Social Security: Why We Should Be Expanding It
If we were in, as they say, a reality-based world, the debate on social security would be completely different. Instead of discussing cutting back benefits for middle-income workers in the future, we would instead be on red alert to expand those benefits, since we are witnessing the ongoing destruction of private pensions for those families. For example:
Buried in the details of a restructuring program cutting 14,500 jobs was a small reference to a decision by [Hewlett-Packard] essentially dismantling its pension program to save $300 million a year. New employees won't get any pension, and many current employees will see their benefits shriveled by the time they reach retirement...
And these cutbacks in pensions exist across large businesses:
In December, IBM announced a cutback similar to HP, closing its pension plan to all new workers...Hewitt Associates, a benefits-consulting company, has dug up some alarming trends among big employers. The number offering so-called "defined-benefit" pension plans, which provide a monthly check on retirement, dropped to 68 percent in 2004 from 91 percent in 1985. The percentage is even lower among small or medium-sized employers.27 percent of big employers surveyed last year said they were likely to start excluding new hires from pension plans starting in 2005, and 18 percent plan to freeze pension contributions for some or all employees.
And there is no evidence that 401(k) plans are picking up the slack. People worry about the burden on future generations of dealing with a relatively small supposed crisis in social security financing, but the real crisis is in the collapse of the private pension.
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The crisis is twofold - pensions, or the cutting of them, and declining health care coverage due to employers being priced out of the market. These are two 'bread and butter' issues that clearly delineate the difference between an 'ownership' society based on priveledge, and a society that bans together to assure everyone's basic needs are rights of citizenship. If Democrats can't craft a very clear, articulate message about these two areas (retirement and health), I doubt they can be very successful crafting any messages at all.
July 26, 2005 1:09 PM | Reply | Permalink
July 26, 2005 2:54 PM | Reply | Permalink
You could make a good argument that a real government pension scheme, just like real universal health care, would level the playing field between the companies who want to be (or have agreed in negotiations to be) decent corporate citizens and the ones who want to squeeze out extra profit by screwing their workers in the long term. In a reality-based world, most major and minor companies would want to get behind something like this.
Of course, in our current world, such a program shouldn't even be considered unless it can be shielded absolutely from this and future generations of fiscal psychopaths.
July 26, 2005 8:49 PM | Reply | Permalink
"And there is no evidence that 401(k) plans are picking up the slack."
In fact, the evidence suggests that 401(k) plans are definitely not picking up the slack. Another Hewitt Associates' study shows that the average 401(k) balance for workers in their 40s and 50s is only $37,000--far short of what's needed to finance a retirement. And 45% of workers cash out their 401(k) plans when they change jobs, leaving them with no 401(k) retirement savings.
With pensions effectively gone for most workers, 401(k)s not working, Social Security under threat, retiree medical benefits disappearing, health care costs skyrocketing, and personal debt exploding, we've got a huge potential financial crisis looming just over the horizon.
July 27, 2005 5:30 AM | Reply | Permalink