Retirement Security

In his second inaugural address, President Bush offered a vision of an "ownership society"

... designed to provide inadequate retirement income for the average worker," says University of California Berkeley political scientist Jacob Hacker. ...

... designed to provide inadequate retirement income for the average worker," says University of California Berkeley political scientist Jacob Hacker. ...

The New York Times pens an editorial today that's half-kvetching at the current state of retirement security and half-prescriptive for policymakers interested in preserving a comfortable retirement for the boomers and beyond. Are they optimistic about a market rebound that acts as a cure for shockingly low account balances (and can you tell I just got my quarterly statement)? Consider the following passages:

The last 25 years was a time of low inflation rates and low interest rates, which boosted stock prices. Going forward, inflation and interest rates have nowhere to go but up...

So far, the cumulative wipe-out of household retirement savings totals about $2 trillion, and no one believes that the downturn is anywhere near over. As a result, participants in 401(k)’s are in greater danger than ever of coming up short in retirement...

The wipeout in 401(k)’s has made it clear that it is not enough to get more people to save more...

Decidedly pessmistic. Alas, the piece is not bereft of hope or constructive talk.

On December 5, 2008, the New America Foundation’s Next Social Contract Initiative hosted a three panel discussion about the future of social policy after the economic downturn. David Gray, Director of the Workforce and Family Program at New America, opened the event with preliminary remarks. Karen Kornbluh, formerly of the New America Foundation, policy director in the office of Senator Barack Obama and the primary author of the 2008 Democratic Party Platform, delivered the keynote address.

NEW AMERICA FOUNDATION HOLDS A CONFERENCE
ON SOCIAL POLICY AFTER THE ECONOMIC PROBLEMS

DECEMBER 5, 2008

SPEAKERS: MICHAEL CALABRESE,
VICE PRESIDENT, NEW AMERICA FOUNDATION

LEN NICHOLS, DIRECTOR,
HEALTH POLICY PROGRAM, NEW AMERICA FOUNDATION

MAYA MACGUINEAS, DIRECTOR, FISCAL POLICY PROGRAM,
NEW AMERICA FOUNDATION, PRESIDENT,
COMMITTEE FOR A RESPONSIBLE FEDERAL BUDGET

MARK IWRY,
NONRESIDENT SENIOR FELLOW, BROOKINGS INSTITUTION

DAVID GRAY,

Which is my answer to those, like Yale Professor Jacob Hacker, who advocate public policies to reduce risk for individuals. In his book "The Great Risk ...

“Some of the core elements of the social safety net have eroded,” said Jacob Hacker, author of “The Great Risk Shift” and a professor of political science at the University of California at Berkeley.

Social Security is the single largest government program. In 2007, the program cost $585 billion and provided benefits for roughly 50 million retirees, dependents, survivors, and disabled workers. It is financed primarily through the payroll tax -- a 12.4 percent tax on wages up to $102,000. The tax is split equally between employees and employers. The remaining revenues come mainly from the taxation of Social Security benefits for wealthier recipients.

In today's Washington Post (and Newsweek, I suppose), Robert Samuelson nominates himself leader of the under-35-voter mob that is supposed to march on the American Association of Retired Persons in protest. Before I grabbed my pitchfork, I thought it might be a nice idea to see what all the fuss was about. It turns out, Mr. Samuelson is encouraging us to "get angry" at AARP (and old people) for mortgaging my generation's future all for the sake of lining the already-stuffed pockets of America's seniors. I see several problems with this approach, not the least of which is the fact that older Americans have disproportionately been walloped by the foreclosure crisis.

My core concerns lie in Americans' retirement and financial security, so I glanced at AARP's positions on such issues in their "voters guide" that has Mr. Samuelson so troubled. First, in the commitments checkbox, AARP asks the candidates to "commit to help end gridlock by working across party lines to develop and support common-sense, bipartisan solutions on health care and financial security." Both candidates in their written response essentially agreed to do so. Innocuous as it is, this hardly strikes me as something I should be angry about.

Second, and more to the point, I found this nugget: "Half of all workers have no organized way to save for retirement such as pensions or 401(k) plans. AARP supports guaranteeing workers access to automatic payroll deductions to an IRA (Individual Retirement Account) in the workplace if their employers do not already provide them a pension or 401(k) plan."

For the record, both candidates, again, essentially agreed. My admitted obsession with automatic enrollment aside, this strikes me as not pandering to current retirees, but future ones.