Publicly Funded Pensions Good for the Fox Cities

    
Retirees Facing Fiscal Cliff.
The Post-Crescent recently printed an article entitled “Retirees Are Facing Their Own Fiscal Cliff” that is worth comment.
(http://www.postcrescent.com/article/20130117/APC06/301170098/Column-Retirees-facing-their-own-fiscal-cliff)  
The article points out that most people facing retirement soon will not have enough money to live out their lives comfortably.  Many will have five dollars a day or less for food.  Three quarters have $30,000 or less saved for retirement.  Some people may simply have failed to save for retirement, but most never earned enough to have significant savings.  In recent years, wages have stagnated, and the value of people’s homes has declined on average by about 17%.

 What Should We Do?
     What should we do in this situation?  Is it acceptable for all people to starve in the middle of the richest country in the world?  Can we solve our fiscal problems by reducing Social Security and Medicare benefits – the only safety nets for millions of people who are approaching retirement?  Can we renege on our promises?  Can we fail to provide benefits for which people have paid all their lives?  Of course not! 

Establish Publicly Managed Pension Funds for All
    The article in the post Crescent also suggests that one way to solve this problem for the future would be to establish publicly managed defined-benefit programs (a.k.a. pensions) for all citizens.  Such pensions would provide people with a decent life and would also be good for business, for the labor market and for our Fox Cities community.

Don't Speak of Entitlements - They are Earned Benefits
    Radical rightists like to speak disparagingly of what they call “entitlements,” but the term is misleading.  Social Security and Medicare are not entitlements.  They are earned benefits.  If we find that we do not have enough money to pay the benefits that have been promised people, we should consider ourselves contractually obliged to find the money.  Cheating people of benefits they have earned is not acceptable behavior for an honorable free people.

Reducing Benefits Would Be Bad For Everyone
    Moreover, reducing the cost of Social Security or Medicare by raising the age at which people became eligible to receive those benefits to 70 would be bad for our middle class because it would reduce the number of jobs available to young people.  Millions of people in their late 60s would hang on to their jobs until they became eligible for Social Security and Medicare, and millions of young people would be unable to find jobs because their parents were unable to retire.

    We should note also that the poverty of the old would reverberate through our economy.  Consumer spending accounts for the bulk of spending in the United States.  Serious reductions in the money available to consumers would harm many businesses, and that would cause increases in unemployment.  As people earned less and spent less our local, state and national governments would collect less in taxes, and we would find ourselves in a spiral of declining income.

 Group Pension Funds Would Earn Higher Returns
    The article in the Post-Crescent suggests that one way to solve this problem for the future would be to establish publicly managed defined-benefit programs (a.k.a. pensions) for all citizens.  The article points out that the returns earned by publicly managed pension programs are always much higher than the returns earned by individual IRA or 401(k) accounts because publicly managed pension programs have a lot of money and a long time frame to work with. Publicly managed programs are also able to manage using average earnings and average life expectancies.  Money now paid by employers and employees into IRAs and 401(k)s could instead be directed to publicly managed pension programs. 

Avoid Rigidity in the Labor Market
    Publicly managed pension programs for all citizens would have an advantage over programs managed by individual companies just as individual health insurance has an advantage over health insurance provided by an employer.  Pensions and health insurance provided by an employer create rigidity in the labor market.  Employers are reluctant to hire new employees because of the cost of benefits for them.  People who have jobs are reluctant to leave them because they are afraid to lose their health insurance or their pensions.  Like Obamacare, which will make it possible for individuals to purchase their own health insurance instead of being dependent on an employer, a publicly managed pension program would make it possible for employees to change jobs more easily and for companies to hire new employees more easily.

We in the Fox Cities need to give serious consideration to the idea of publicly managed pension programs, and we need to fund Social Security and Medicare fully for the future. Doing so will benefit our people, our businesses, and our community.