Wake Up, Plutocrats

IBM is the latest major American company to cease its defined benefits pension program i.e., a pension that pays so much per year based on so much income and a certain amount of service. Based on clear evidence that has come forward over the past several decades, corporations no matter how rich understand that greater life spans of recipients, economic uncertainty, a changed tax and accounting situation, and competition from abroad mandate pension reform. And that means reform now and even more so in the years ahead. The end of defined benefits pensions in favor of defined contributions programs – those in which the employee and the employer put aside tax deferred income for the employees benefit during retirement - is upon us. This is a good thing for the national economy and for the American worker, as without such reforms, more jobs than ever will be shipped abroad. The trend is clear; the end of American pension programs as we know them is at hand.

Even government programs must be adjusted. The federal government bit the bullet and beginning in 1981, all new employees began work with a significantly scaled back defined benefits program and began a defined contributions program very much akin to those being offered in the private sector. I never cared much for Jimmy Carter, but that’s one he can take credit for.

State and local pension programs are creating fantastic problems for the governments and their citizens, and only lately have politicians begun to look realistically at them. Reforms much like that of the federal government or the private sector are inevitable if states, cities, and towns are to avoid bankruptcy. This is, however, the third rail of our federal system, but it must be faced by the politicians and the citizens despite the outcry from powerful public employee unions or disaster will overwhelm us all.

With that setup, what’s my point? Simple, Social Security must be saved as a defined benefit program and funding reform must occur soon. President Bush did us both a great favor and a disservice with his effort to reform the system last year. By highlighting the need for reform, the voters were made aware of the problem, but by demanding that reform be in the form of a defined contribution system he frightened both old and young and by being unwilling to consider how the defined benefit program might be funded, he assured that the problem would be more difficult to solve when Americans realize what we’re facing in terms of far more recipients and fewer contributing workers.

But The United States is much better off than many of its modern industrial competitors. Our population is younger than those of the European countries and Japan and is growing older far more slowly. Say what you will, but immigration gives us time to deal with the problems of our aging workforce and we must seize the opportunity.

I hope I’m wrong, but next to nothing is likely to be done to deal with the problems of Social Security and Medicare during the next three years. This will be one of the lasting legacies of this terrible presidency. Mr. Bush’s hubris in what he was demanding for Social Security reform is almost equal to that of his misbegotten Iraq War and we will all pay for it.

Despite living in the largest and most dynamic economy in the history of man, we cannot afford everything. That conservatism has highlighted this `there is no free lunch’ situation for more than a generation, many of those able to defend themselves have done so, but huge numbers – and a high percentage - of our population have been unable to assure any kind of economic security for themselves as they approach old age, and they live in utter fear that the one great benefit coming out of the New Deal, Social Security, will not be there for them when they can no longer work.

The Republican plutocracy simply cannot fathom this fear and their proposal for Social Security reform demonstrates how out of touch with the masses they really are. The GOP is fortunate, however, that millions of good people with deep religious convictions and of high moral values have been gulled into supporting many of their worst programs because they cannot abide what the Evangelical leaders have labeled as evil. The eyes of these people are opening, however, and the Democrats, too, are beginning to heed their message and to court these nice folks.

Millions of our citizens cannot face a future in which they are dependent on a Dickensonian system of private handouts and a dole. That paying into a Social Security system for a lifetime could result in poor choices leading to a dotage of impoverishment is simply too much for them to contemplate. With each passing day another corporation throws in the sponge on its pension program and even upper middle income workers fear that there will be no floor under their benefits.

Democrats, independents and moderate Republicans must understand that Social Security must be saved in its present form and the rising costs must be addressed soon. Accountants, actuaries, economists, and plutocrats can proclaim the benefits of compounding till the cows come home and can demonstrate in black and white that the country would be better off under the system proposed by President Bush; it doesn’t matter, a society is held together by a social compact that is greater than sheer logic. There is a great fear of failure out there and the one shining light in the window for all to home in on is Social Security. “Let them eat cake,” is the obvious answer for those who fail. It isn’t a satisfactory response, and the Republicans better get with the program.

Blog on!

Wild Bill