Belief in Power of the Private Sector Is a Driving Force in Public Policy

Future historians are likely to consider it a sign of the times that ABC has decided to air “Who Wants To Be A Millionaire” no less than four nights a week this fall. This is an era when the money culture is overshadowing the public culture, when the government seems enfeebled and the free market robust. When The Times Poll recently asked Americans to whom they gave the most credit for the booming economy, more people picked the technology industry than President Clinton and the Federal Reserve Board combined.

Inexorably, if almost unconsciously, this celebration of the private sector is reshaping our debates over public policy. Across party lines, there’s a growing belief that one way to solve social problems is to apply the lessons and values of the business world.

Consider education. There’s now a consensus in both parties that a key to improving the public schools is to expose them to more competition for students. Democrats talk about giving parents more choices through the right to transfer their children out of poorly performing public schools into better ones, and through the creation of charter schools that operate free from most bureaucratic and union rules. Republicans, like presumptive presidential nominee George W. Bush, would go a long step further by offering parents vouchers to help send their children to private schools.

But that’s really a dispute over the best means of creating more competition for the public schools; few people anymore question that goal. As even Vice President Al Gore, an ardent voucher opponent, put it last month: “We need to apply the pressure and competition that will improve all public school districts in America.”

Similar assumptions are driving the growing discussion about tying teacher pay to student achievement. Advocates are betting that teachers will somehow summon better performance from their students if they receive a bonus for doing so, like middle managers given a sweetener in their paycheck for meeting a quarterly sales target.

Variations on these themes now run through policies at every level of government. Take the Kyoto agreement to combat global warming. It mandates that countries worldwide reduce their emissions of the gases that contribute to the problem. But it allows the mandated reductions to be treated as a commodity that can be bought and sold as if they were pork bellies. That allows countries where cleanup is especially expensive to pay other countries to assume more of the burden. The goal is to produce the maximum cleanup at the lowest price.

Or consider the proposals that Bush and, earlier in the campaign, former Democratic contender Bill Bradley unveiled to provide health care for those Americans without it. Both would provide subsidies for the uninsured to purchase private insurance. When critics argued that the subsidies would be too small to allow families to buy any policies actually on sale today, Bradley and Bush countered that the market would naturally create new low-cost insurance plans to meet the demand created by that new buying power.

This reliance on market values to advance public goals reached an apex last week when Bush announced his plan to allow workers to divert part of their payroll taxes into personal accounts they could invest in the stock market for their retirement. The political bet is that so many Americans are now comfortable investing in stocks that they will accept a smaller guaranteed Social Security benefit in return for a greater opportunity to accumulate assets in the market. The implicit underlying contention is that Americans now have more faith in Wall Street than Washington to produce sufficient funds for their golden years. Indeed, when Gore charged that it’s too risky to let workers rely on the stock market for retirement, Bush advisors strikingly insisted that it was riskier to assume government would keep its promise to deliver future benefits.

In many ways, these efforts to adapt lessons from the market have shown promise; public policies that reflect Information Age business principles, such as decentralizing authority, usually have more chance of success. But there are limits to how far the market model can be applied. Consider education again. Creating more competition for public schools (either through charter schools or vouchers) would undoubtedly generate some positive pressure for improvement.

But almost 90% of U.S. children attend conventional public schools--a number that hasn’t changed for decades. It’s difficult to imagine that increasing the share of children in private (or charter) schools by a few percentage points will be a lever sufficiently powerful to force change in the leviathan public school bureaucracies: The tail simply isn’t big enough to wag the dog. In other words, compelling public schools to battle for market share, even if valuable on its own terms, isn’t likely to spare us the hard work of reforming school administrations and increasing the resources available for education.

The Social Security debate will test the limits of the market metaphor even more profoundly. Social Security stands at the pinnacle of another model for organizing society: government as a counterweight to the uncertainties and excesses of the free market. For all their suspicions of government, Americans still overwhelmingly support that role in many arenas; it’s why environmental regulation, for instance, retains such broad backing. As much as Americans admire the market’s ability to expand opportunity, they show no evidence of wishing to place their future entirely in its hands.

With his plan to initially divert only a portion of the payroll tax into private investments, Bush isn’t asking Americans to totally bet their retirement on the market. But he would begin transforming Social Security from a system in which society collectively shares the risk of funding retirement toward one that provides individuals with both greater opportunities (to amass wealth) and greater risks (of failed investments).

In an era when the private sector is esteemed more than government, many may find that trade-off appealing. Yet Americans have also demonstrated a lasting commitment to communal institutions--from the public schools to Social Security--that offer shelter from the caprices of the market. Finding ways to learn from market principles, without eroding that commitment, is likely to prove a central, if subtle, tension in the most important policy battles of the coming decade.

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Ronald Brownstein’s column appears in this space every Monday.

See current and past Brownstein columns on The Times’ Web site at: https://www.latimes.com/brownstein.