The Social Contract

GUEST: Franklin Thomas
VTR: 3/12/1982

I’m Richard Heffner, your host on THE OPEN MIND. Sometime ago on another television program that I participate in called FROM THE EDITOR’S DESK, I had the opportunity to deal with the fact that one of the major themes of the Reagan administration is the importance of private initiative taking over many of the services that have in recent years been provided by government. Indeed, in his frequent calls for budget reductions, President Reagan has promised a nationwide effort to put the spirit of voluntarism to work for America. But the question remains, of course, how much private initiative and voluntarism really can do to lessen the impact of dramatic federal budget cuts. And on a deeper level, given rising expectations and a now almost all-pervasive sense of entitlement, how much can government effort not to continue to bear the brunt of supporting its less fortunate citizens without at east seeming to break the social contract that right or wrong seems to prevail in our times, without shattering the public peace, without tearing asunder the often fragile social fabric that has kept us largely at peace with each other in this great nation? Now, there never could be enough time sufficiently to grapple with these questions. But now I’d like to return to them in the more leisurely setting of THE OPEN MIND. And my guest, once again, is Franklin Thomas, President of the Ford Foundation.

Thanks for joining me again, Mr. Thomas.

THOMAS: Thank you.

HEFFNER: I have to go back, since I stole that notion of the social contract from you, to comments that you made not so many months ago in a speech in which you said, “The Current scenario is the latest episode in a historical process that is resulting in a fundamental reexamination of the mutual claims and obligations running between citizens and their governments of the social contract, so to speak”. And you indicated that that examination is taking place in other countries as well. To what end?

THOMAS: Well, I think the reality in our own country in particular and increasingly in other industrialized countries that have enough affluence to begin to address these issues of allocation of resources, is one which says that the increasing erosion of the value of whatever currency the country lives on, the impact of that erosion on the individual’s sense of stability, or security, of the notion that having worked for a lifetime, having saved, having some pension or social security income, you would be able to live in relative comfort. The beginning erosion of that state of affairs which I guess is traceable in its most dramatic form to the early 70s with the virtual quadrupling of the price of energy and the resultant acceleration of an inflation rate that was already with us, has caused a basic insecurity on the part of many Americans and many others across the world. And I think part of what is happening in our own country is a struggle to find out what can be done to stimulate healthy growth in the economy so that opportunities for more Americans in this instance to achieve better lives would be enhanced. The differing approaches to that question, it seems to me, have captured most of the headlines and are currently the center of much of the debate. But I think the underlying issue is the one alluded to in your opening comment and in the quote you just indicated. Where this will lead us, I don’t think any of us knows at this point.

HEFFNER: But if you talk about the currency of a nation, isn’t part of that currency the assumption that has been made in the past few decades, let’s say, since the Roosevelt New Deal, that in this brave new world indeed one not need be concerned about old age, one not need be concerned that in depression times there isn’t a strong force, a government that will look after the handicapped and those who are financially handicapped as well as physically handicapped? Isn’t that part of our national currency?

THOMAS: Well, I believe it is. I hope it will continue to be. I think the current examination which I think will continue over the next several years may well result in a restatement of that basic truth with perhaps some adjustments as to content within it, but a restatement of that as an objective, a purpose, a desired outcome of our economic system.

HEFFNER: But in our time it seems to be a denial rather than a restatement.

THOMAS: Well, I think that the way you get the issue drawn as sharply as it is currently being drawn is that there is clearly an ideology afloat in the national government in terms of the administration which says that the provision of these basic needs, these basic services, has in its opinion reached more broadly that the truly needy at a cost which is greater than the body public is able or willing to sustain and thus the push to arrest the growth of entitlements, the level of support provided, and to somehow magically cause all of that to go over to private initiative and self-help and the like, I think there is at the root a belief that if you can reduce the level of expenditure from the government side that you can thereby stimulate economic growth which is healthy, which is resistant to inflation, which is expansive of employment, which then allows you to provide the kinds of health and housing and related needs the public aspires to in a way which is not inflationary.

HEFFNER: Do you subscribe to that notion?

THOMAS: I don’t subscribe to the degree to which the current administration policy is attempting to arrest this pattern. I do subscribe to the importance of reexamining what our basic assumptions are about entitlement, where the government role ought appropriately be, and how that role ought to be financed. I don’t have any trouble with that reexamination. I hope it will come out that a concern for human welfare is one of the basic missions and responsibility of government. And how we go about financing that is something we need all debate. But not to ever suggest that segments of our population could not look forward to health and housing and the opportunity to work and the opportunity to be cared for if you’re unable to work, coming out of a healthy and vibrant nation. I think there is enough wealth for that to take place in our country. The issue as to whether we have extended the entitlements further perhaps than is absolutely essential is one legitimately on the table. The issue as to whether the level of support is greater than it need be in some instances, the issue as to whether we can improve the efficiently with which these services are delivered is certainly one which we ought all to embrace and be willing to look at. But it seems to me all of that must start and must rest on the notion that to have a healthy country, to have a healthy society, to have one that functions and doesn’t tear itself apart, we have to commit to both the opportunity to work, the opportunity to achieve, and the importance of providing for those who are unable to provide adequately for themselves.

HEFFNER: You talk about entitlements and you talk about the efficiencies with which those entitlements have been delivered. Suppose we set aside the question of efficiency. Let’s say we’re all against waste and inefficiency. Let’s say we all agree that there is considerable inefficiency and waste. Do you think there has been in our times overentitlement?

THOMAS: Oh, I don’t know. I don’t know of overentitlement that I would point to. I think the question is to whether in the spread of some of the social benefits we have perhaps understandably in order to get them passed by the Congress included within their sweep some who would be able to provide those benefits without the help of government. I suspect the answer to that’s yes. I suspect the answer to that’s yes with respect to some of our housing finance efforts across the country. I don’t say it’s bad, but I think the answer is yes. And I think that if you reach a point where the costs of the programs is seen as too high in relation to the resources you have available, that the issue becomes one of examining the sweep of those programs to ensure that as you attempt to modify them you do not eliminate from their coverage those who are genuinely in need of the provisions those programs provide. Now, the process of doing that, it seems to me, is not inconsistent with a democratic system. It seems to me that that process can and should involve all of us in the kind of debate that we’re familiar with having. The same is true of tax policy, the same is true of transportation support, the same is true of education, subsidies and the like. The part of it which, I repeat, I find most troublesome is that portion which says that somehow the basic responsibility is up for question, whether that responsibility is fundamentally governmental and should be spread across the body politic. That fundamental question to me should not be up for grabs.

HEFFNER: Don’t you think it has to be, though? Don’t you think it has to be in our time, which is fairly well indicated by the fact that it is. We had a president who was elected to some considerable extent by putting that notion up for grabs.

THOMAS: Well, I think the notion that was really put up for grabs was the notion that we want to eliminate waste in the growth of government and its delivery of services. I think that notion is what was more widely understood by the body politic than simply that government was about to retreat from its basic responsibility of seeing to the welfare of those in the country less able to take care of themselves.

HEFFNER: I respect our judgment on that, of course. I’m surprised. Because I have heard so many times from those who are close and those who are far away from me ideologically, the comments that we can’t afford and shouldn’t be doing this. Let them shift for themselves. It’s almost as if we were back to the age of social Darwinism. It’s almost as if Andrew Carnegie and the ideas that he represented had come to the fore in our own times. And you don’t feel that way, obviously. You’re talking about efficiencies and savings.

THOMAS: That’s correct. And I think when, you know, we could debate who more accurately reflects the core of the American people and their attitudes…

HEFFNER: I hope you do.

THOMAS: I not only hope but I think so. Because the provision for safety, the provision for education, the provision for health, the provision for housing in the country is something that we pride ourselves as a nation in having progressed to the point where it is within the reasonable expectation of each person in the country that he or she can find work, can find work that will compensate them at a level which allows them to meet certain basic needs and where that is not true that there will be support from the rest of us who have been able to achieve that level of economic and social stability to provide for them and others who are less able to care for themselves, particularly children. The children of the poor and the children of the near-poor and the children of the working poor it seems to me are without question entitled to, and that entitlement is accepted by wide segments of the American public, adequate access to housing, health and food and education.

HEFFNER: Not wishful thinking on your part, Mr. Thomas?

THOMAS: Well, I don’t know. I’ve been accused of being an optimist before. Perhaps.

HEFFNER: Optimism is fine. But wouldn’t it mislead us if it were not based upon substantial fact in our time? You talked about the children.

THOMAS: Yes.

HEFFNER: My understanding is that it is increasingly difficult to find funding for projects that relate to the well-being of our children, and that this indeed has been the case for some time.

THOMAS: But are you saying that there is, in your opinion, an acceptance of the notion that support for the truly needy in the country is not a responsibility of government? That the provision of health care is not a responsibility of government?

HEFFNER: Well, I must say that increasingly in the past year there seems to be a feeling of that indeed that’s the case. We’ve gone too far in terms of entitlement. I mean, this is what we’re talking about: entitlement.

THOMAS: It doesn’t too far in itself imply that some distance is appropriate.

HEFFNER: Yes, but some distance, wouldn’t you say, in terms of the work of the foundation and the area that you’re going to have to try to pick up in – after all, yours is the largest foundation, yours is the one to which many people will look to fill the gap between what government used to do…

THOMAS: We should put that in some scale. Ours is a foundation that has roughly $120 million a year to expend on behalf of the public welfare. The kinds of cuts we are now talking about so dwarf those resources of not only our own foundation but the aggregate of all private foundations in the country as to make the foundation resource relevant, but just barely relevant to that question.

HEFFNER: Then how relevant do you think the president’s urging of voluntarism upon us is?

THOMAS: Well, as we’ve discussed earlier, it seems to me that voluntarism is something which exists in our country, it is healthy that it exists in our country, it’s rewarding both to the persons who volunteer and to those who are assisted through that process of volunteering. It too will probably expand and be enhanced. But it is not a replacement, it’s not a substitute for the kinds of responsibilities we are now describing as appropriately the role of government. It’s not an arena of activity in which simply by willing you can cause to rise to a level sufficient to even begin to fill the kinds of gaps we’re talking about. The most generous estimates I’ve seen suggest that 55 million Americans devote two or more hours a week to some charitable purpose, usually in their own communities and neighborhoods. That’s wonderful. That’s an almost uniquely high level of citizen voluntarism in the world. It’s critically important. It has gone on, it preceded Benjamin Franklin and it will continue, I think, indefinitely, and hope that it will and hope it will grow. But in its entirely, in its forecasted growth, it is not adequate to even begin the process of replacing government in the role of the provision of certain basic social services. So that while I embrace and endorse the notion of voluntarism and the recognition of the volunteer as a critically important factor in the American scene, and it’s wonderful that that recognition exists from the highest levels of government and permeate out, but the notion that through voluntarism you can begin to replace government in any significant degree in the provision of these services is, I think, misleading and unfair.

HEFFNER: If it is misleading and unfair, then where are we going to be in a few months from now, in a year from now, if there is nothing, not in your world, the world of foundations, to fill that void sufficiently, and if voluntarism cannot fill it sufficiently? What do you anticipate, in terms of your experience at Bedford Stuyvesant?

THOMAS: Well, let me say a word generally before turning to Bedford Stuyvesant, and that is that, you know, our government is more than its executive branch. It’s a Congress as well. And it’s a Congress which has direct accountability back to a constituency, very, very, very diverse across the land. The president proposes and the Congress disposes with respect to the bills and the provision of services and the revenue to support them. The congress is clearly having second thoughts, third thoughts, fourth thoughts about the president’s budget. The governors of the states are clearly having second thoughts, third thoughts. The mayors of cities, the managers of cities are having second and third thoughts. As they begin the process of assessing the likely impact of these budget provisions on their responsibilities in the first instance, and their capacity to meet those responsibilities in the second instance, it seems to me not unlikely that that process of second and third thoughts by the Congress and others across the nation will result in some modification of the proposed legislation now before the Congress. It seems to me that is the threshold level at which a democracy begins to grapple with this kind of issue.

HEFFNER: But doesn’t that bring us back to the question – and you and I have touched on this before – the question of indeed can we afford – let’s say we agree that we can’t afford not to meet these needs – but can we afford as a nation to meet them? You had referred in the earlier program that we did to the Proposition 13 psychology rampant in this country. You had referred to the fact that for some years before the administration there had been a building the notion that we can’t afford all of this.

THOMAS: That’s correct.

HEFFNER: Do you think we can?

THOMAS: Well, I think the answer to that’s yes, we can afford to provide the kinds of services that we would agree are basic and essential. Can we afford them and at the same time keep the level of expenditure in each of the other categories set forth in the budge? The answer’s questionable there. I don’t know the answer to that. You know, it stems from where you believe the appropriate level of taxation on income should be. It seems to me it starts from that core, because the drive to arrest the problem of growth of government and the inflationary impact of trying to finance a government budget deficit, there are two sides to that budget equation. One is the expenditure side; the other is the revenue side. And the revenue side is triggered, one, by the tax level on individuals and corporations, and there’s a great debate as to whether if you reduce that tax level you can in fact stimulate further savings and investment which in turn stimulate the economy which in turn generate more revenue over time. And if you accept that or if you even posit it for the moment, the question as to what the appropriate level is remains. And as to that question, the Congress and the president, his initiative a year ago passed a tax cut bill which still as two stages to it. And it seems to me there is a reexamination probably going to go on – I don’t know how it will come out – as to whether that tax cut as currently anticipated will in fact come about or should it come about or should it be delayed. The second area on the expenditure side clearly turns to the major categories of expenditure, one of which is defense. And I think there’s a growing debate in the country as to the appropriate level of our defense budget. Some would argue that an increase in real terms is needed given the state of the world, given the state of our military preparedness vis-à-vis a likely hostile combatant. What the level of that real increase ought appropriately to be is I think now back on the center stage of the debate. And the question of imposing on the military similar obligations for efficiency as have been indicated as appropriate on the social side of the budget, it seems to me is going to happen, is going to be debated, and some outcome is likely to take place there.

A third portion of the budget which I don’t think we can escape paying attention to is the growth and increasing instability of our social security system for the aged. It seems clear that the trust funds looking out are not going to be adequate to meet the anticipated demands on that social security system. The demographics of our population suggest that as there are fewer workers contributing to that trust fund and as more of us reach the age when we will draw on the trust fund, there is a serious question as to how those benefits will be provided. The obvious place to turn is to the general revenue of the country, to the tax base. The trust fund’s not adequate. You’re going to have to turn to the public for that revenue.

The issue as to whether it is appropriate to provide a year or two of opportunity for the president and his economic strategy to have a chance to demonstrate that it can work is a question that I think the Congress is going to have to wrestle with. And if it decides yes, it wants to provide another year or two, but at the same time it is not willing to accept the kind of budget deficits we’re not confronting, then some deferral of the tax cut provision, some reduction in the proposed level of expenditure no the military side, it seems to me, have to be numbers one and two on the list. And a question as to whether you can defer some of the indexing that is currently anticipated on the social security side does seem to bean appropriate subject for discussion. I think these are the issues which underlie the struggle now going on and likely to continue over the next many months in Washington. And this struggle will be influenced by the growing reality of the governors and the mayors and the universities and the localities of the plight they face if the cuts as proposed by the administration on the social side are left intact and the economy is left to face the kind of deficit that is currently projected.

HEFFNER: You talk about the governors and the universities and the mayors and those who will work over it, the appropriateness of the present levels for domestic spending. There is another group, and we ought to talk about them. And I’m getting the signal that we’re just about off the air now. But I will continue in our next program. That’s those people who would participate in that social contract that we started to talk about.

THOMAS: Well, I’d like to get to that.

HEFFNER: And they have some voice in this. And the question of what they’re going to be doing in the long, hot summer ahead of us and the long year ahead of us is certainly of great consequence.

THOMAS: Well, I agree with that. And I think we have an interesting and in some ways frightening prospect which is deferred in part by a recession in the economy. Because to the extent that we all are seeing – somewhat of an overstatement – but the suffering is broadly based through the auto industry, through a number of support industries in the Midwest, there is a tendency to mask the disproportionately negative impact on particular segments of the society.

HEFFNER: Let’s talk about them. Stay where you are and we’ll come back. Thanks very much for joining me today on THE OPEN MIND, Franklin Thomas.

And thanks, too, to you in the audience. Stay with us next week too, when I hope that you will join us again here on THE OPEN MIND. Meanwhile, as an old friend used to say, “Good night, and good luck”.