How government is like insurance

Public opinion analyses repeatedly show that Americans, to borrow an oft-repeated phrase, are "philosophically conservative" but "operationally liberal."

That is, Americans express a strong belief in hard work and making their way by pluck or even luck, rather than privilege or government assistance. But American majorities also support various social programs and the taxes that pay for them, including Social Security, Medicare and unemployment insurance — not to mention government investments in roads, bridges, communications systems and other public works.

Is there a way to rectify this ideological schizophrenia? Actually, there is: It's called "insurance."

Insurance is designed to safeguard people against a variety of potentially bad outcomes: the death of a spouse, wrecking one's car, getting sick, having one's home burgled or engulfed by fire. Insurance is risk aversion, the saving for the proverbial rainy day. And averting risk is, if nothing else, an inherently conservative tendency.

So what does insurance have to do with government? Well, almost everything.

If governmental priorities are quantified in budgetary terms, our governments — and especially the U.S. government — are all about insurance. Peter Fisher, a former deputy treasury secretary for President George W. Bush, once described the federal government as "a gigantic insurance company with a sideline business in defense and homeland security," which sounds eerily similar to liberal blogger Ezra Klein's recent characterization of the federal government as an "insurance conglomerate protected by a large standing army."

That said, most of what the government collects in "taxes" might more accurately be thought of as "premiums." Social Security and Medicare receipts, collected via payroll taxes, are premiums collected to insure citizens against the possibility of living long and, if and when they do, needing health care coverage to enjoy and extend that longevity. Unemployment taxes are collected from paychecks to cover workers in case they lose their jobs. Heck, even a small fraction of every dollar deposited into checking and savings accounts is collected by the Federal Deposit Insurance Corporation to guarantee those deposits in cases of bank failure.

And the fifth of the federal budget spent on military, homeland security and disease control? Raised largely from undedicated income taxes, this is government insurance against various potential threats, be they attacks by foreign militaries, stateless terrorists, cyber-hackers or viral diseases. Sure, the rich pay more for this insurance; but then again, they have more wealth to insure. (No sane insurance salesman would charge the same premium to insure five Bentleys as one Prius, would he?)

Conservatives may object that government-managed insurance is coercive, whereas in the private sector individuals may opt to save on premiums by accepting greater risk. That's true. But a problem arises when the risks assumed by others become socialized — when the decision by some not to insure themselves against negative consequences ends up costing the rest of us, such as a financial crash that leads to corporate bailouts or the spreading of mad cow disease.

Car insurance is a good example of how to solve the problem of socialized risk. When a citizen driving without insurance crashes his car into an insured driver, the insured driver is still covered, thanks to her uninsured motorist coverage. But her premium is higher to reflect the cost of this coverage. In effect, she is paying the uninsured motorist's insurance premiums too, which hardly seems fair.

Notice that few citizens drive around without insurance. Why? Because states require motorist and vehicle insurance, and there are severe penalties for being caught driving without coverage. Similarly, those who support the health care reforms that former Gov. Mitt Romney enacted in Massachusetts and President Barack Obama and the Democrats (partly) enacted nationally believe true health care reform begins with mandatory insurance. The insured are already paying the premiums of the uninsured, so why not universalize and standardize it?

The U.S. government and state governments effectively force taxpayer-citizens to insure themselves against potentially bad outcomes (losing their job, catastrophic illness), as well against the one great outcome for which every U.S. taxpayer/insurance policyholder hopes to be insured — that is, reaching retirement and receiving Social Security benefits. Properly understood as a giant insurance company with a military behind it — a military that, again, is itself a form of insurance against various potential harms by outsiders — the federal government is thus both philosophically and operationally conservative.

So why do conservatives hate government so much?

Thomas F. Schaller teaches political science at UMBC. His column appears every other Wednesday in The Sun. His email is

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