiding, statist, and collectively-oriented society than the U.S..[2] Meanwhile, the U.S.’s foundation in Whig tradition emphasizes individualism and meritocracy, which were central to the Declaration of Independence and continually reinforced throughout American history.[3] While a comparison of North America’s welfare states to other OECD nations will show them to be similar liberal welfare states, Banting notes the ability of Canadian social policy to distinguish itself from the U.S. has immense political significance.[4] Stemming from revolutionary and counterrevolutionary ideologies, unique values and forms of federalism shape the policies of North America’s welfare states.

The revolutionaries were Whigs, while the counterrevolutionaries were Tories; this divergence has distinguished the American value system from the Canadian one. Despite divergent ideologies, their strong resemblance is a product of their joint origins as a liberal settler society.[5] However, America’s checks & balances system reflects its anti-statist tradition, meanwhile Canada’s parliamentary system allows for unchecked power comparable to an absolute monarch.[6] The Dominion of Canada was created by Tories protecting themselves from American territorial expansion, and Lipset notes that the conservative Tory value of collective rights has motivated Canada’s contemporary support for social democratic redistributive and welfare policies.[7] The U.S.’s laissez-faire Lockean tradition is incompatible with such programs, as this stresses individual responsibility.[8] While North America’s countries seem similar, it is their nuanced revolutionary and counterrevolutionary ideologies that contribute to drastic differences in social policy.

The divergent ideologies shaped their values, which determine support for social policies. Adams notes that Americans are more extreme in their views of patriarchy, gender, family organization, religion, and openness to violence, while Canadians tend toward moderation.[9] Accordingly, Adams describes that “[Canadians] have moved away from traditional religion, questioned traditional family models and generally have become a less hierarchical, more flexible people.”[10] Adams concludes that “this ‘heterarchical’ flexibility… is manifested in many ways, from increased acceptance of flexible gender identities …to the changes in workplace dynamics and the management of human resources.”[11] Moderation has influenced the Canadian view of the liberal tenet of individual responsibility, compared to their southern neighbors; “[Americans] are more likely than Canadians to feel that people should be given a chance to make something of themselves but that if they fail, it is their own responsibility, not that of society or of the government. By contrast, the somewhat greater strength in Canada of the belief that a person’s life is not necessarily subject to his or her control.”[12] Canadians value collective rights and believe it is appropriate to use state power to intervene in the market to benefit the common good.[13] The contrast of America’s individual responsibility to Canada’s collective responsibility is clearly seen in health policy. Evans succinctly notes “in Canada the primary source of funding depends upon the type of benefit; in the United States it depends upon the characteristics of the beneficiary.”[14] Individual responsibility motivates America’s welfare provisions that incentivize changing the recipients’ behavior; there is no equivalent in Canada.[15] Absolutist Americans and moderate Canadians have created distinct welfare states.

Canada’s Westminster-inspired parliamentary federation is a stark contrast to the congressional federation of the U.S.. At the national level in the U.S., power is shared between the President and Congress, where weak party discipline further disperses power.[16] Banting describes the U.S.’s legislative process as painful, as it’s fragile and temporary coalitions make it probable “that any proposal will be delayed, diluted, or defeated.”[17] Banting describes Canada’s policy-making process as “more concentrated than in the United States, a difference that facilitated the development of social programs.”[18] Simeon explains Canada’s “fusion of executives and legislatures, combined with strong party discipline, renders both national and provincial governments much more centralized.”[19] Yet, while power is centralized at both the provincial and national level, it is decentralized across these levels of government.[20] Distinct regional politics, specifically Francophone Canadians concentrated in Quebec, have caused decentralized social policy, yet equalization transfers do not allow geographic variation in benefits; variation in benefits is characteristic of the American system.[21] The minority population of African-Americans are distributed throughout the U.S., without a strong majority in any region or state.[22] With African-Americans lacking adequate representation, Banting describes the racist policies of the Social Security Act of 1935, “resistance from southern congressmen and other conservatives led to the exclusion of agricultural and domestic labour, denying coverage to three-fifths of black workers. In addition, southern congressmen led a successful campaign in the name of ‘states’ rights’ against national standards in public assistance, leaving southern blacks at the mercy of the local authorities.”[23] Racism and regional politics, magnified by the unique federal systems of Canada and the U.S. have resulted in distinct social policy.

Stemming from the system’s separation of powers, American policymakers can buck party discipline and are inclined to please interest groups, which is infeasible in the Canadian system. Canadian policy makers can take bold action because its parliamentary federation lacks the checks & balances of a congressional federation.[24] Immergut describes how “veto points” are points all along a congressional federation’s chain of decisions to create legislation; interest groups can influence the legislation’s outcome by accessing the political representative at the “veto point” along the chain. [25] Harles describes America’s system teeming with veto points, “Americans are suspicious of political authority…accordingly, the American government is hedged with an impressive array of institutional devices meant sharply to curtail its authority. This fragmentation of power means that there are numerous access points in the American policy-making process…federal and state officials are freed from the strictest norms of  party discipline and thus highly susceptible to the solicitation of private citizens and groups.”[26] The fractured power of the American federal system creates numerous “veto points” for interest groups to impact social policy for their specific benefit.

Traditionally Tory, Canada has created a collectively responsible political culture and intervened in the market for society’s benefit. Traditionally Whig, the U.S. has stressed laissez-faire policy and created a welfare system to incentivize individual responsibility. Banting notes these ideological differences also shaped the two countries’ unique retrenchment policies, “cuts in the United States fell disproportionately on benefits for the poor, whereas Canadian cuts accelerated an historical trend of targeting benefits on such people.”[27] Embracing its liberal roots, Canada has taken a step to “Americanize itself,” with the Charter of Rights and Freedoms creating a more individualistic and litigious culture.[28] Canada’s bill of rights reflects its shared beginnings with America, as the British North American liberal immigrant society. North America’s shared heritage created very similar countries, but the nuances of revolutionary and counterrevolutionary ideologies created divergent welfare states.

[1]Seymour Martin Lipset, Continental Divide:The Values and Institutions of the United States and Canada ( New York: Routledge, 1990), 1-2.

[2] Ibid, 8.

[3] Ibid.

[4]Keith G. Banting, “The Social Policy Divide: The Welfare State in Canada and the United States,” in Degrees of Freedom Canada and the United States in a Changing World,  eds. Keith G.Banting, Richard Simeon, and George Hoberg ( Montreal: McGill-Queen’s University Press, 1997), 267-8.

[5] Lipset, 212.

[6] Ibid, 20-21.

[7] Ibid, 43, 48 & 225.

[8] Ibid, 48 & 225.

[9] Michael Adams,“Canadian and American Values Divergences: The Narcissism of Small Differences?” in Canada and the United States:Differences That Count, eds. David M. Thomas and Barbara Boyle Torrey (Buffalo:Broadview Press, 2008), 46 &49.

[10]Ibid, 49.


[12]Lipset, 170.

[13] John Harles,“Welfare, Safety Nets, and Values, ” in Canada and the United States:Differences That Count, eds. David M. Thomas and Barbara Boyle Torrey (Buffalo:Broadview Press, 2008),  175 &178.

[14] Robert G. Evans, “Extravagant Americans, Healthier Canadians,”  in Canada and the United States:Differences That Count, eds. David M. Thomas and Barbara Boyle Torrey (Buffalo:Broadview Press, 2008), 141.

[15] Harles, 167 & 175.

[16] Richard Simeon, “Canada and the United States:Lessons from the North American Experience,” in Rethinking Federalism:Citizens, Markets, and Governments in a Changing World, eds.  Karen Knop et al (Vancouver:University of British Columbia Press, 1996), 250.

[17] Banting, 281.

[18] Ibid.

[19] Simeon, 250-251.

[20] Harles, 183.

[21] Ibid, 183 & 184.

[22] Simeon, 253.

[23] Banting, 276-277.

[24] Harles, 178.

[25] Ellen M. Immergut, “Institutions, Veto Points, and Policy Results: A Comparative Analysis of Health Care,” Journal of Public Policy 10, no. 4 (1990): 396.

[26]Harles, 176.

[27] Banting, 284.

[28] Lipset, 225.