The coming retirement-security crisis: let’s get real

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Bravo to Michael Lind, writing for Salon, for daring to challenge media conventional wisdom–that the country can no longer support Social Security and those who depend on it. For his smart, clear essay attempting to reframe the discussion, Lind deserves a CJR laurel.

We have been reporting for some time about how the public debate over Social Security’s future has been too narrowly defined, noting that a number of Beltway press types have fallen for and passed along the notion that “greedy geezers” have brought the program to the edge of bankruptcy, and thus that something must be done about “entitlements.” We’ve argued that many in the media have engaged in one-sided reporting, “using ‘facts’ that are flat-out wrong while ignoring others” about such things as the demographics of Social Security, the stability of the trust fund supporting it, as well as the options for filling its shortfall.

The “greedy geezer” framing has crowded out serious discussion on the larger problem– America’s looming retirement crisis.

Thomas Mann, a senior fellow at the Brookings Institution, in his critique of faux balance in the press, argues that the journalistic imperative to balance out opposing points of view often winds up obscuring an issue more than illuminating it. Social Security could well be his exhibit A.

In the last piece of a three-part series, Lind, a co-founder of the New America Foundation, argues that tax-favored private pensions, IRAs, and 401(k)s are inefficient, volatile, and subject to manipulation by money managers, whereas Social Security is:

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Simple and efficient, and has low overhead costs. And yet the bipartisan establishment, including many ‘progressive’ Democrats as well as Republicans, want to cut Social Security–the part that works–and expand tax-favored private savings, the inefficient, unstable and inequitable part.

So who wants to cut it? Lind explains: “While cutting Social Security makes no sense at all in terms of economics or public policy, it makes excellent sense in terms of the selfish class interests of the super-rich.” Lind notes that not only have the super-rich reaped half the gains from economic growth in the last 50 years, they’ve also recycled “some of their profits to fund politicians and lobbyists, as well as mercenary propagandists who pose as neutral think tank experts.” He could have added that those experts are the ones many in the media rely on to flesh out their stories, which, in turn, focus on the need for cutting entitlement programs rather than on the financial needs of most of their recipients.

Thomas Edsall, writing in The New York Times, gets to why the rich might feel threatened, an underlying point that most of the press has pretty much ignored. Edsall noted:

The conservative political class recognizes that the halcyon days of shared growth with the United States leading the world economy may be over. The wealthy are acutely aware that the political threat to their status and comfort would come from rising popular demand for policies of income redistribution.

Lind reports that Social Security doesn’t mean much to the super-wealthy. They don’t need the money, he writes, like 80 percent of Americans do. For those not among the super-rich, even small cuts like those imposed on beneficiaries by the Chained CPI, an alternative calculation for cost-of-living increases, could add up to a king’s ransom over time, as the cuts compound. On the other hand, the wealthiest 20 percent receive 80 of their income from tax-favored retirement accounts like 401(k)s, Lind reports.

Ordinary men and women on the street–the ones we see everyday–aren’t buying the notion of benefit cuts. “Elite discourse on the subject is radically at odds with public opinion,” Lind says. He cites a recent Pew poll finding that only 10 percent of Americans want to cut Social Security while 41 percent want to increase its benefits, a finding that’s hardly surprising. Most people on Social Security know they need it and would have a tough time surviving if the monthly payments did not arrive. Other polls show high public support for the program.

There’s a certain irony to the message that Social Security must be trimmed to save it for future generations. Many experts believe that future generations will need Social Security more than ever, since other sources of retirement income, like good defined benefit plans, have disappeared and 401(k) arrangements provide an inadequate retirement for most people. The Boston-based Center for Retirement Research, a respected organization for retirement studies, found that more than half of today’s households will not have enough retirement income to maintain their pre-retirement standard of living.

Cutting Social Security benefits now will give the future beneficiaries even less to live on. As Christine L. Owens, executive director of the National Employment Law Project, told The New York Times. “We’re setting ourselves up for somewhere, 10 years down the road, when a lot of retirees who didn’t expect to live in poverty are going to be in poverty.”

Where could the press be really useful? Take a good, hard look at retirement income–in light of the demise of good pension plans, inadequate 401(k) and personal savings, as well as rising medical expenses, which are likely to grow if Obama’s plans for changing Medicare become law and seniors are required to put more “skin in the game,” as the phrase goes. Those changes would require seniors to pay higher premiums and a greater share of their medical bills.

Lind uses his Salon essay to try to start that longer look. He and his colleagues have written a new paper called “Expanding Social Security: A Plan To Increase Retirement Security for All Americans” (Summary with link here).

The paper calls for a two-part plan: Social Security A would be the current Social Security retirement program, fully funded; on top of that would be another layer, Social Security B, a universal flat benefit. Lind argues that under his proposal, low wage earners would be the biggest winners, because nearly 100 percent of their pre-retirement income could be replaced from public funding in the new system. The current program replaces about 60 percent of pre-retirement income for low-wage workers and about 42 percent for an average-wage worker. Under Lind’s proposal, he says, the funding of Social Security would be “far more progressive than today’s system.” Some experts have long criticized the payroll tax, which funds the program today, as too regressive, since the burden of paying the tax falls heavily on those with the lowest incomes.

Lind is a realist. He writes “in today’s money-soaked Washington, the chances that our Expanded Social Security plan will be enacted are slim to none.” But, he adds, the purpose of putting the idea out there is to try to move the boundaries of what’s currently acceptable to talk about.

His piece should be essential reading for anyone interested in looking beyond the fences erected by some members of the media, and by media sources whose goal is to cut Social Security (and Medicare) benefits without looking at the looming crisis in retirement income.

CJR’s United States Project covers the coverage of politics and policy. Follow @USProjectCJR for more posts from this author and the rest of the United States Project team. And follow @Trudy_Lieberman.