"American liberals have made scarcely a new proposal for reform in twenty years," John Kenneth Galbraith wrote in 1952. Liberals were living off the patrimony of the New Deal. They still are.

Saving Social Security is the priority of the hour for liberal interest groups, progressive bloggers, and congressional Democrats. If half the energy and intelligence the Democrats spent fighting President Bush's privatization plan went into developing new proposals for reform, they might once more be seen as the party of hope. As it is, divided on taxes, war, and social issues, they achieve unity of purpose only in defending a program enacted in 1935. They may stymie Bush—but at the cost of defining themselves as the party of memory.

For the New Dealers "reform" meant reforming capitalism; it meant state intervention in the economy to increase the economic security and individual freedom of ordinary Americans. That idea, a synthesis of populism and progressivism, was called liberalism. Liberals have been in retreat from liberalism for at least a generation. They defend Social Security, but not the principle of intervention behind the New Deal.

George Lakoff, Bill Moyers, and other commentators have attributed the Democrats' troubles to a lack of funding for liberal think tanks to match that of the conservative Heritage Foundation, American Enterprise Institute, and the like. But think tanks won't help a party afraid to state its central idea. Think tanks proliferate policies. Democrats already have a policy for every problem. What they lack is a governing philosophy. That's why so many Americans don't know what the party stands for.

Yet the problems the Democrats highlighted in last year's election campaign—from global warming to growing inequality—cannot be managed without state intervention in the economy. Liberals shrink from the "L-word" just when reality has renewed its relevance.

The pollster and political scientist Samuel Lubell famously observed that Americans are ideologically conservative and programmatically liberal. Consequently, liberals have justified economic intervention in pragmatic terms, ceding the ideological high ground to conservatism. But the conservatives in power have demonstrated that the liberal-conservative distinction is not between intervention and laissez-faire. It's between intervening to achieve public benefits that could not be realized through the private market versus intervening to reward special interests. The Republican Party of George W. Bush has lavished billions in subsidies on profitable industries; John McCain refers to the Administration's energy bill as "No lobbyist left behind." Corporations pump millions in campaign contributions into one end of the GOP, and not a few Democratic lawmakers extract billions from the other—in subsidies, tax breaks, and regulatory relief. In decrying the resulting budget deficits, the Democrats legitimate the core, "fiscal responsibility" idea of conservatism which is honored only in the breach by conservatives themselves. Having a real conservative party, one that believed in fiscal prudence as the guarantor of laissez-faire, would be nice; antiquity has its charms. But the Democrats should not be that party. What they say about deficits today could come back to haunt them tomorrow, when they will have to borrow to implement policies that—unlike Bush's tax cuts—at least benefit the future generations paying for them.

Market-based solutions to the problems of our age are not plausible. Take globalization, health care, and—the problem that perhaps looms larger than all others—the environment. Globalization and technology are a scissors cutting away at an American job base formed in the post-war era of self-sufficiency and technological stability. Perhaps innovation will hasten the development of new forms of mass employment—but in countries with cheaper labor. Meanwhile, the twenty-five to thirty-year olds living at home with their parents because they can't afford to live on their own—a growing demographic in the U.S.—may portend a future of structural unemployment and underemployment. If the private market cannot create jobs, then government must. Just as the New Deal put the unemployed to work building post offices, dams, and wilderness trails that are still in use today, so twenty-first-century government will either provide jobs or face social unrest.

Left to the private market, health-care expenditures on an aging population will empty the federal treasury, and more and more Americans will go without health insurance. Only a single-payer health-insurance system offers hope of controlling costs while expanding coverage.

From the Gilded Age to 1929 Americans were torn between fears of corporate "monopoly" power on the one hand, and of the strong government necessary to protect them from it on the other. The Great Depression resolved their ambivalence and broke the ideological grip of laissez-faire. Today, the environmental crisis, together with the stresses of globalization, may break that grip again.

Industrial civilization threatens the biosphere. The transition to a sustainable economy cannot be left to a private market that has brought humanity to the brink of disastrous climate change. Government—whether as planner, regulator, or employer—must take the lead.

As in the 1930s, the "system" must be reformed to be saved. The state's role in economic life will expand. The longer we wait to make the necessary changes, the more drastic and thoroughgoing the state's role will be. My fear is that nothing will change until an environmental 9/11 occurs. At that point, to deal with the "emergency," Americans will accede to martial law and eventually—as drought, crop failure, the flooding of coastal cities continue—to dictatorship. Clearly more than preserving the polar ice cap is at stake in stopping climate change. Earth may not hang in the balance, but American democracy might. We must plan now to avoid panic later.

The debate over Social Security has usefully focused public attention on the future. The system will begin to require transfusions from general taxation just when, a British government report predicts, irreversible climate change will be setting in—meaning that nothing humanity can do thereafter will be able to stop nature's restorative processes from shutting down. The size of their Social Security pensions won't mean much to the seniors of 2075 if they can't leave home without oxygen masks. That is the future challenge the Democrats should address—the vast social insecurity that will snuff out freedom unless we change course.