David Frum has an excellent, thought-provoking post on child poverty and economic mobility up at his site FrumForum. It does – and it should – make you question our assumptions about how we’ve set up our social spending programs for the poor as well as our faith in markets solving all our social problems. In America, expensive middle-class entitlement programs all but ensure that not enough will be spent on the poor, or at least that not enough will be spent in the right ways on the poor.

Our health insurance system ensures that when you lose your job, you also lose your health care. In purely economic terms, this is crazy. The employer-based tax break is expensive and puts employees at the mercy of their employers. Even with the tax break, health costs are weighing down businesses, making them less competitive in the global economy, and making employers less likely to make new hires. There’s nothing wrong with American health care but everything wrong with our system of insurance, which is uncompetitive, expensive, and largely unattainable without an employer. This has a major impact on economic mobility, and is one reason why, as David points out, the Scandinavian nations have much better mobility numbers than we do.

David writes:

“Only the UK does worse than the US among the 9 countries surveyed – and the social democratic countries of Scandinavia all do better.

This is not an argument in favor of the European way of doing things. I agree with Lowry and Ponnuru – and Charles Murray too – that American freedom and individualism are important national values to be celebrated and defended.

But let’s not flatter ourselves: Those values exact a social cost – and they would be easier to defend if the cost were less high. And the fact that this cost is not being paid by my children or (probably) yours does not make the cost less real to the one-third of America whose children do pay it.”

Policy-makers on the right need to combine their faith in free markets and the prosperity that the American system generates, with a real push to reform entitlements to make them more effective engines of social security for those who need them most: not the middle or upper class, but the working poor and the unemployed.

Consider this a project for positive conservatism. Social engineering and central planning are ultimately very ineffective tools, so we need to come up with safety nets rather than entitlements and focus on putting money directly in people’s pockets rather than erecting even more of an endless bureaucracy of red-tape and government stagnation.

Furthermore, we need to construct our safety nets so that they are most effective when they are also most needed. Losing one’s job should not mean the loss of one’s health care. Republicans did not address this conundrum when opposing the Democrats' healthcare reform legislation. If conservatives ever hope to reform that law or any other entitlement, they will need to address how they can help the poor, the unemployed, and they will need to address the question of economic mobility.

Food stamps are actually a pretty effective social welfare program – basically they’re vouchers for people who can’t afford groceries. Why not reform health insurance so that it’s actually a competitive industry and then give people who can’t afford it health stamps?

Personal savings accounts to replace Social Security are one way to bring wealth to a much broader cross-section of the American people; vouchers for catastrophic insurance are a good first step to reforming health care and can later be worked into Medicare and Medicaid; and cutting red tape for the unemployed to fast-track their benefits and extend their health coverage can also help with economic mobility and social security.

David is entirely right – the social cost of our unsustainable, inequitable system is being paid by one-third of America’s children. That number is far too high. This is not an indictment of free markets or social welfare programs. It speaks to the importance of striking a sustainable, efficient balance between prosperity and social security which creates long term employment and helps catch those who fall through the cracks. We have certainly not found that equilibrium yet. I suspect this will be the major project for conservatives and liberals alike moving into the 21st century.