The submerged state : how invisible government policies undermine American democracy

168 Pages·2011·2.05 MB·English

by  Mettler

SUZANNE METTLER is the Clinton Rossiter Professor of American Institutions at Cornell University.
Her most recent book is Soldiers to Citizens: The G.I. Bill and the Making of the Greatest Generation.
The University of Chicago Press, Chicago 60637
The University of Chicago Press, Ltd., London
© 2011 by The University of Chicago
All rights reserved. Published 2011.
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-13: 978-0-226-52164-0 (cloth)
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-10: 0-226-52164-8 (cloth)
ISBN
-13: 978-0-226-52165-7 (paper)
ISBN
-10: 0-226-52165-6 (paper)
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-13: 978-0-226-52166-6 (e-book) Library of Congress Cataloging-in-Publication Data Mettler, Suzanne.
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The submerged state: how invisible government policies undermine American democracy / Suzanne
Mettler.
p. cm. — (Chicago studies in American politics) Includes bibliographical references and index.
-13: 978-0-226-52164-0 (cloth: alk. paper) -10: 0-226-52164-8 (cloth: alk. paper) -13: 978-0-
ISBN ISBN ISBN
226-52165-7 (pbk.: alk. paper) -10: 0-226-52165-6 (pbk.: alk. paper) 1. United States—Social policy—
ISBN
Public opinion. 2. Public welfare—United States—Public opinion. 3. United States—Politics and
government—Public opinion. 4. Americans—Attitudes. 5. United States—Social policy. 6. Public welfare
—United States. 7. United States—Politics and government—21st century. 8. Democracy—United States.
I. Title.
59.2. 485 2011
HN M
320.60973—dc23 2011017776
This paper meets the requirements of ansi/niso z39.48-1992 (Permanence of Paper).
THE SUBMERGED STATE
HOW INVISIBLE GOVERNMENT POLICIES UNDERMINE AMERICAN
DEMOCRACY
SUZANNE METTLER
THE SUBMERGED STATE
CHICAGO STUDIES IN AMERICAN POLITICS
A series edited by Benjamin I. Page, Susan Herbst, Lawrence R. Jacobs, and James Druckman
For Sophie
CONTENTS
Cover
Copyright
Introduction
Confronting the Submerged State
1 Governance Unseen
2 The Politics of the Submerged State
3 From Nudge to Reveal
with
MATT GUARDINO
4 Scaling Back the Submerged State
The Victory for Student Aid
5 Sustaining and Expanding the Submerged State
Tax Policy and Health Care Reform
6 Toward Visible and Vibrant Democracy
Appendix
Text and Graphics for Additional Experimental Questions and Treatments
Acknowledgments
Notes
Index
1 · GOVERNANCE UNSEEN
When Senator Mary Landrieu held a town hall meeting in Louisiana in the
summer of 2009 in order to hear her constituents’ views on health care reform,
she encountered a boisterous crowd. One man stood up, waving a copy of the
U.S. Constitution, and asked, “Where does the federal government get any right
to stick its hands anywhere in the health care system?”1 Members of Congress
heard similar sentiments expressed at such meetings across the nation.
Meanwhile, letters to the editor in newspapers throughout the country contained
protestations like that voiced by Ohio resident Ray Brown, who wrote to the
Columbia Dispatch: “There are no circumstances on this Earth under which we
should let our government have anything at all to do with our excellent health-
care system.”2 In each case, opponents of reform implied that the U.S. health
care system as we know it was borne and persists sui generis, a natural
development that has been nurtured only by the market economy.
Such characterizations are, quite simply, wrong. As Senator Landrieu
explained patiently to the man who questioned her, “Some aspects of our system
are nationalized,” noting that government programs such as Medicare and
Medicaid cover a significant portion of the population, nearly one in three
people.3 She could have explained, further, that the so-called “private” insurance
plans provided by employers, through which 59 percent of Americans under age
sixty-five receive insurance, are subsidized by government, which privileges
them with tax-exempt status.4 She might have added that the construction of vast
numbers of the nation’s hospitals was funded by a federal policy enacted in
1948, signed into law by President Harry Truman.5 Or that a significant portion
of students in the nation’s medical and nursing schools are funded by federal
scholarships.6
In fact, the health care system experienced by Americans of the early twenty-
first century has been fostered by public policy and highly subsidized by
government spending for three-quarters of a century. It is fairly well known that
the United States spends more per capita on health care than any other nation; in
2009 this amounted to $2.5 trillion, or 17.6 percent of GDP.7 Less commonly
known is the fact that government itself foots most of the bill—some estimate 56
percent, amounting to more than in any other country.8 Remarkably, however,
many Americans have been largely unaware of government’s substantial role in
health care, and therefore reform legislation in 2009–10 appeared to them to be a
startling new and foreign intervention into a system that belonged mostly if not
entirely to the private sector.
The misunderstanding that many people possess about health care policy is
unsurprising, however, because much of it—like other areas of contemporary
social provision—is embedded within the submerged state. When most people
think of government programs, they likely envision cavernous, austere buildings
located in the vicinity of Washington, D.C., filled with bureaucrats sitting in
cubicles who directly oversee the delivery of goods and services to citizens, as
exemplified by Social Security. Many would also acknowledge that states and
local governments often play the role of “supporting actors,” carrying out much
of the day-to-day work of the federal government by following its mandates and
dispensing its funds, for example, in unemployment insurance or welfare offices.
But, in fact, much of the activity financed by the federal government today fits
neither of those standard descriptions. Rather, it disguises or subverts
government’s role, making the real actors appear to be those in the market or
private sector—whether individuals, households, organizations, or businesses.
The mechanisms or tools through which such activities occur have proliferated
to include a great variety, such as loans subsidized and guaranteed by
government but offered through private banks and government-sponsored
enterprises; social benefits in the form of tax incentives and tax breaks for those
engaging in activities that government wishes to reward; and benefits and
services provided by nonprofits and private third-party organizations that are
subsidized or “contracted out” by government.9
Take student loans, for example. Several years ago, while teaching an
undergraduate course on public policy, I included student loans among a list of
government social programs. One student objected, saying, “But student loans
shouldn’t be called a social program! I’m paying for my tuition with student
loans and I got them through a bank—not a government agency. And I have to
pay them back after I graduate, with interest.” Another student quickly countered
the first, saying, “But if any of us just went to a bank ourselves and applied for a
regular loan—not a student loan guaranteed by government—they probably
wouldn’t be willing to lend to us. At our age, we don’t look like very safe bets
for paying back what we borrow. And even if they did lend to us, the loan would
cost us a good deal more than it does with government’s help.” A lively
discussion ensued, reflecting different understandings of how student loans
operate and different views of the characteristics that define public policies.
These disparities in perceptions owe to the fact that student loans, like much
of U.S. health care policy, have long operated primarily by subsidizing private
actors to provide social benefits. In the 1960s, policymakers sought means to
make college affordable for more students. Banks were typically reluctant to
loan to students, considering them a bad risk, and when they did, they imposed
high interest rates, typically ranging from 11 to 14 percent and above.10 The
Higher Education Act of 1965, signed into law by Johnson, established the
Guaranteed Student Loan Program, giving banks incentives to lend to students at
lower rates of interest. It did so by offering that the federal government would
pay half the interest on such loans and would guarantee them, promising to repay
them entirely if a borrower defaulted. In 1972 policymakers provided further
impetus to student lending by creating the Student Loan Marketing Association
(SLM, otherwise known as “Sallie Mae”), a “government-sponsored enterprise,”
meaning that while being privately owned and operated, it would enjoy special
privileges—flowing from tax benefits and special regulatory treatment—
unavailable to any competitor.11 In the decades since, student lending became a
lucrative business, attracting many banks to participate.
The amounts borrowed annually through these government-subsidized and
government-guaranteed loans, renamed as Family Federal Education Loans
(FFEL), escalated rapidly, as shown in figure 1.1. Even after Clinton’s reform
effort in 1993 led to the beginnings of “direct lending,” in which government
itself made loans using federal capital rather than subsidizing lenders to do so,
the well-established bank-based system still continued to predominate, making
80 percent of all loans until the credit crisis hit in 2008.12 The banks and Sallie
Mae possessed marketing power lacked by the U.S. Department of Education,
granting them greater leverage in promoting their products to students. In
addition, their ability to offer perks and benefits to financial aid offices on
college campuses in many cases helped them to secure the privileged status of
“preferred lenders,” a practice eventually curtailed after an investigation by New
York Attorney General Andrew Cuomo.13
Not surprisingly, then, even many student loan beneficiaries themselves
perceived the program to be private rather than public. A 2008 survey asked
such individuals, “Do you think of student loans primarily as a public program—
that is, belonging to government—or as a private program, that is, belonging to
lenders, banks, or academic institutions?” Half of respondents—50 percent—
reported that they viewed the program as private, only 43 percent described it as
public, and the remainder volunteered that it was both, equally. Despite the fact
that such loans would not be available without government—which took the
initiative to encourage lending, provided generous subsidies to lenders, and bore